14

Suppose one phones an insurance company and arrange and pays for car insurance. One then receives the documentation and there is an additional clause that was not mentioned that invalidates the insurance. Is this clause valid?

The story that prompts this question is real, but I am not asking for advice as I have solved the problem with communication. I just wonder what would have happened had I said nothing.

I just phoned my insurance company to arrange my car insurance for next year. We went through all the details and I was about to accept the offer when I mentioned that my brother was visiting from the US. At that point the salesperson informed me that the insurance would not cover my brother, as they must be resident in the UK. At no point prior to this had they mentioned such a requirement. I therefore declined their offer. I have done this many times before an it has not been an issue. However had I not mentioned this I would have accepted the offer. They may well have sent me a verbose contract with that term in there, but I may not have read it and my brother would have driven the car assuming they were insured.

If this had occurred would my brother have been insured?

From answers it seems it may be relevant how frequent such a clause is. I have two old car insurance contracts and neither mention such a residence requirement. I have found many more "Certificate of Insurance" with my brother as a named driver and they make no mention of the requirement. It is those that must be shown to the police on request to prove one has insurance. I have found a policy document online that does not appear to mention such a requirement.

4
  • If this is the UK an insurance company has to supply you with an insurance certificate. This is your essential proof of insurance which, together with your driving licence, a police officer can ask you to produce - or if you don't have it with you to take it to a police station within 3 days. The insurance certificate will state who is eligible to drive the vehicle. It could be "any driver", or the names could be listed. But the certificate has to be clear in this regard. I WOULD NEVER drive a vehicle, or allow anyone else to drive one that I owned without checking the certificate.
    – WS2
    May 30, 2023 at 8:09
  • Driving a vehicle without third-party insurance on UK roads is a very serious offence. (If you are unfortunate enough to knock someone down and kill them, and you are uninsured - heaven help you!) People have become lax about certificates since it became the practice for insurers to notify DVLA when insurance is effected. The police tend to rely on that and can see immediately which vehicles are insured. But it is no guanantee to anyone that a particular driver is covered.
    – WS2
    May 30, 2023 at 8:14
  • @WS2 This is the point. The insurance certificate names my brother, and has no mention of residency requirement. To find that they are not covered you would need to examine the fine print of the contract, and this clause is certainly not universal (as I say, I have checked 2 full policy documents and many insurance certificates and I have not found such a restriction).
    – John
    May 30, 2023 at 8:18
  • My wife's family are Malaysians, and when any of them are here and need to drive, I always get confirmation from my broker that they are covered. It is something worth being clear about when you add anyone's name to a policy. This is one reason I always work through a broker - they are easier to deal with than insurance companies. It is always best to assume non-UK licence holders are NOT covered, unless you get specific confirmation.
    – WS2
    May 30, 2023 at 8:22

3 Answers 3

11

In any sane jurisdiction, the clause would hold.

By and large, the legal fiction is that one has read and agreed to execute the entirety of the contracts they signed. If it was otherwise, no contract of substantial length would ever be enforceable upon individuals; yet such contracts are routinely offered and enforced (look at the terms&conditions of any internet website that sells stuff).

It is absolutely normal that a phone sale would gloss other minor details of the contract, and implicitly refer to the written text for the finer points. If the specific point had been raised in the phone call, and the salesperson erroneously told you X when in fact the contract read Y, you might have a case, but even then it is not necessarily a strong one (you signed the contract after having called; you might have changed your mind when reading the actual text, and you paying the insurance monthly bill is evidence that you agreed with the contract as-formed).

There are some exceptions to that general principle:

  1. General conditions of validity of a contract. For instance, in , a contract must have a "definite and legitimate content". If we sign a contract for "a few apples against a few euros", and then I give you five apples, you owe me zero euros because the contract was not specific enough to be enforceable. If the whole contract is unenforceable, the clause falls with it.
  2. General conditions of a validity of a clause. Specific clauses can be invalidated without bringing down the whole contract (for instance, "in case X fails to perform their obligations under clause 70Z, Y is allowed to take a pound of flesh from X").
  3. Specific conditions on certain clauses. Consumer laws in some jurisdictions make certain clauses of certain contracts either invalid entirely, or only valid if they were read aloud to the prospective buyer, or only valid in certain forms. (For instance, in France, a sale of real estate between individuals must be notarized.)

I would be extremely surprised if the rule in the OP’s example (residence condition to bring another driver on the insurance policy) would fail under any of those.

