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ombudsman news

issue 90

November/December 2010

vehicle-related complaints

We are regularly asked to help resolve complaints relating to the purchase or insurance of motor vehicles and we are aware that this is an area of considerable interest to many of our readers. Queries relating to disputes involving motor vehicles feature prominently among the topics most frequently raised by businesses and consumer advisers with our technical advice desk.

The following case studies illustrate some of the wide range of vehicle-related complaints that are referred to us.

issue 90 index of case studies

  • 90/1 - consumer says new caravan bought on hire purchase was of unsatisfactory quality and that delay in carrying out repairs was unreasonable
  • 90/2 - consumer complains that used car bought on hire purchase was sold in an unsatisfactory condition
  • 90/3 - consumer dissatisfied with the value his insurer places on car which is uneconomical to repair
  • 90/4 - motor insurer refuses to pay claim for damage on grounds that consumer had failed to disclose modifications to his car
  • 90/5 - motor insurer refuses to pay claim on grounds of non-disclosure
  • 90/6 - motor insurer refuses to pay for stolen motorbike on grounds that policyholder failed to disclose modifications
  • 90/7 - motor insurer refuses claim for stolen car on grounds that policyholder failed to take reasonable care of his car keys
  • 90/8 - motor insurer refuses to pay claim for damage to stolen car because policyholder left keys in the car
  • 90/9 - consumer disputes fairness of the price offered by motor insurer for vehicle it considers uneconomic to repair

90/1
consumer says new caravan bought on hire purchase was of unsatisfactory quality and that delay in carrying out repairs was unreasonable

Mr H bought a new caravan by hire purchase. With this type of arrangement, until the consumer has made their final payment, the vehicle does not belong to them but to their finance provider.

On the day the caravan was delivered to him, Mr H was concerned to find a number of faults in the interior fittings and parts of the décor. He contacted the dealer from whom he had bought the caravan and complained that none of these faults should have been present in a brand-new vehicle - particularly as it had been made to order.

The dealer arranged for three of the faults to be remedied almost immediately. However, eight months later Mr H was still waiting for the remaining repairs to be done. At that stage he contacted his finance provider and said he wished to reject the caravan on the grounds that it had been "unfit for purpose" when it was sold.

The finance provider told Mr H that it would contact the dealer to ensure the outstanding repairs were completed. Several attempts were then made to carry out the repairs but the remedial work was badly done and in a couple of instances it caused additional problems.

Mr H again complained to the finance provider, repeating his request to reject the caravan. The finance provider said it could not accept this. It said that, in its opinion, the caravan was "of a satisfactory quality". The faults were cosmetic - not structural - and they had all been remedied except for the fitting of new flooring, which would be undertaken shortly.

Mr H then referred his complaint to us.

complaint upheld
Mr H told us that a number of repairs were still outstanding. He said the flooring had not yet been replaced, the kitchen work-surface trim remained loose, the seating was not bolted together as it should have been and a bracket was missing from the corner seating area.

On the basis of the evidence we saw, we concluded that the finance provider had failed to ensure the caravan was of a satisfactory quality when it was supplied. We said that the fact that most of the faults were not structural did not prevent Mr H from exercising his right to reject the caravan.

We noted that Mr H had acted reasonably in agreeing to allow time for the repairs to be carried out, rather than rejecting the caravan outright. And we accepted that the finance provider had not initially been aware of the faults, as Mr H had contacted the dealer direct. But we said that once the finance provider became aware of the problem, it should have ensured that matters were put right promptly.

We upheld the complaint and told the finance provider to allow Mr H to reject the caravan. Mr H had asked for a refund of all his payments. We did not agree to this, as we had seen evidence that he had been able to make use of the caravan - and had sub-let it on a number of occasions. We said the finance provider should release him from the finance agreement and return his deposit of £17,000, plus interest.

90/2
consumer complains that used car bought on hire purchase was sold in an unsatisfactory condition

Mr G bought a second-hand car by means of a hire purchase agreement. At the time of the purchase the car was seven years old and had travelled 110,000 miles.

The day after Mr G collected the car from the dealer it broke down. He managed to get it working again - but the problem recurred several times over the next couple of weeks, so Mr G took the car to his local garage. He was told that repairs were needed, at an estimated cost of just under £3,000.

Mr G then contacted the firm that had provided the finance for the car. He said he wanted to exercise his right to reject the vehicle. However, the finance provider told him to return the car to the dealer and ask it to arrange the necessary repairs.

Mr G did this, but it was nearly five months before the repairs were finally completed. And when Mr G went to collect the car, the dealer asked him to pay £500 towards the repair costs. As he refused to pay, he was prevented from taking possession of the vehicle.

