Question

During February 2019 Festus insured his Renault car with Provident. In the previous year, two events had occurred. A car accident which his girlfriend (driving her own car) had suffered a fractured leg as a named driver and which had been declared to the insurers and was settled satisfactorily and secondly, Festus had been convicted for drunk driving and negligent driving. In May 2019 Festus changed his Renault for a BMW and was charged an additional premium. He did not disclose his two convictions and the accident in which his girlfriend was involved. In July 2019 when Festus had an accident on B1 road near Okahandja, the drunk driving and negligent conviction came to light. Is Provident entitled to cancel and not pay out any claim on Festus' policy? Discuss. 

Answer 1

Provident is not liable to pay the insurance claim to Festus on the following pretext –

Insurance agreement is an agreement based on trust between the insurer and the insured and during the agreement of the policy it is explicitly enquired in the agreement about driving experience, previous car mishaps and any accidents or convictions and relevant car information. If any of this information is found false as is in this case where Festus had not disclosed the drunk and driving case and hence this amounts to the breach of trust. The other problem is that Festus might have hidden this information so as to pay low premiums which again is another breach of contract as the consideration of the contract was not paid fully thus on the basis of this the insurance contract can be considered void.

Due to the above aspects Provident is not liable to honor the claim of Festus.