Obligations on insurer of "Utmost Good Faith"

[bed32]

I know this is going slightly away from the main focus of the CAG - but it seems that this is another area where the large companies are regularly in breach of their contract with consumers.

I am at the moment trying to speed up the processing of a claim for theft with my insurance company. As part of this I am trying to find out what obligations are placed on the insurer because the contract is one of "utmost good faith".

Although the claim is only about 10 days old so far I am already getting the usual run around. Poor communication, contradictory statements from the claims department and the introduction of reams of stages into the claims process (including having to ask for the Crime Report) that I regard as unreasonable and likely to cause long delays.

Does anyone here have any experience or insight into whether "utmost good faith" does indeed place any obligation on the insurer in terms of how they handle claims?

I am so annoyed by their behaviour that unless they respond very quickly I will consider pursuing them through the small claims court to reclaim my out-of-pocket expenses (mainly car hire while they are procrastinating) so I am also keen to know of anyone who has made such a claim against their own insurer

[Trojan1401]

I don't think that any such delay or handling of the claim could be a breach of this principle of insurance. This refers to the binding of a contract of insurance where each party has a duty of disclosure.

What were the circumstances of the theft ? Has the vehicle been recovered ? There may be delays if circs not too clear or not yet recovered.

If you cam explain in more detail, perhaps one of the claims gurus may be of assistance

[xrchris]

Originally Posted by Trojan1401

What were the circumstances of the theft ? Has the vehicle been recovered ? There may be delays if circs not too clear or not yet recovered.

If you cam explain in more detail, perhaps one of the claims gurus may be of assistance

Details here Privilege Claim for Theft

I agree with the UGF, this is mainly to do with the formation/terms of the contract.

[bed32]

That would seem to make the principle totally one sided - but perhaps that is the case.

In this case I think I could win a court case (and let's hope it doesn't get to that) without going anywhere near "utmost good faith".

Specifically their policy says that repairs can be started immediately - and doesn't seem to have any clauses at all that would enable them to delay the repairs - I am just wondering if "utmost good faith" can limit the insurance company to impose drawn out claims procedure on the grounds that that should have been disclosed when the policy was taken out.

In this case the thief broke into our house, stole the keys and drove away in the car which was recovered undamaged in a car park a few hours later. As there is no damage and the only work that needs doing is replacing the locks. The ins co won't let me drive the car while they are processing the claim and are now saying that it could take a further 4 weeks before they can authorise the claim. They won't even let me get the car repaired my self and claim the money back from them - even though the policy says I can!

This is still in the early days of a claim/complaint but as I need a car I have had to hire one so that is costing - and I intend to try to get the company to pay for that on the grounds that they are unreasonably delaying the process. I will really wait until they have responded to my complaint before deciding whether I do have grounds to take things further

[Trojan1401]

On the face of it, this is pretty straight forward and there appears to be no raeson for any further delay. The only isuue could be availability of parts, but I doubt it.
First of all, ring the Insurer (claims dept) and insist that you speak to the claims manager i.e. someone who knows what they are doing !!! Explain situation & demand immediate repair authority. If that cannot be done at the garage where it is, get your own garage to pick it up and arrange repair. The vehicle is still your property. That way, it will be in their custody so any loss prior to repair will be on their insurance.

For a simple replacement lock claim, this is totally unreasonable.

Doing it this way, you will have a far better chance of full recovery (minus excess ) from "under"priviledge than for hire costs.

I appreciate insurers must be cautious where theft claims are made when keys are involved however as the vehicle was recovered, I cannot see any further reason for delay.

[bed32]

Originally they refused even to let me do pick up the car but I kicked up a fuss and the car is now with the MB dealer awaiting parts. I will then have the car back and can concentrate on dealing with these jokers.

In the meantime they continue to mess about with the claim. After telling me twice on the telephone that certain forms had been dispatched on 27th March they finally turned up on 4th April dated 2nd April - included in what they have demanded to process the claim include a recent photograph of the car, all the car keys, the insurance document, the original of the receipts and VQ5. None of which seem at all relevant to processing a claim for new locks!