He therefore contacted the finance provider again and said he wanted to reject the car. The finance provider told him he had no grounds for this now that it had been repaired.

Mr G was far from happy about the situation. He thought the finance provider should at least pay the cost of the repairs. However, it said it was not responsible for these costs, as they had resulted from "the kind of wear and tear to be expected with a used car".

Mr G then brought his complaint to us.

complaint upheld
On the basis of the evidence, we concluded that the finance provider had breached the relevant sale and supply of goods legislation by supplying a vehicle that was evidently not of satisfactory quality.

In our view, Mr G should have been allowed to reject the vehicle after giving the dealer a reasonable amount of time to repair it. We did not think it reasonable that he was kept waiting five months for the repairs to be completed, nor did we think it reasonable that he should have been asked to pay £500 towards the cost.

We upheld the complaint. We told the finance provider to take back the vehicle and unwind the finance agreement, returning to Mr G the deposit and all the payments he had made except for the first one, as he had use of the car during the first month. We said the finance provider should also add interest to the amount it paid Mr G.

90/3
consumer dissatisfied with the value his insurer places on car which is uneconomical to repair

Mr Y's motor insurer decided that his car had been so badly damaged in a road traffic accident that it would not be economic to attempt a repair. It therefore offered him £500, which was what it considered the car to have been worth immediately before the accident.

Mr Y told the insurer its offer was "ridiculous" in view of the car's "classic nature and fantastic condition". He thought the insurer had failed to take into account the modifications he had made and he believed the car's value to be nearer £3,000. Unable to reach agreement with the insurer, Mr Y eventually referred his complaint to us.

complaint upheld in part
To back up his view that the insurer had undervalued his car, Mr Y sent us copies of several press advertisements, together with extracts from website forums. We explained to Mr Y that the "evidence" he had provided did not constitute proof of his car's value - and reflected "asking" prices, rather than actual selling prices.

We also noted that all this material related to the sports version of that particular vehicle. The modifications Mr Y had made to his car included having a body kit professionally fitted. This gave his car the appearance of a sports model - and added value to the vehicle. However, it did not mean that the car had the same value as the sports version.

Mr Y's policy said that if it was not economical to repair the vehicle, the insurer would pay the vehicle's "market value at the time of the loss". The policy definition of "market value" was "... the replacement value of the same make and model of a similar age and condition vehicle, as determined by reference to standard trade guides."

Although the insurer was aware of the modifications Mr Y had made to his car, it did not appear to have taken them into account when assessing the car's value. We agreed with Mr Y that his car was worth more than he had been offered but we did not think his estimate of the value was correct. We said a fair price, based on the trade value, was £1,500 and we told the insurer to pay this amount.

90/4
motor insurer refuses to pay claim for damage on grounds that consumer had failed to disclose modifications to his car

Mr M's car was badly damaged after being stolen and used in a ram-raiding incident. His motor insurer refused to pay out on his claim, as it said he had failed to disclose that modifications had been made to the vehicle. Alloy wheels had been added and the air filter and exhaust system had been modified. The insurer said it would never have provided insurance at all if it had been aware of the modifications to the air filter and exhaust.

After failing to reach agreement with the insurer, Mr M brought his complaint to us. He said he thought the insurer's response was "wholly unjustifiable". He told us that he had mentioned the alloy wheels when he applied for the policy but had not been aware of any other modifications.

complaint upheld
Mr M sent us a copy of the sales invoice he received when he bought the car. No modifications were noted on this - and the price he had paid did not suggest that he had been sold anything other than a standard model.

The insurer sent us its recording of the phone call in which Mr M applied for his policy. In answer to the insurer's question about any modification to his vehicle, he said he had changed the wheels but that nothing else had been modified.

We said that, on the balance of probabilities, we thought Mr M had not been aware of the modifications to his car's air filter and exhaust system. We upheld the complaint and said the insurer should meet the claim.

90/5
motor insurer refuses to pay claim on grounds of non-disclosure

Miss K complained that her insurer refused to pay her claim after her car was damaged in a road traffic accident. It said it had discovered that she had been involved in another accident several years earlier. She had failed to disclose this, and it said it would never have issued her policy if it had known about it. The insurer therefore declared the policy "void" (in other words, treated it as if it had never existed).

Miss K thought the insurer was acting unfairly. She said she had been "totally open and honest" when answering the questions put to her when she applied for the policy. However, the insurer was not prepared to reconsider the matter, so she referred her complaint to us.

complaint upheld
As Miss K insisted that she had not been asked about any previous accidents, we obtained a recording of the call she made to the broker to arrange the insurance. We noted that she had said "no" in response to the question, "have you made any claims in the past five years-" She was not asked about any motoring accidents.

