Upheld: unfair claim decline - strict application of policy terms complaint against AMERICAN INTERNATIONAL GROUP UK LIMITED

Decision detail

Summary

Mrs M purchased an excess reimbursement policy for a car rental that she extended twice, renewing the policy each time. When she damaged the rental car on 17 July 2025, she claimed the £1,500 excess. AIG declined the claim citing a 2-hour gap between the first renewal expiring on 18 July 2025 and the second renewal starting on 19 July 2025, arguing this breached the continuous cover requirement. The ombudsman upheld Mrs M's complaint, finding that she had continuous cover when the damage occurred and that AIG was not prejudiced by the gap, which occurred after the date of loss. AIG was directed to pay the £1,500 claim plus 8% interest and £150 compensation.

The Ombudsman's reasoning

While the continuous cover requirement is a common and not inherently unreasonable policy term, the ombudsman found it unfair to apply it strictly in these circumstances. Mrs M had renewed her policy such that the entire rental period was covered, and the damage occurred on 17 July 2025 when the first renewal was in place. The initial mismatch between the first policy dates and the rental agreement dates was corrected before the incident occurred, so AIG was not prejudiced. The gap between the first and second renewal occurred after the date of loss and therefore cannot fairly be used to decline a claim for an incident that happened before that gap. The ombudsman also found Mrs M's delay in submitting the claim (28 August 2025) was reasonable given AIG's own requirement that she provide a credit card statement showing the excess charge.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website