Jax obtained finance to buy a Harley Davidson motorbike which he stored in a locked garage. Jax contacted his car insurance company to also insure his bike. The insurance company agreed over the phone and provided Jax with full cover for his bike.
At this stage, Jax did not hold a motorbike licence. He required a full motorbike licence to legally ride his Harley Davidson. He got his restricted licence a few months later. Sometimes, Jax’s brother who held a full licence would ride his bike. Jax also made some modifications to the bike.
A year later, Jax’s bike was stolen from his garage.
Jax made a claim to his insurer to cover the theft of his bike.
The insurer declined Jax’s claim. The insurer said Jax had wrongly advised them that he held a full licence. Had the insurer known of Jax’s unlicensed status, they would not have offered him any cover. This is because the insurer could not provide cover for bikes ridden by unlicensed drivers. The insurer assumed from the modifications and the bike’s mileage, Jax intended to ride the bike. On that basis, the insurer sought to avoid the policy noting it had been null and void from inception, and and declined Jax’s claim. The insurer offered Jax a refund of his premiums.
Jax felt it was unfair the insurer would avoid the contract and decline compensation for his stolen bike. He had been working towards getting a full licence and wanted insurance cover for his bike. Jax disagreed that he was asked about his motorbike licence when he purchased the policy. Jax also noted he did not receive a copy of his policy.
Jax felt upset he had to continue paying finance for a bike he no longer had. He complained to FSCL.
We did not agree with the insurer.
The insurer had relied on its standard practices to show that Jax would have been asked about his motorbike licence on the phone and would have been posted a copy of his policy. However, the insurer was unable to provide records of this.
There was no evidence the insurer had discussed the suitability of the policy with Jax, nor the requirement to have a full motorbike licence in order to be eligible for cover.
In our view, for the insurer to avoid the policy, they would need to act in good faith as provided for in the Fair Insurance Code, and be sufficiently satisfied of Jax’s non-disclosure.
The insurer agreed that the lack of a full licence did not cause, nor materially change the risk of Jax’s bike being stolen. Any non-disclosure relating to Jax’s licence was unrelated to the motorbike’s theft. It would be unduly harsh for the insurer to avoid the insurance policy without, at the least, evidence that Jax withheld information about his licence.
The insurer agreed it did not have sufficient evidence to avoid the contract with Jax and agreed to pay Jax’s claim.
Key insights for the participant and the complainant
In this instance, it would have been helpful if the insurer had records of its communications with Jax. Participants should be aware that, when looking at non-disclosure issues, they must act in good faith and in accordance with the provisions of the Fair Insurance Code.