[Trojan1401]

Happy to hear things are progressing albeit slowly.

I would ask the dealership to e-mail photps of the car to the claims dept + pro-forma invoices also the final invoice. Do not at this stage send your insurance cert - they don't need it ! Also why the V5, this is only requested when a vehilce is either written off or stolen not recovered.

Agree with the keys though.

Can only think these guys are stalling. Ring them up and ask them why - speak to the organ grinder though.

[bed32]

I should be able to pick the car of from MB on Tuesday, but by that time I will be about £2000 out of pocket. Then it will be a case of claiming that money back from Privilege. Luckily I can easily afford to be without that £2000 for as long as it takes.

I have already spoken to someone claiming to be the "acting branch manager" at their Croydon Branch (which is their head office) - she won't let me escalate any higher by telephone so I am now writing a second written complaint. I look forward to getting their response. This

Once I have the car back there is no time pressure from my side so I will pursue this by the "proper channels" of first their internal complaints procedure, then the Insurance Ombudsman and FSA and finally the courts.

At this stage they are not getting the original of anything - too easy for them to get misplaced in their internal system, and I am certainly not returning the schedule.

The car was with their repairs for over a week before I collected it so they had ample time for their engineers to assess its condition (as indeed they did) so any request for photographs is totally unreasonable.

Not sure what you mean about the keys - surely you don't think that they are reasonable in asking for them?

[Trojan1401]

Bed32,

Reason I suspect thay are asking for all sets of keys is purely security to ensure they are destroyed, I doubt anything sinister here.

As for photograhs - yes their engineers should have a report & also on video/digi camera as they all do this now.

Good luck on this - keep us informed.

[bed32]

Originally Posted by Trojan1401

Bed32,

Reason I suspect thay are asking for all sets of keys is purely security to ensure they are destroyed, I doubt anything sinister here.

None of it is sinister - just incompetent (although that might be worse).

I'm not sure how destroying our keys would be a security measure since the thief will still have a set.

These keys are pretty expensive (£100 each) and do not need to be replaced so returning them to Privilege will just add another £200 to the billl!

[xrchris]

Originally Posted by bed32

These keys are pretty expensive (£100 each) and do not need to be replaced so returning them to Privilege will just add another £200 to the billl!

I am puzzled why you believe this will increase the claim cost by £200?

If you are claiming for lock replacement then surely you will also receive new keys otherwise there would be no point in replacing the locks in the first place.

[bed32]

Originally Posted by xrchris

I am puzzled why you believe this will increase the claim cost by £200?

If you are claiming for lock replacement then surely you will also receive new keys otherwise there would be no point in replacing the locks in the first place.

The key consists of two separate pieces. One is a little bit of metal that operates the physical lock in the door - which you never use.

The other is the fancy electronic bit (price £100 ) that operates the remote locking, the alarm and starts the ignition; each of those keys is individually coded and it is the car that knows which keys are valid.

It takes the engineer 5 minutes to disable a stolen key - without that the thief will have physical access to the car but will not be able to disable the alarm or start the engine.

Had I just lost the key I would just have had the lost one removed from the car's memory and bought a replacement. It is only because the thief had deliberately targetted the car that I felt (and the ins co agreed) that it was worth replacing all the locks.

[MrMatteh]

As someone working in Insurance Claims...

The rule of "Utmost Good Faith" really only applies when your are asking for a quote for insurance, not really at the 'claims' stage - as at that point that you are making a claim you have already agreed to the terms of the policy (which normally states you have to substantiate your own claims, provide police reports, etc..)


A bit of background...

In general contract law the principle "caveat emptor", let the buy beware, applies. This is because the contract usually covers an item that is available for inspection by the buyer. In insurance contract law this principle is almost reversed because the principle of "uberrima fides", utmost good faith, applies.

