Priya's home renewal: forgotten water claim and a son's police caution
Priya owns a three-bedroom semi-detached house in Bristol. She renews her home insurance online with Thistle Insurance. The annual premium is £480. The proposal asks: 'In the last five years, have you or anyone living at the property made a claim on any home insurance policy?' Priya answers 'No'. She has forgotten an escape-of-water claim for £1,200 made four years earlier at her previous flat, which was insured by a different company. The proposal also asks: 'Has anyone in your household received a police caution or conviction for theft, burglary or fraud?' Her 22-year-old son received a police caution for shoplifting eight months ago. Priya does not mention it because she believes a caution is not a conviction. Thistle would have charged 20% more premium for the prior claim and would have imposed a £500 theft excess because of the son's caution. Two years later, the house is burgled and £18,000 of jewellery and electronics is stolen. Thistle discovers both omissions and declines the claim.
1. Was each of Priya's answers a qualifying misrepresentation under the Consumer Insurance (Disclosure and Representations) Act 2012? Consider the standard of care and the effect of the specific questions.
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A qualifying misrepresentation under CIDRA requires a false statement of fact made before the contract, which induced the insurer to enter the contract. The consumer must take reasonable care to answer the insurer's questions honestly and accurately. The standard is that of a reasonable consumer, not an insurance expert.
The prior water claim is a false answer. Priya forgot it, but a reasonable consumer would check previous policies, bank statements or emails before answering a clear five-year claims question. Forgetting is capable of being careless. The son's caution is also a false answer in substance: the question asked about cautions as well as convictions, and her belief that a caution is not a conviction does not make the answer accurate. The question was specific, and a reasonable consumer would either ask the insurer or disclose the caution. Both statements induced Thistle to enter the contract on the terms it did, because Thistle would have charged more and imposed a theft excess. Both are therefore qualifying misrepresentations. Neither appears deliberate or reckless on these facts: there is no dishonesty, only a failure to take reasonable care.
2. Assume both misrepresentations were careless. Explain the remedy Thistle can apply to the £18,000 theft claim, taking account of the 20% premium increase and the £500 theft excess. Calculate the amount payable.
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For a careless qualifying misrepresentation, CIDRA Schedule 1 gives a proportionate remedy. The insurer must put itself in the position it would have been in had the truth been told. If the insurer would have entered the contract on different terms, those terms are treated as included. If it would have charged a higher premium, it may reduce the claim proportionately. If it would not have entered at all, it may avoid the contract but must return the premium.
Here Thistle would have imposed a £500 theft excess, so the contractual amount before the premium remedy is £18,000 − £500 = £17,500. It would also have charged 20% more premium: £480 × 1.20 = £576. The proportionate fraction is £480 ÷ £576 = 0.8333. Applying that to £17,500 gives £14,583.33. Thistle would therefore pay about £14,583. If the reduction were applied to the gross £18,000 before the excess, the figure would be £15,000 − £500 = £14,500, but the better view is that the excess is a term of the contract and applies first. The insurer must prove what it would have done; it cannot simply choose the most favourable calculation.
3. How would the analysis change if Thistle would not have insured Priya at all had it known about the prior claim?
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If Thistle would not have insured Priya on any terms, the remedy is avoidance under Schedule 1: the insurer may treat the contract as never having existed and refuse the claim, but it must return the premium. That is different from the proportionate reduction. The insurer would need evidence of its underwriting stance, such as its guidelines or a statement from the underwriter. The fact that it would have charged more for one omission does not automatically mean it would have declined for the other; each misrepresentation must be assessed separately. If Thistle would have declined because of the prior claim but would still have insured if only the son's caution had been disclosed, the remedy would depend on which misrepresentation induced the contract. The consumer's remedy would then be the return of premium, not payment of the £18,000 claim.