Moonstone: Unbeknown non-disclosure

Don, one of our regular contributors, raised a very interesting question as a result of a personal experience. I copy the correspondence below. My thanks to Mike Stoker of InsuranceGateway for his valuable response.

I recently bought a "new vehicle" in April 2009, which was then licensed as a 2009 new vehicle. So far so good. I experienced some problems and found out that this vehicle actually "landed" in RSA in Dec 2005 - not a typo. The Vin number, someone confirmed to me was 2005 (not verified).

In good faith I purchased, insured and obtained finance for a 2009 vehicle, and everyone seems to want to convince me that this is now a 2009 new vehicle, even the manufacturer. The vehicle was described in the order form as a "New Vehicle" and in brackets (2009).

Anyway, to cut a long story short, I returned the vehicle and got my money back.

One of the Insurance companies verbally informed me, after a query, that in the event of a write-off they would only have paid a claim based on the 2005 price.

Question 1: What leg would I have to stand on in case this happened?

Question 2: Is there some method of verifying the Vin number to identify the year?

Mike responded as follows:

It is well established case law in SA that the year of manufacture of a vehicle is a material fact, or sorry, is that, the year first registered in SA?

This case demonstrates well though, why I said in my article about the Duty of Good Faith under the heading of The Need for Reform:

“As an industry, here in SA, we too have yet to address the matters of innocent misrepresentation or non-disclosure, where a more proportionate response to complete rejection of the contract could be considered and Insurance law in South Africa still requires disclosure by the insured. Even if questions are asked or a proposal form is completed, the requirement to supply information not requested, still remains.”

“These two issues certainly give rise to unintended hardships and are not a small source of reputational damage suffered by the industry. They could also be key contributors to the cause of a lack of contract certainty surrounding an insurance purchase, from a consumers’ perspective.”

Now, as an alternative to Don’s optimistic hope of only receiving a reduced settlement, imagine if the misrepresentation was construed by the insurer as material and the policy was voided and the claim repudiated in its entirety! In this instance the insurer would only have to refund the premiums paid and Don would at most be able to afford to drown his or her sorrows with some good wine from the Cape.

As an aside, a vehicle registration certificate does not guarantee when the vehicle was made. It records the first year that the vehicle was liable for licensing in South Africa and specifically says in brackets (Not year model).

This then also raises the question of what the responsibility of the broker is when arranging insurance on the vehicle? Is this a rare occurrence, or are there many catastrophes out there waiting to happen? The "reasonable man test" should be the decider, but what will the Ombud rule?