Not upheld: policy avoidance for qualifying misrepresentation regarding business use complaint against Tesco Underwriting Limited

Decision detail

Summary

Mr D and Mrs D complained that Tesco Underwriting Limited unfairly avoided their home insurance policy and refused to pay a claim for fire damage. Tesco discovered that one bedroom was being used as a paying salon business, which Mr D and Mrs D had not disclosed when answering the business use question on the policy application. The ombudsman found that the business use question and guidance were clear, and the evidence (including a website advertising the salon, business signage, paying guests, and Mr D and Mrs D's own separate business insurance) demonstrated they failed to take reasonable care in their answer. The ombudsman upheld Tesco's decision to treat this as a qualifying misrepresentation and avoid the policy, declining the claim.

The Ombudsman's reasoning

The ombudsman applied the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA), which requires consumers to take reasonable care not to misrepresent facts when taking out insurance. The question about business use was clear, and the accompanying guidance explicitly stated that paying guests counted as business use. The evidence demonstrated the property was being used for a salon business with paying guests, and Mr D and Mrs D's own arrangement of separate business insurance showed they were aware of the business nature. The misrepresentation was qualifying because Tesco provided evidence it would not have offered cover had it known about the business use. Tesco's decision to treat the misrepresentation as careless rather than deliberate or reckless was fair, and under CIDRA, Tesco was entitled to avoid the policy and decline the claim.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website