Consumer insurance: misrepresentation and avoidance

United Kingdom

An early decision under the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA), where the judgment has recently become available, considered the presumption under section 5 that, where the insurer asks a clear and specific question, the insured will be assumed to have known that a matter was relevant to the insurer. The issue arose in Tesco Underwriting Ltd v Achunche in the context of an application by the insurer for a declaration that it had been entitled to avoid a motor insurance policy under section 152 of the Road Traffic Act 1988.

The insured answered a question in his insurance application confirming that he had no previous driving convictions when, in fact, within the previous five years, he had been convicted of driving without insurance. The insurer’s evidence was that, had the prior conviction been disclosed, it would have charged a much higher premium.

The defendant did not attend the proceedings nor did he provide any evidence to dispute the facts of the matter. The judge therefore held that the defendant’s omission to disclose his conviction had been deliberate or reckless (a careless misrepresentation would not have been sufficient to avoid the policy) and that the declaration should be made. In his judgment he referred to section 5 of CIDRA and the presumption that (a) the defendant would have had the knowledge of a reasonable consumer and (b) that he would have known that a matter about which the insurer had asked a clear and specific question was relevant to the insurer. The judge found that the insurer’s documents had made it “quite clear” that it needed to know about previous convictions and that “most, if not all, road users obtaining insurance would be aware of the importance of disclosing convictions”. Even if there had not been a presumption, the fact that there was “a clear and specific question” in the application form concerning convictions in the past five years to which the defendant answered “none”, made it self-evident that the insured had known what he was doing and the insurer was entitled to the declaration sought.

The statutory presumption under section 5 CIDRA was also considered in Ageas Insurance Limited v Stoodley, a decision of the Bristol County Court.

The defendant, Mr Stoodley, was convicted of causing death by careless driving while over the prescribed limit, in an accident where a passenger died and another sustained a catastrophic injury. Mr Stoodley was not the owner of the car he had been driving.

A number of insurers had potential liability in respect of the claims arising from the accident including:

  1. Insurer A, who issued a policy to Mr Stoodley in relation to a motorhome with an extension covering the driving of other vehicles; and
  2. Insurer B, who issued a policy to Mr Stoodley in relation to a Vauxhall Frontera also with an extension to cover the driving of other vehicles.

Insurer A brought proceedings seeking a declaration that it was entitled to avoid its policy pursuant to the Road Traffic Accident Act 1998 and CIDRA. It argued that, at the time of obtaining the insurance, Mr Stoodley’s wife (acting as Mr Stoodley’s agent) had failed to disclose an accident for which she had been found to be responsible in answer to a question asking whether Mr Stoodley or anyone who would drive the motorhome had been involved in any accidents.

The application was effectively unopposed as Mr Stoodley did not attend the hearing and, therefore, the declaration was granted. Insurer B then sought an order under CPR 40.9 which permits a person who is not a party to an action, but who is directly affected by a judgment or order, to apply to set it aside.

The judge considered that Insurer B satisfied the requirement of being directly affected by the declaration as (a) Insurer B was materially and adversely affected by the judgment; and (b) the effect was direct (as opposed to indirect) given the result was to significantly increase Insurer B’s financial liability.

The judge then turned to assess the merits of setting aside the declaration and whether there was a real prospect of Insurer B obtaining a different judgment. He concluded that, while insurers did not stress the importance of ensuring information was correct, the question regarding prior accidents was “objectively straightforward, clear and specific”.

Referring to section 5 of CIDRA the judge held that any reasonable consumer, in answering a clear and specific question, would know the question was seeking highly important information and therefore should be taken as doing so deliberately. The fact that Mr Stoodley had disclosed a windscreen accident pointed even more to a deliberate failure to disclose his wife’s accident, than mere oversight. The judge was also satisfied with Insurer A’s witness evidence, that it would have regarded the risk as unacceptable had the matter been disclosed, without the need for additional supporting documentation.

As a result, Insurer B’s application failed.


Both cases highlight the statutory presumptions in CIDRA and show that, where an answer is clear and specifically phrased, the courts will be inclined to consider that a reasonable consumer would understand the implications of the question. Absent an explanation to justify an incorrect answer (or omission), the courts are likely to conclude that it was made deliberately. The decisions underline the importance of insurers (particularly of consumer risks) asking clear questions as part of the underwriting process. There have been very few reported cases decided under CIDRA, perhaps unsurprisingly, due to other recourses available to consumers (for example through the FOS). However, in a non-consumer context and given the hardening market, we do anticipate more misrepresentation and/or non-disclosure claims will be brought under the Insurance Act 2015 in the not too distant future.