6
  • 2
    Your claim of "any sane jurisdiction" is false. In the UK, just for example, the company have a duty to accurately inform you about the contract; they cannot sneakily hide things in the small print and use that to get out of stuff. Whether that would apply in this particular case, I have absolutely no idea. May 27, 2023 at 16:25
  • @JackAidley In the context of this story, it sounds like you're claiming that the company representative on the phone must verbally inform you of every single clause in the contract. Is that your claim? Although, your uncertainty that it would apply in this case doesn't make much sense, if so.
    – Corrodias
    May 27, 2023 at 18:48
  • 1
    @Corrodias: I'm breaking down the question; I can't make a full answer but there's some details here. Insurance can generally be obtained over the phone and there's some oddball here where when the paper contract shows up a few days later after there have been actions taken in reliance of the policy already and an unexpected term invalidated it.
    – Joshua
    May 27, 2023 at 21:35
  • 3
    @Corrodias No, it's not every clause, but they can't hide a subtle restriction in the small print and have it stand up in court. The presumption is that ordinary people won't completely read and understand the small print and so clauses can be considered "unfair" or not in "good faith" if they don't fairly reflect the plain language communication with the customer. May 28, 2023 at 7:10
  • 1
    @JackAidley "Only UK drivers are covered" doesn't sound like something that would fall under what you're talking about. 99.9% of all UK drivers will never have a non-UK driver driving the car, so if that clause has to be mentioned then it sounds like virtually all of them do. May 29, 2023 at 17:53
9

Aside from what others have mentioned, there are a few more barriers to you making a successful claim due to not having been able to read the contract yet.

First is what is reasonable and customary in the market. If the "no non-residents" clause is boilerplate language found in virtually any auto insurance contract, then you would have no standing to say that as a consumer you were reasonable to presume it would be in this contract.

Second, you had a question in your mind about a non-resident visitor being insured if you drove the car. Why didn't you ask the agent about that when you were on the telephone? Here you are likely to face a "reasonable person" test: would a reasonable person in your shoes think it prudent to ask?

And conversely to the first two, if the insurer had an unusual term/condition contrary to a reasonable insurance buyer's presumption (e.g. only insures EVs), the onus would be on the insurer to make this clear.

Third, there's the question of whether you could have searched the answer on your own, and here the Internet puts you at disadvantage. For instance it's difficult to make the argument that "the claim happened in between when I signed up for the policy and when I finally received a paper copy" when they'll cheerfully deliver you a copy on request via Internet the moment you hang up.

Indeed UK gives you a 14 day "cooling off period" to collect your copy of the policy by mail if needed, read it, and cancel without consequence. Such things are a double edged sword: it creates a presumption that on day 15 you have read everything you need to, and agree to the contract as written.

If a claim arises in that 14 days? Well, that's the case where the insurer is going to raise those three points I mentioned.

2
  • 1
    If one declines the policy after e.g. 10 days, would one receive a refund for any premiums paid, or a pro-rated refund minus the ten days? If the former, could an insurance company who thought someone might be seeking to get almost two weeks require that a customer accept a policy whose effectiveness would commence 14 days after purchase initiation?
    – supercat
    May 27, 2023 at 14:24
  • If the policy hasn't come into effect, the refund is complete, though annoyingly companies are starting to charge an "admin fee", the legality of which is not yet well-established AFAICT. If cover has started, the refund will be pro-rated for the period covered (less dubious admin fee in some cases). If cover has started and a claim has occurred things can get very murky. See s3 of the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 for much more information.
    – MadHatter
    May 29, 2023 at 6:31
6

The nature of your insurance contract is spelled out in the written policy which you will by law receive in a timely fashion. There is no specific burden on the insurance company to recite specifics of the contract during a phone sale, other than those necessary to determine what is being insured (vehicle; liability without comprehensive; statutory minimum on liability).

Therefore, until you receive and read the insurance policy, you do not know exactly what is covered, and you are sort of buying a pig in a poke. Liability insurance is somewhat different in that it is mandatory by law and more-highly regulated, and you can easily know in advance what is covered (they don't construct ad hoc contracts, you pick from a standard form). You are expected to know of any relevant limitations on coverage. For example, personal vehicle liability insurance does not cover for-hire livery service, you would need a separate policy. If you fail to mention this need when talking on the phone to the agent, you would not be covered if you then got in an accident.

Verbose contracts are ubiquitous: verbosity does not invalidate the provisions of a contract.

1
  • 1
    "(they don't construct ad hoc contracts, you pick from a standard form)" -- Maybe this is different in Washington, but my experience in California is that this varies. I currently have my car and renters' insurance through Amica, which uses standard forms. But previously my car insurance was with AAA, which used their own contract for it, and frankly they didn't have a great idea what their own contract said (which is part of why I switched.) Their agents were confused at why I would even want to read the actual text, or where to find it. May 27, 2023 at 0:43

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .