Sarah owned an interior decorating business. She had business insurance which included a commercial motor vehicle policy.
Sarah’s siblings had two classic cars stored at the business premises. Sarah had not declared the cars to the insurer, and they were not listed on the policy schedule.
Sarah’s siblings did not have private motor vehicle insurance because the cars were not roadworthy.
The two cars were damaged when the business premises were broken into. One of the cars was stolen and later recovered with damage. The other car was damaged during the burglary.
Sarah made a claim under the commercial motor vehicle policy for the damage to the two cars. The insurer declined the claim because they believed the cars were not covered. The insurer said the cars were not listed on the policy schedule and no agreement had been made to cover them, nor had a premium to cover them been agreed.
Sarah disputed the insurer’s decision. She believed the cars were covered because they fell within the definition of insured vehicle in the policy wording. The definition included vehicles listed on the policy schedule and vehicles in the care, custody and/or control of Sarah’s business.
Sarah complained to FSCL about the insurer’s decision to decline the claim.
Sarah believed the cars fell within the definition of insured vehicle. Her siblings had left the cars in the care and custody of her business. The business had agreed to keep the cars safe and secure, locked inside the business premises.
The insurer did not agree. They believed Sarah’s business had not assumed the care, custody and control of the cars. The business had no liability for the safe custody of the cars.
The insurer also said Sarah should have disclosed to them if her business’s activities included taking vehicles into the business’s care, custody and control.
We concluded that the insurer was not obliged to accept the claim.
We agreed with Sarah that the cars fell within the definition of insured vehicle. The cars were in the care of Sarah’s business because the business had agreed to store the cars.
The cars did not have to be in the business’s care, custody and control as the insurer believed. It was sufficient for the cars to be in the business’s care (or custody or control).
However, the insurer was not obliged to accept the claim because Sarah should have disclosed the cars to the insurer. If they had been disclosed, it was unlikely the insurer would have agreed to cover them because they were classic cars, for personal use.
Sarah accepted our view and discontinued her complaint. However, she was going to complain to her insurance adviser. The adviser knew the cars were stored at the business premises but did not tell her the cars needed to be insured separately.
Insights for consumers
It is important for small businesses to discuss cover with their insurer if there is a personal or privately owned asset the business wants covered under a business policy. The insurer may be prepared to provide cover, but full disclosure about the asset needs to be made and the insurer will want to charge a premium that reflects the risk posed to them.