Legal Opinion for Mr. Nawa Mubita

TO: Mr. Nawa Mubita FROM: Trainee Solicitor DATE: 24 October 2023 RE: Insurance Claim for Mercedes Benz, registration ABV 2X

Introduction

1. This legal opinion addresses the refusal by “Come Easy” insurance company to indemnify you for the loss of your Mercedes Benz following a road traffic accident. The insurer’s refusal is based on the grounds that you did not disclose material facts when the policy was executed.

1. The purpose of this opinion is to advise you on:

a) What constitutes “material facts” in the context of your insurance policy; b) The potential defences available to “Come Easy” if you were to bring a legal action against them; and c) The likely prospects of success in such an action.

1. This advice is based on the law of England and Wales. The core legal issue concerns the duty of disclosure owed by a consumer to an insurer, which is governed by the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA).

The Consumer's Duty of Disclosure

1. Historically, all insurance contracts were based on a duty of ‘utmost good faith’. This required the person seeking insurance to volunteer all ‘material facts’ known to them, even if the insurer did not ask about them. A failure to do so allowed the insurer to avoid the contract.

1. However, the law for consumers was reformed by CIDRA. As you took out the insurance for a private car, you are classified as a ‘consumer’, and this Act applies to your policy with “Come Easy”. Under CIDRA, the old duty to volunteer information no longer exists. Instead, a consumer has a duty ‘to take reasonable care not to make a misrepresentation’ to the insurer before the contract is entered into.[^1]

1. This means your legal position depends not on what you failed to volunteer, but on the answers you gave to the questions “Come Easy” asked you. A misrepresentation is an incorrect statement. The insurer’s defence will only be valid if they can prove that (1) you were asked a question, (2) your answer was incorrect, and (3) you did not take reasonable care in giving that answer.

What Constitutes a "Material Fact"?

1. The phrase “material facts” relates to the old law. Under CIDRA, the key concept is a “qualifying misrepresentation”. A misrepresentation is ‘qualifying’ if the insurer can show that, without that misrepresentation, it would have acted differently.[^2] Specifically, the insurer must show that had it known the true facts, it either would not have entered into the contract at all, or would have done so on different terms (for example, by charging a higher premium or including a specific exclusion).

1. In your case, the relevant facts discovered after the accident were:

a) The car’s brake pads were “finished”. b) The car had not been serviced for two years. c) Many of its parts “could not hold”.

1. These facts are undoubtedly significant. They relate directly to the roadworthiness of the vehicle and substantially increase the risk of an accident occurring. A prudent insurer, if aware of these issues, would almost certainly have acted differently. They would likely have refused to provide cover until the vehicle was serviced and repaired, or at the very least charged a much higher premium. Therefore, if you made an incorrect statement about the car’s condition or service history, it would almost certainly be considered a “qualifying misrepresentation” because the true facts would have influenced the insurer’s decision to offer you a policy.

The Potential Defence for “Come Easy”

1. “Come Easy”’s main defence will be that you made a qualifying misrepresentation. To succeed, they must establish several points.

Was a Misrepresentation Made?

1. The first step for the insurer is to prove that you made a misrepresentation. This depends entirely on the questions you were asked when you applied for the insurance. For example, you may have been asked:

• “Is the vehicle in a roadworthy condition?”
• “Does the vehicle have a full and up-to-date service history?”
• “Are you aware of any defects with the vehicle?”

1. If you answered “yes” to the first two questions, or “no” to the third, your answers would be misrepresentations, as the facts later showed the car was not roadworthy and had not been serviced for two years. If, however, “Come Easy” did not ask you any specific questions about the car's mechanical condition or service history, you cannot have made a misrepresentation and their defence will fail. The burden of proof is on the insurer to show what questions were asked and what answers you gave.

Did You Take Reasonable Care?