This was defined in 1766. "Insurance is a contract based upon speculation. The special facts, upon which the contingent change is computed, lie most commonly in the knowledge of the insured only..."

Utmost Good Faith places the duty of disclosure of all material facts about the risk on the proposer for the insurance.

The definition of a material fact has been the subject of legislation. In summary the definition is considered to be "the proposer should disclose any fact that would affect the judgement of a prudent underwriter when deciding whether to or at what rate to accept the risk."

This is necessary because during the underwriting of an insurance contract the underwriter knows less about the subject matter of the insurance than the proposer. The insurer is highly reliant on the information supplied by the proposer to be able to effectively assess the level of risk presented.

Although the duty of utmost good faith rests more heavily on the proposer, the insurer still has a duty not to make untrue statements during the formation of the contract.

The final definition of what is a material fact will rely on interpretation by a court of law. In making their decision the court will take the perspective of the professional underwriter rather than a lay person. This means that the proposer needs to carefully consider whether a fact should be disclosed on a proposal.

As someone who does claims all day every day, I can honestly say that in our department we work to the policy wording. If the wording clearly states that a Policyholder must substantiate their own claim or provide a police report - then that is what we expect. If, for example, their is a *good* reason for not having a police report, we can enter a 'rationale' onto the claim and make a settlement.

Hope this has helped.

Matt.

[bed32]

Originally Posted by MrMatteh

As someone who does claims all day every day, I can honestly say that in our department we work to the policy wording. If the wording clearly states that a Policyholder must substantiate their own claim or provide a police report - then that is what we expect. If, for example, their is a *good* reason for not having a police report, we can enter a 'rationale' onto the claim and make a settlement.

Hope this has helped.

Matt.

The problem with these clowns is that they take the position "the claims process is whatever we define it to be" - and they don't feel that they are bound by the wording of their policy that says "Repairs can start immediately" (little scope for varied interpretations of those words).

Having looked into things further the real problem seems to be that even if they are in breach of "utmost good faith" (as I'm sure they are) then the only remedy that seems to be available is to avoid the contract - and of course from the perspective of the insured just avoiding the contract is not really an appropriate remedy.

So it seems that "utmost good faith" actually is of no significant benefit to the insured.

In my case it must be worth going through the FSO first and then if necessary through the courts for breach of contract and breach of the Data Protection Act (which they've also done).

[MrMatteh]

Could be a good idea. I would firstly recommend telephoning through to the claims department and demanding to speak to the manager. If you dont get a satisfactory response from them, then tell them your contacting the FOS (Financial Ombudsman Service) and see what reaction that gets.

From experience, the FOS will not deal with complaints until you have followed the complaints procedure with the company you are claiming - this should be detailed within your policy booklet.


Matt

[bed32]

Originally Posted by MrMatteh

Could be a good idea. I would firstly recommend telephoning through to the claims department and demanding to speak to the manager. If you dont get a satisfactory response from them, then tell them your contacting the FOS (Financial Ombudsman Service) and see what reaction that gets.

From experience, the FOS will not deal with complaints until you have followed the complaints procedure with the company you are claiming - this should be detailed within your policy booklet.


Matt

I've already tried to pursue a formal complaint with Privilege with very limited success. They do not have a complaints process that complies with the FSA requirements (for example they have not been able to provide me with details of what their complaints process is) you should have heard how shirty they got with me when I started quoting FSA requirements at them (since I work in an FSA regulated environment I have some familiarity with them )

I think it has got to the stage where I can now escalate that to the ombudsman. I will certainly send a formal complaint to FOS shortly - and include in the complaint a point about the inadequacy of the complaints process. The worst they can say is that I have to wait for a further 3 weeks until the 8 week period has elapsed.

Meanwhile I am also going to take this up with Information Commissioners Office. One of the jems that I discovered was that they had deliberately refrained from recording certain important information that I had given them over the phone, and then used the fact that that information was not on record to justify further delays!

[LittleMissSunshine]

Hello Bed 32


As I am helping