Russell ran a plumbing business and insured all company cars under a commercial motor vehicle policy.
In February 2024, his employee Nisha reported one of the company cars stolen. Shortly after reporting the theft to Police, she found the car on the side of the road. Nisha claimed she had tried to move it to a safe place, but lost control of the car and damaged two parked cars.
Russell claimed for the theft of the vehicle, which was damaged along with the two parked cars Nisha had hit. The insurer accepted the claim for the damage to the parked cars, but declined the claim for theft.
Why did the insurer decline the claim for theft?
The insurer identified inconsistencies in Nisha’s story.
Nisha told the insurer the car was stolen from her driveway, but told Police it was taken from the street outside her friend’s house. The time Nisha claimed the damage had occurred differed to the time given by the owner of one of the damaged cars.
The insurer said that Nisha had not given complete and correct statements, so had breached one of the general conditions of the policy.
Russell disagreed with the insurer’s decision. He said he had no direct knowledge of the events in question, and had co-operated by allowing the insurer to interview Nisha. He stressed that Nisha’s explanation and statements were her own, not made on his behalf, and he did not endorse them. He also argued there was no proof that anything Nisha said was untrue.
The insurer responded that the policy allowed them to rely on Nisha’s statements. They argued that, given Nisha had made several inconsistent statements, they were not required to prove which parts were false.
What was FSCL’s view?
In our review of the insurance policy, we determined that the requirement to provide complete and correct statements applied to both Russell and any driver using the vehicle with his consent.
This meant that Nisha was required to give complete and correct statements. We did not accept Russell’s argument that the insurer needed to prove the statements were false. Since Nisha made conflicting statements about the incident, not all of them could be true at the same time.
What was the outcome of FSCL’s investigation?
We concluded that it would be unfair to expect the insurer to pay out for a dishonest claim, so we suggested that Russell discontinue his complaint. As a result, Russell would need to pay for the repairs himself and disclose to any future insurers that a claim of his was declined.
Russell disagreed with our decision, but agreed to discontinue his complaint and consider legal action instead.
Insights for consumers
Under New Zealand law, insurers are entitled to honesty when a claim is made. Many policies include this as a general condition. Businesses should inform employees of the potentially severe consequences of being dishonest.
