Indemnity denied for failure of an agent of the named insured to disclose relevant information pursuant to section 21 of the Insurance Contracts Act 1984 (Cth) (the Act).

In Issue

  • Whether the beneficiary of an insurance policy was acting as an agent for the insured at the time of renewing the policy and whether the beneficiary’s non-disclosure was imputed to the insured, as principal.

The Background

Danielle Taylor and Hasheam Tayeh were involved in a motor vehicle accident on 9 September 2014. Taylor’s vehicle ran into the rear of Tayeh’s 2005 Porsche Cayenne, causing significant damage to both vehicles. Tayeh issued proceedings against Taylor for the damage caused to his vehicle. Following a denial of indemnity by Allianz, the insurer of Taylor’s vehicle, Taylor issued third party proceedings against Allianz seeking a declaration of indemnity.

Taylor’s vehicle was registered under her mother’s (the mother) name as she had assisted Taylor by financing the purchase of the vehicle. The vehicle was insured under a policy of insurance that the mother was required to obtain as part of her finance contract with her bank.

The insurance policy noted the mother as the sole insured and noted herself and Taylor as nominated drivers. All correspondence from Allianz was sent to the mother’s address, where Taylor permanently resided.

Whilst the vehicle was financed by the mother and registered in the mother’s name, Taylor paid the monthly repayments and other maintenance and operational costs of the vehicle, and she also paid for the renewal fees associated with the insurance policy.

Taylor and her partner had incurred a number of traffic infringements whilst driving the vehicle and had nominated the mother as the driver. As a result, the mother accumulated a number of demerit points and her license was subsequently suspended for three months, without her knowledge.

Despite knowing that the mother’s licence had been suspended, Taylor did not disclose the licence status of the mother at the time she effected renewals of the policy in June 2013 and then again in June 2014.

Following investigations, Allianz found out that the mother’s licence had been suspended and sought to deny indemnity to Taylor. Allianz argued that Taylor was acting as agent for the mother and her failure to disclosure a matter of relevance to risk, as required under section 21 of the Act, was attributable to the mother.

The Decision at Trial

In the first instance, the court held that Taylor was a third party beneficiary acting out of her own self-interest and for her own benefit when renewing the policy, and not for the benefit of the mother. As such, Taylor was not engaging with the insurer as an agent for the mother and her knowledge could not be considered knowledge of the mother for the purpose of section 21 of the Act.

Accordingly, the court held that there was no non-disclosure on the part of the mother and Allianz was ordered to indemnify Taylor.

The Issues on Appeal

Whether the court erred in finding that there was no agency created between Taylor and the mother based on the facts found.

The Decision on Appeal

The Court of Appeal found that Taylor was responsible for creating and effecting the contract of insurance and that she had been given authority from the mother to act on her behalf in relation to the insurance policy. Taylor was therefore found to be acting as an agent of the mother when the renewals were effected.

The Court of Appeal further accepted that the knowledge of an agent to effect insurance is the knowledge of the insured for the purpose of section 21 of the Act and found that Taylor owed a duty to disclose the status of the mother’s licence.

The appeal was allowed and it was held that Allianz could rely on section 21 of the Act to deny indemnity on the basis that Taylor, as agent for the insured, failed to disclose a matter which she knew had to be disclosed and a matter which was relevant to Allianz’s decision to renew the insurance policy.

Implications for you

Disclosure obligations under the Act may extend beyond the named insured.

It is important to consider your insurance arrangements and to understand that whilst beneficiaries of any given policy may not be the named insured, if they have been delegated the contractual obligations and effect the insurance, then their knowledge will be considered that of the insured and any failure on their part will be attribute to the named insured.

Allianz Australia Limited v Taylor & Anor [2018] VSC 78