Chapters

Exclusions Under Car Insurance

Some of the more common exclusion clauses prescribed in the regulations under the Insurance Contracts Act under this heading include the following:

  • “Policy to be invalid while the car is in an unsafe or unroadworthy condition”. Some of the more reasonable policies say that this exclusion does not apply if the defect could not reasonably have been detected by the insured, or if it can be proved that the defect had nothing to do with the accident;
  • “Policy to be invalid if car is being driven by an unlicensed driver” (unless the insured can prove the car was being driven without consent);
  • “Policy to be invalid if driver is driving while intoxicated” (unless car is being driven without insured's consent), although the insurer cannot exclude liability for conviction of a breathalyser offence alone (see under Traffic and Parking Offences in volume 9);
  • “Policy invalid if car used for particular businesses, or for hire, or reward”. Those in ‘high risk’ occupations (such as travelling salespeople, stock and station agents, driving instructors) are required to pay higher premiums for car insurance, and should not attempt to save money by misrepresenting their occupations. The ‘hire or reward’ exclusion has, on occasion, been waived by state transport ministers seeking to reassure people providing a car pool during public transport strikes. A court has held that an arrangement to provide a ride for another car owner, in the expectation that they would reciprocate, amounts to use of the car for hire or reward. It would, however, be a brave insurance company that relied on such an exclusion if an accident did occur during a public transport strike.

In addition, insurance offered to people renting cars is invariably confined to use of the car by named drivers. Accessories (such as radio, cassette player or air conditioning) are not usually insured unless specifically listed. Also the insurer must often approve all repairs, or repairs over a certain value.

Exclusion Clauses in House and Contents Insurance

Two of the more common exclusion clauses prescribed in the regulations under the Insurance Contracts Act Regulations under this heading are as follows:

  • Storm and Tempest policies usually exclude damage caused by sea, tidal wave, high water, flood, erosion, subsidence, landslip, and damage to retaining walls;
  • Some policies say they are conditional on the insured having insured the house and contents for their full value. Failure to comply with this condition could allow the insurer to refuse a claim. If it is complied with, the effect of an ‘averaging’ clause can be avoided (see below).

At common law, a breach of a condition or a warranty might have meant that the insured had no claim against the insurance company, whether or not that breach had anything to do with the loss that was suffered. Again the Insurance Contracts Act changed these rules. Sometimes, an insured can obtain an order from a court excusing their failure to comply with a condition or a warranty, and the insurer can usually only refuse to pay if there is some connection between the breach and the loss.

Because the insurance policy is a contract of the ‘utmost good faith’, the insurer can avoid the whole policy if there has been a fraudulent claim. A highly exaggerated claim about the value of insured goods may be held to be fraudulent. In any dispute that leads to a court case, this will be a question of fact to be decided by the trial judge, or (sometimes) by the jury. The duty of good faith still exists at the time of making the claim, and many of the questions asked in the proposal form will be asked again in the claim form.

If you reside in a flood prone area, you should insist on a policy which covers damages by flood.

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