1. If a misrepresentation was made, the insurer must then show that you failed to take reasonable care. The standard is that of a ‘reasonable consumer’.[^3] This is an objective test, but the Act states that the specific characteristics of the consumer should be taken into account if the insurer was, or ought to have been, aware of them.[^4]

1. You had just purchased the vehicle. A reasonable consumer is not expected to be a qualified mechanic. However, a court might consider that a reasonable consumer purchasing a car for an admittedly “exorbitant price” would at least ask to see the service history or documentation. If you were asked about the service history and confirmed it was complete without having checked the service book, this could be seen as a failure to take reasonable care. Conversely, if you had no reason to suspect any problems with the car, it might be argued that you did take reasonable care by answering to the best of your knowledge at the time.

The Type of Misrepresentation

1. Under CIDRA, the insurer’s remedy depends on the type of misrepresentation.

• Deliberate or Reckless: This is where you knew the statement was untrue or misleading and knew it was relevant to the insurer.[^5] Based on the facts, this is very unlikely. There is no evidence to suggest you deliberately misled “Come Easy”.
• Careless: This is the most likely category. It applies to any misrepresentation that is not deliberate or reckless.[^6] If you answered a question incorrectly because you made an assumption or did not check the facts (like the service history), it would be classed as a careless misrepresentation.

Advice on Your Prospects of Success

1. Your chances of success depend heavily on the evidence regarding the questions you were asked by “Come Easy”.

1. If “Come Easy” cannot prove they asked you about the car’s condition or service history, their defence will fail. In that scenario, you were under no duty to volunteer the information, and your claim for indemnity should succeed.

1. If “Come Easy” can prove you made a misrepresentation carelessly, their remedy will be determined by what they would have done had they known the truth.[^7]

• If they would have refused to insure the car altogether, they are entitled to avoid the policy and refuse your claim. In this situation, they must return the premium you paid.[^8] Given the serious nature of the defects (finished brake pads, no service for two years), this is the most probable outcome. An insurer would be highly unlikely to take on such a risk.
• If they would have still offered insurance but charged a higher premium, they could proportionally reduce your claim payout.[^9] For instance, if the premium would have been double, they would only have to pay 50% of your claim. This is less likely given the severity of the defects.
• If they would have included a specific term in the policy (e.g., excluding claims arising from mechanical failure), the policy can be treated as if that term was included.[^10] This would also result in your claim being denied.

1. Therefore, if a careless misrepresentation is established, it is very likely that “Come Easy” would have refused cover. This would allow them to avoid the policy and reject your claim, although they would have to refund your premium. On this basis, your prospects of success are unfortunately low if you were asked about, and misrepresented, the condition of the vehicle.

Conclusion

1. In summary, the success of your claim hinges on a question of fact: did you make a misrepresentation in response to a direct question from “Come Easy” when you took out the policy?

• The condition of the car and its lack of service history are "material facts" in the sense that they would have influenced an insurer’s decision to offer cover.
• If you were not asked about these matters, your claim should succeed.
• If you were asked and gave an incorrect answer, even without intending to mislead, it is likely to be a careless misrepresentation. In this case, the insurer would probably be entitled to avoid the policy and refuse your claim because they would not have insured such an unsafe vehicle had they known its true condition.

1. I would advise you to locate all documentation relating to your application for this insurance policy to see what questions were asked and what information was provided. This will be crucial in determining the strength of your position.

— Disclaimer: This legal opinion is based on the facts provided and represents our initial assessment of the legal position. It is not a substitute for comprehensive legal advice.

[^1]: Consumer Insurance (Disclosure and Representations) Act 2012, s 2(2). [^2]: ibid s 4(1). [^3]: ibid s 3(2). [^4]: ibid s 3(4). [^5]: ibid s 5(2). [^6]: ibid s 5(3). [^7]: ibid, sch 1. [^8]: ibid, sch 1, para 2. [^9]: ibid, sch 1, para 7. [^10]: ibid, sch 1, para 8.

Bibliography

Legislation

Consumer Insurance (Disclosure and Representations) Act 2012