Indebted driver's plea he didn't hear disclosure duty falls on deaf ears

A man who said he did not disclose to his car insurer that he was subject to a debt agreement because he could not properly hear what was being asked regarding his duty of disclosure has lost a claim dispute.

Hollard told the Australian Financial Complaints Authority (AFCA) it would not have offered the motor insurance policy when the customer telephoned in April had he correctly disclosed that he was subject to a debt agreement under part 9 of the Bankruptcy Act 1966.

Hollard declined his claim and cancelled the policy due to non-disclosure, refunding the premium paid.

The man, who had an accident around 10 weeks after purchasing the policy and made a claim for damage to the car, said that on incepting the policy over the phone he could not properly hear Hollard’s consultant, and that the consultant stated a number of times she could not hear him and so she should have terminated the call.

AFCA ruled Hollard had clearly informed him of the duty of disclosure.

“The insurer clearly informed the complainant of the general nature and effect of his duty of disclosure on policy inception, and in the policy documents it provided,” the ruling said. “The insurer has shown that it was prejudiced by the non-disclosure as it would not have offered cover had the complainant disclosed this.

“Accordingly, the insurer would not have been on risk when the loss happened. The insurer can therefore reduce its liability to nil.”

The man said he could not hear or understand the questions asked by the consultant or the automated questions.

A call recording revealed she played an automated message about the duty of disclosure and then asked him to confirm he had heard and understood his duty of disclosure, to which he responded “Yep”.

The automated message asked if he was subject to a debt agreement and he clearly responded “No”. When the consultant then asked if he had any questions, he initially said “Pardon?” and then said “No”.”

“I am satisfied that the information provided by the insurer during this call was clear, and that the complainant’s responses indicate that he understood,” the AFCA ombudsman said.

“I find the complainant knew the correct answer to the question about being subject to a debt agreement was ‘Yes’, and that a reasonable person in the complainant’s circumstances would have disclosed this information.”

The man could not confirm that he received Hollard’s email sent after he arranged his cover over the phone, but Hollard provided a systems screenshot confirming that the Policy Welcome Document was successfully sent to the complainant by email on April 8.

A letter included the Certificate of Insurance (COI), explained the duty of disclosure and asked him to check that the information in the COI – which included his answers to the questions asked on policy inception – was correct.

“I am therefore satisfied that the insurer clearly informed the complainant of the general nature and effect of his duty of disclosure prior to the contract being entered into,” the ombudsman said.

“The insurer subsequently provided the complainant with the responses he provided to specific questions when he incepted the policy, thus allowing him the opportunity to check that the information he disclosed was accurate and to make any necessary corrections.

“I therefore find that the insurer has established that the complainant failed to comply with his duty of disclosure.”

See the full ruling here.