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The complainant bought a car from an individual. The next day it was stolen and after the loss was reported to the insurer it was discovered it was a vehicle on which the insurer had previously paid a theft claim made by its previous owner (not the individual from whom the complainant acquired it), following which the vehicle had not been recovered. The insurer rejected the complainant' s claim on the grounds that he had not had good title to the car (since it actually belonged to the insurer once the previous claim was paid) and did not have a proper insurable interest in it. While the insurer' s reluctance to pay a claim for theft of its own property was understood, we demonstrated that the complainant did have title to the car, albeit a title liable to be defeated i.e. it was good against the whole world except the rightful owner, that is the insurer. A defeasible title of this sort is capable of supporting an insurance. The insurer accepted, on legal advice, that the complainant' s policy was valid in contractual terms but indicated that if the claim was pursued and paid it had been advised that it could seek damages from the complainant in a court of law for trespass and conversion in regard to the car. Our view was that the claim should be paid although we warned he complainant of the insurer' s possible subsequent legal rights against him and the chance that these would be pursued. After taking legal advice of his own the complainant decided to continue with his claim on the policy and the insurer was asked to pay. I.O.B. - AR (93) para 7.7 p. 40
I.O.B - AR (93) para 7.7 p. 40 Deception – no claim – insurable interest 4. Stolen car - whether policyholder had insurance interest in car - exclusion for loss by deception - whether recovery of stolen car by true own an insured loss The policyholder purchased her car in May 1995 for £13,000. She insured it comprehensively. However, when she attempted to register it with the DVLA, the police notified her that the car was a stolen vehicle with false documents. The police interviewed the vendor who stated that he had concluded the sale on behalf of a third party. In due course, the vendor was prosecuted. The policyholder submitted a claim for her loss, but the insurer declined to make any payment. It argued that the policyholder did not have good title to the car and that the policy specifically excluded loss by deception from theft cover. Complaint rejected The root cause of the policyholder' s loss was deception and this was confirmed by the vendor' s prosecution for that offence. Her claim accordingly came with the terms of the exclusion. However, we did not accept the insurer' s argument regarding title. In legal terms, she had a defeasible title to the car, that is her title was good against everyone except the true owner. She had purchased the car in good faith and her possession gave her an insurable interest for its full value. Outcome: We supported the insurer' s rejection, but would recommend the insurer to reconsider the claim if the vendor was found to be innocent. BN (97) 11.27 p. 14
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