The Dispatch Van That Was Insured as a Private Car
Kunle Ade owns a Toyota Hiace registered as a private vehicle and insured comprehensively with a sum insured of ₦12m, a ₦3m third-party property damage limit and a ₦150,000 excess. The proposal describes use as 'private/social'. In fact, Kunle runs a dispatch business: the van carries paid customer parcels across Lagos daily. On 2 September the van, driven by Musa, whose driver's licence expired in June, was carrying 1.6 tonnes although the manufacturer's limit is 1.0 tonne. It collided with a Lexus on the Third Mainland Bridge. The repair estimate for the Hiace is ₦7m; the Lexus repair is ₦5m and its owner claims that amount. A pedestrian suffered a fractured femur, with medical costs of ₦4m and a likely award of ₦6m. Customers' parcels worth ₦2.5m were destroyed and two customers are demanding compensation. The investigator confirms the business use, the expired licence and the overloading, and finds the rear tyres were below the legal tread depth. Kunle says his agent knew about the dispatch business.
1. Can the insurer repudiate the own-damage claim? Discuss misdescription, the expired licence, overloading and the agent's knowledge, and calculate what would be payable if the claim were covered.
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Private/social use versus a daily paid dispatch business is material: it changes accident exposure and premium, and the proposal was wrong. The expired licence breaches the 'licensed driver' condition; an expired licence is not a valid licence, although a court may be sympathetic if renewal was in progress. Overloading and bald tyres support negligence and causation arguments but are not essential.
The agent's knowledge is the strongest counter. If the same agent completed the proposal, knew of the dispatch business and was acting for the insurer, that knowledge may be imputed and the insurer cannot avoid. If the agent was the insured's intermediary, knowledge may not bind the insurer.
Recommendation: obtain the agent's file and statement. If knowledge is proved, pay; if not, repudiate own damage and refund any premium due.
If covered: 12 ÷ 15 = 0.8; 7 × 0.8 = ₦5.6m; less ₦150,000 excess = ₦5.45m. The customers' parcels are not covered by a motor policy.
2. Must the insurer meet the third-party claims? Can it recover from Kunle? How much of the Lexus and pedestrian claims falls on Kunle?
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Third-party liability is different. The Motor Vehicles (Third Party) Insurance Act requires the insurer to satisfy judgments for bodily injury and property damage arising from the insured vehicle, and restricts avoidance against third parties based on the insured's misrepresentation. The insurer should therefore handle the pedestrian and Lexus claims, then pursue Kunle for recovery.
Lexus: the policy limit is ₦3m. The insurer pays ₦3m; Kunle bears the ₦2m balance, subject to the excess. The ₦5m repair does not increase the limit.
Pedestrian: the ₦6m award plus ₦4m medical is a bodily injury liability. The ₦3m figure is the property-damage limit; bodily injury is not capped by it. The insurer must meet the judgment and then recover from Kunle. Check the schedule for any aggregate limit.
Parcels: destroyed customer goods are not third-party road users. They require goods-in-transit cover, which was not purchased. Kunle is personally liable to the customers.
Advise prompt payment to third parties, recovery proceedings against Kunle, and a declaration on indemnity. Report the expired licence and overloading in the recovery file.
3. How should the insurer handle the agent's claim that he knew of the business use, and what evidence would settle the point?
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Treat the assertion as a coverage issue, not a conversation. The agent's knowledge binds the insurer only where the agent was acting within authority for the insurer and the knowledge was acquired in that role. Obtain: the agent's agency agreement and authority limits; the completed proposal and any covering email; the agent's file notes; premium records showing commercial-rated or private-rated premium; and a signed statement from the agent.
Check whether the insurer issued the certificate without querying the vehicle's registration class or the described use. If the agent completed the proposal on the insurer's form and the insurer accepted it, the insurer may be fixed with the knowledge. If the agent was merely the insured's intermediary, the knowledge does not bind the insurer.
Document the conclusion. If the evidence is equivocal, do not repudiate on suspicion; negotiate or pay and reserve rights. If knowledge is proved, the own-damage claim is payable on the average calculation and the insurer should correct the policy going forward.