Courier work on a private car policy: the consumer remedy and the injured cyclist
Daniel holds a private car policy on his Ford Fiesta. The certificate and policy describe the permitted use as 'social, domestic and pleasure purposes and travel to and from a single permanent place of work'. There is no business use and an express exclusion of 'use for hire or reward'. In March Daniel signs up to a delivery app as a self-employed courier and averages 25 drops a week in the Fiesta; he never tells the insurer. Eight years earlier, when the policy started, he mentioned to his broker that he 'might do a bit of driving work'; the broker's file note says only 'social, domestic and pleasure plus commuting'. In June, while delivering a parcel, he pulls out of a side road and injures a cyclist, who claims £68,000 for a fractured wrist and lost earnings. The insurer writes to Daniel saying the policy is void from inception, encloses a cheque for £210 of unused premium and tells the cyclist's solicitor that it has 'no involvement'. Daniel's renewal is due and he asks whether he has to declare the accident.
1. Advise the insurer on the correct remedy against Daniel and whether voiding the policy from inception is justified.
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This is a consumer case, so the Consumer Insurance (Disclosure and Representations) Act 2012 applies, not the 2015 Act. Daniel owed a duty to take reasonable care not to make a misrepresentation. The insurer asked clear questions: the permitted-use description and the hire-or-reward exclusion define the risk, so becoming a paid courier is a misrepresentation about the risk even though nobody asked him directly. The reasonable consumer test judges him against what a reasonable customer would understand from the questions and documents.
Two facts help him. First, the broker was told in year one that he might do some paid driving. The insurer is fixed with what its agent knew, so if the note was lost that is the broker's error, and the insurer should listen to any call recording before pleading misrepresentation. Second, the conduct looks careless rather than deliberate or reckless.
The remedy for a careless misrepresentation is proportionate. The insurer would not have covered courier work; it would have excluded that use and charged more for the rest. The contract is therefore treated as containing that exclusion. The June claim is not covered because the loss arose from the excluded use, but the policy is not void and the whole premium cannot be kept. Avoidance is available only where the insurer would not have written the risk on any terms.
So voiding from inception is wrong: the correct outcome is an exclusion-based declinature, a refund of the premium attributable to the excluded use, and a clear explanation. And yes, the accident is a circumstance he must disclose at renewal.
2. The injured cyclist's solicitor is demanding an answer. Explain the insurer's obligations to the third party and the practical steps it should take.
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The insurer cannot simply say it has 'no involvement'. Compulsory motor insurance exists so that injured third parties are paid, and the insurer holds the certificate.
Under the Road Traffic Act 1988 the insurer may have to satisfy a judgment for a liability that the compulsory cover requires, even where there is no cover as between insurer and insured, and it can then recover from the insured. Avoidance for misrepresentation does not automatically extinguish that: the insurer needs to consider the statutory route by which it can escape liability, and the timing of its avoidance. If the vehicle was not being used on a basis covered by the certificate at all, the injured party's route is the Motor Insurers' Bureau uninsured driver scheme instead - but the insurer should identify which route applies and tell the solicitor, not leave them to guess.
Practical steps: investigate the accident and the certificate; notify the MIB if it considers Daniel uninsured for this use; reply to the solicitor promptly with reasons; if it pays, pursue recovery from Daniel, recognising that recovery is limited by his means; and keep the third-party file separate from the coverage dispute.
On renewal: the accident is a circumstance he must declare, and the insurer should ask a clear question about business or courier use rather than relying on a general description of use.