On Boxing Day, one of the public was arguing on television that he expected his insurer to have a loophole to get out of paying for pre – existing hail damage to his vehicle now that the vehicle had suffered further damage.
With the huge hail storms in Melbourne and Perth during 2010 along with the many other smaller hail storms that occur there have been an enormous number of vehicles which were damaged prior to the Christmas Day hail storms in Melbourne and Whyalla at Christmas 2011.
Hail damage is typically insured under a comprehensive motor vehicle insurance policy. If a vehicle had pre-existing damage as at the Christmas 2011 hail storms then I would suggest four things have happened. Either:
1. The car was written off and retained by the Insured after receiving the payout.
2. The car was damaged at a dealer and purchased at a discount from the dealer or at auction.
3. The vehicle was not comprehensively insured at the time of the first lot of hail damage.
4. The vehicle was insured, but repairs have not been completed as yet. Due to the time between events, this is the least likely.
The vast majority of insurance policies covering property, which includes motor vehicles, only cover damage to the property that occurs during the period of insurance. It should not come as a surprise that it would not cover pre-existing damage which occurred prior to the current period of insurance. To suggest otherwise is like saying that anybody need not insure, have a burglary or fire then insure the property and claim the loss. Insurers could, of course, do this. The premium would be the value of the loss, plus administration costs, and an allowance for any other claims that may arise during the balance of the period of insurance. In other words; the normal premium plus the cost of the pre-exisitng damage. This just becomes a nonsense dollar-swapping exercise.
It is my recommendation that issues of any pre-existing damage be addressed at the underwriting stage of the process and not at the time of the claim. This is reinforced by the duty of disclosure clause included in the vast majority of policies (motor or otherwise).
A typical example taken from an Allianz Motor wording selected at random (policy reference POL284BAAUST 01/06/2010) states the following:
Duty of Disclosure – what you must tell us
Under the Insurance Contracts Act 1984 (the Act), you have a Duty of Disclosure. The Act requires that before a policy is entered into, you must give us certain information we need to decide whether to insure you and anyone else to be insured under the policy, and on what terms. Your Duty of Disclosure is different, depending on whether this is a new Policy or not.
• If you do not tell us
If you do not answer our questions in this way, we may reduce or refuse to pay a claim, or cancel the Policy. If you answer our questions fraudulently, we may refuse to pay a claim and treat the Policy as if it never existed.
Some insurers state they will not meet any claim on a vehicle that is not in good repair and free from rust or hail damage. For example, NRMA (policy code G012979 01/03/2009) states:
Your responsibilities when you are insured with us.
If you do not tell us the following we may refuse or reduce a claim, or cancel your Policy: you change the address where your vehicle is normally kept, you change the way you use your vehicle, you use your vehicle for a driver education course, you hire out your vehicle, your vehicle is not in a condition that meets registration requirements in your State or Territory, your vehicle is not in good order and repair, free from rust, mechanical, hail or unrepaired damage, or any other damage that would make it unsafe you use your vehicle for events relating to a motor vehicle club, bash or charity event.
Most insurers also clearly state their position in respect of what their duty is in the event of damage to a motor vehicle. I provide a few examples below.
Budget Direct Car Insurance (policy reference CAR 12/10/2011)
Repairs To The Car:
Our duty is to return the car to the condition it was in immediately before the damage happened. If we agree to additional repairs, painting or parts which improve the condition of the car, you may have to pay for the amount of the improvement.
Just Car Comprehensive Car Insurance (policy reference J01425 07/09/2011)
Your contribution to repair work:
If the repair of your car leaves it in a better condition than before it was damaged, we may ask you to contribute to the repair cost. If we ask you to contribute we will always explain why, tell you how much it will be and how to pay it.
Youi Car Insurance (policy reference CARPDS 0511 16/05/2011)
Car Cover Exclusion:
We will not pay for repair of any damage that existed prior to the start date of the policy.
I sincerely hope this explains the position on pre-existing hail damage and why it should be so.