The plaintiff was the owner of a $250,000 Aston Martin DB9 Volante F1 convertible, which he somehow drove off a boat ramp in May 2011, causing it to become submerged in seawater and rendering it a total loss. The insurer refused the claim on the basis that the plaintiff had failed to disclose a prior licence suspension and numerous traffic infringements when the policy was taken out.

The plaintiff (and his employee) gave evidence that at policy inception the plaintiff disclosed the suspension of his driver’s licence on the basis of an accumulation of demerit points but that he was not sure when the suspension occurred. The plaintiff also claimed that he disclosed having received multiple infringements and fines but was not asked further questions in relation to this.

There was no audio recording of the relevant telephone call. However, given the expensive vehicle involved, the insurer’s employees claimed to vaguely remember the plaintiff taking out the policy. Aided by the insurer’s ‘screen dumps’ which indicated the plaintiff had a clean driving record, the insurer’s employees gave evidence that the plaintiff did not disclose a license suspension or the loss of demerit points when he applied for the policy. Evidence was given that had a licence suspension or multiple traffic infringements been recorded on the system, it would have been referred to a manager to determine whether the insurer would accept the risk.

Evidence was given by the insurer’s state manager that had the plaintiff disclosed his full driving history including the license suspension and six traffic infringements for which three demerit points were assigned, the plaintiff would have been deemed an unacceptable risk in accordance with the insurer’s National Underwriting Guidelines.

The trial judge considered the plaintiff and his employee to be unreliable witnesses and accepted the evidence of the insurer’s witnesses. The judge considered it unlikely that the insurer’s employees would have failed to record the license suspension or traffic infringements had they been disclosed by the plaintiff and determined that the plaintiff did not disclose his full driving history when he applied for the policy. The judge determined that these matters were within the plaintiff’s consciousness and ought to have been disclosed.

Section 28(3) of the Insurance Contracts Act provides that where an insured fails to comply with the duty of disclosure and that failure was not made fraudulently, the insurer is entitled to reduce its liability to put it in the position it would have been in had full disclosure been made. The trial judge accepted that had the plaintiff disclosed his true driving history, the insurer’s underwriting criteria would have deemed him an unacceptable risk and the insurer would not have issued the policy. Accordingly the insurer was able to reduce its liability to nil. The trial judge also determined that the insurer did not need to repay premiums to the insured.

The insured appealed claiming that even if full disclosure had been made, the insurer would have accepted the risk. The Queensland Court of Appeal disagreed and upheld the trial judge’s findings that had the plaintiff made full disclosure, the insurer would not have accepted the risk and therefore had no liability for the claim.

Michail v Australian Alliance Insurance Co Ltd

This case demonstrates the importance of having clear underwriting guidelines. The insurer was able to successfully rely on its underwriting criteria to prove that it would not have accepted the risk had the plaintiff disclosed his full driving history.