Not upheld: policy avoidance for careless misrepresentation regarding non-disclosure of car modifications complaint against First Central Underwriting Limited

Decision detail

Summary

Mr J complained that First Central unfairly avoided his motor insurance policy and refused to pay his claim after he damaged his car in an incident with a third party. First Central discovered during claim validation that the car had modifications (an aftermarket spoiler, rear diffuser, and exhaust changes) that Mr J had not disclosed when taking out or renewing his policy in March 2025. Mr J's representative argued the modifications were minor cosmetic parts unrelated to the accident and that First Central had recovered costs from the third-party insurer. The ombudsman applied CIDRA and found that Mr J failed to take reasonable care by not disclosing the modifications, which constituted a careless qualifying misrepresentation. First Central's underwriting criteria showed it would not have offered cover if the modifications had been disclosed, entitling it to avoid the policy from inception and decline the claim. The complaint was not upheld.

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 make misrepresentations when taking out insurance. The ombudsman found that Mr J failed to take reasonable care by not disclosing the modifications, particularly the spoiler and diffuser which were made after the policy inception but before renewal. The misrepresentation was qualifying because First Central's underwriting criteria demonstrated it would not have offered cover had the modifications been disclosed. The misrepresentation was careless rather than deliberate or reckless because Mr J genuinely believed only performance-related modifications needed disclosure. Under CIDRA, First Central was entitled to avoid the policy from the start of the term, refund premiums, and decline the claim. The ombudsman rejected the argument that the modifications were unrelated to the accident or that First Central had benefited financially, noting that underwriting decisions are separate from accident causation and that First Central had not received payment for repairs.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website