Treat insurers with caution Stand your ground
Know your obligations
High Court found.
High Court judge David Gendall said: ‘‘The plaintiff alleges that withholding the June 2011 report ... which, although only a brief report, did recommend a rebuild of the house, is a serious breach of the defendant’s obligation of good faith. I agree.’’
Young’s battle has established precedent insurers must take notice of. But there’s another story here.
Imagine what would have happened if Tower had caught Young having hidden something from it, breaching his duty of utmost good faith to it.
The Insurance Council of New Zealand, says on its website: ‘‘An insurance policy is a contract of ‘utmost good faith’ between the insurer and the customer. The insurer is required to observe and honour the contract conditions. The customer is required to disclose to the insurer all material facts that could affect the risk.’’
One contract condition is to cooperate at claims time, which certainly does not include concealing important information.
Failing to act with utmost good faith may ‘‘jeopardise’’ a policyholder’s insurance cover, says the Insurance Council.
What does jeopardise mean? Well, when an insurer finds a policyholder has failed to act in the utmost good faith, it may be in its rights to ‘‘avoid’’ its policy, which means to tear it up.
In addition, it may decide to enter the policyholder’s name on the Insurance Claims Register, which insurers check before deciding whether to issue policies.
Effectively, it is a black list developed by insurers to protect themselves from dishonest people, but it is an unregulated register.
They are dubbed an insurance fraudster and may not be able to get insurance again.
If you can’t get insurance, you can’t get a mortgage.
Had Young not acted in utmost good faith, as the High Court found Tower had, he would have been in an awful lot of trouble.
What happens to an insurer which has breached the duty of utmost good faith?
It has a moment of embarrassment, and then moves on with its commercial life.
It has strengthened my belief that New Zealand needs a specialist insurance court to deal rapidly and publicly with disputes.
It’s time to make it easier for the little guy.
Greg Young sued Tower Insurance, and won.