Insurance claim declined due to lie...

An insured has had his claim declined due to a “little” lie during the claim process and has also had all of his other insurance policies cancelled. The insured made a claim for damage to an iPhone, supposedly belonging to his wife.  He told the insurer that he had arranged for their au pair to take the phone to a repairer.  The repairer’s report was however, addressed to the au pair and, when the insurer questioned the ownership of the phone, the insured claimed that he had bought it second hand.

It turns out that the phone actually belonged to the au pair and was therefore not an item insured under the insured’s policy.

As a result of the dishonesty, not only did the insurer decline the claim, but it also cancelled all other policies that they had with insured and registered the dishonest claim on the Insurance Claims Register.  Registering the claim on the Insurance Claims Register resulted in the insured being unable to obtain insurance for their house.  The Insurance & Financial Services Ombudsman held that the insurer was entitled to cancel the policies and to register the claim on the Insurance Claims Register, because of the dishonest statements made by the insured in breach of the duty of utmost good faith.

A lesson to be learned is that even what the insured saw as a “little lie” had drastic consequences of causing them to lose their insurance cover and not being able to arrange any alternative insurance cover.

Alan Knowsley

Insurance Lawyer
Wellington