Ishan purchased equipment for his workshop when he started a tyre business in October 2018. From the beginning, Ishan felt uneasy about the wheel alignments performed using the new wheel alignment machine.
Ishan contacted an insurance adviser in November 2018 to discuss insurance cover for his business. In mid-December he completed the required forms, and he confirmed the insurance policies he wanted with the adviser at the end of January 2019. Ishan’s public liability policy was an “occurrence policy”, meaning that the insurer would only accept a claim if the event giving rise to the claim occurred while the policy was in place.
Ishan confirmed at the end of January that the wheel alignment machine was indeed faulty, and he began to compensate affected customers in early February. He also undertook court proceedings with the supplier of the wheel alignment machine.
In late February 2019 Ishan’s insurance adviser suggested he submit a claim for the costs associated with the faulty wheel alignments. The insurer declined the claim due to the cover not being in place when the wheel alignments were carried out and because Ishan did not meet his duty of disclosure. Ishan believed that his lack of cover was the adviser’s fault, so he complained to FSCL.
Dispute
Ishan believed that the adviser had not done enough to ensure that he had the right cover for his business. Ishan also believed that the adviser had not assisted enough in the claims process, and questioned why the adviser had suggested that Ishan claim for the wheel alignment costs when the claim was unlikely to succeed. Further, Ishan said that the claim process with the insurer was stressful and unfair.
The adviser’s company said that there were no shortcomings in their service. They said that Ishan had not given them all the relevant information as they did not know about the issues with the wheel alignments at the time that insurance cover was placed.
Review
We thought the adviser’s company’s service was acceptable, but even if there were service shortcomings, they would not have affected the outcome of Ishan’s claim as he did not have cover in place when the faulty wheel alignments were performed.
It is standard practice for an adviser to suggest that a consumer make an insurance claim if they have a relevant policy. We found that the adviser’s company could not have done more to advocate for Ishan with the insurer as the absence of cover at the time of the wheel alignments meant that there was little prospect of the claim being accepted.
Even if the adviser had not explained Ishan’s duty of disclosure, we considered Ishan’s knowledge of the wheel alignment faults to be so fundamental to his business that he should have disclosed this regardless of the adviser’s explanation. Ishan said that he had spoken to the adviser about his wheel alignment concerns prior to policy inception, but we did not have any evidence of this. If Ishan had disclosed all relevant information, it is unlikely any policy would have covered Ishan’s business for the claim relating to the wheel alignments, when Ishan already suspected that the wheel alignment machine was faulty.
We noted that the adviser’s company could have done more to stress the importance of Ishan having cover in place as soon as possible at the time he first approached them. However, this would not have made any difference to Ishan’s claim due to the wheel alignment issues occurring before he approached the adviser’s company.
Ultimately, Ishan was taking a risk by not having insurance in place before he began trading. It would have been difficult for Ishan to receive compensation for anything that went wrong before the insurance cover was in place, even if he had met his duty of disclosure.
Resolution
We suggested that Ishan discontinue his complaint. Ishan disagreed with our preliminary decision but did not offer any new evidence that changed our view so we could not take the complaint any further.
Insights for consumers
Consumers starting a business should ensure they have the insurance cover they need before they start trading to avoid the risk of not being covered for any events prior to the insurance policy being in place. Further, consumers should take care to disclose all information relevant to their insurance cover, even if the cause of any problem has not yet been determined.