The insurer sent us a copy of the statement of insurance it had given to Miss K and that it said it had based on the information she gave the broker. In that statement a blank space had been left immediately under the words:

"Give details below of any motoring accidents, claims or losses in the last 5 years, irrespective of blame."

The insurer told us that regardless of what questions the broker had asked her, Miss K should have checked carefully through the statement of insurance and amended it to provide details of her earlier accident.

We asked Miss K about that accident. She told us that four years earlier she had been involved in a minor incident that "was merely a case of bumpers having touched, with no visible damage to either car".

She said she had noted at the time that the other driver's car showed signs of earlier damage. She had asked the driver, a Mr T, about this damage. He had said it resulted from a separate incident and that he had not so far found time to get his car repaired.

Some while after that, Mr T's insurer had written to Miss K in connection with a claim he had made following the incident with her car. In her reply she had denied all liability and stated that no damage had been caused to either car. She told us she had never heard any more in connection with this claim and presumed it had not been successful. She said she had not thought to mention the incident to the broker and did not think it was relevant.

We pointed out to the insurer that the insurance had been agreed on the basis of Miss K's answers to the questions put to her by the broker. These had not included any questions about previous accidents. We did not agree that the insurer could subsequently seek to change the terms of the insurance on the basis of a differently-worded question in the statement of insurance.

We said that, in the particular circumstances of this case, it was reasonable for Miss K to have assumed that the accident involving Mr T's car had not been worth mentioning - and that his claim had not succeeded.

We upheld the complaint and said the insurer had acted unfairly in treating Miss K's policy as "void". We told the insurer to reinstate Miss K's policy and deal with her claim for damage to her car, adding interest to the amount it paid her.

90/6
motor insurer refuses to pay for stolen motorbike on grounds that policyholder failed to disclose modifications

Mr L complained about his insurer's decision not to pay his claim after his motorbike was stolen.

When making the claim he had described the bike and mentioned that it had been decorated with a number of football emblems, painted on the sides. The insurer subsequently refused to pay the claim and declared his policy "void", on the grounds that he had failed to disclose these "modifications".

After lengthy correspondence with the insurer, Mr L brought his complaint to us.

complaint upheld
The insurer had taken longer than we would have expected to reach a decision on this claim. We noted that at one stage Mr L had said the insurer appeared to be treating him as if he had committed fraud.

The insurer's file revealed that it had some doubts about the validity of the claim. However, it had no evidence to back up its suspicions. One internal email about the claim said "although we have concerns, nothing we can do except use the fact that insured has football logos all over his vehicle."

To be justified in turning down the claim on the grounds of non-disclosure, the insurer needed to show that Mr L had withheld information about the modifications, despite having been asked a clear question about them.

We looked at the proposal form that Mr L had completed when applying for the policy. The only question on the form that could be taken to refer to modifications was the one that asked: "Is the motorcycle a manufacturer's standard model-" Mr L's response was "yes".

We asked him what he understood the question to mean. He said it thought it referred to the bike's "mechanical properties". He told us that he considered that he had answered the question correctly, as he had never made any adaptations to the bike in order to enhance its performance.

The insurer had not made it clear that it required information about the type of "modifications" that Mr L had made to his bike, nor had it asked him any clear questions about "modifications". We therefore said it could not reasonably refuse to pay his claim on the grounds of non-disclosure.

We upheld the complaint and said the insurer should pay the claim, together with interest, and reinstate the policy.

We noted that Mr L lived in a relatively remote rural area and that the motorbike was his only form of transport. He provided evidence of the practical difficulties he had been caused - and the extra expense he had incurred - while waiting for the insurer to settle the claim. We told the insurer that it should pay Mr L £400 in recognition of this.

90/7
motor insurer refuses claim for stolen car on grounds that policyholder failed to take reasonable care of his car keys

Mr E's car was stolen while he was watching his teenage son playing football in a local park. He said he had locked the car and put the keys in his bag, which he had placed on the ground by his feet while he was watching the game. Whoever had stolen the car had taken the keys from his bag at some stage during the match.

The insurer turned down Mr E's claim as it said he had "failed to take reasonable care in safeguarding the vehicle's keys".

Mr E disputed this. He said he had put the keys in his bag because the clothes he was wearing that day did not have any pockets. He was aware that there were some lockers in the hut that the players used as a changing room. However, he had not wanted to leave his bag and keys there because his son had told him the lockers were frequently vandalised.

He said he had taken care to stand close to the bag throughout the match. He thought the thief must have seen him arrive and had taken advantage of a brief moment when his attention was distracted in order to steal the keys. It was only at the end of the game that he had realised the keys were missing - and he had then rung the police immediately.

The insurer remained adamant that it would not pay the claim, so Mr E came to us.

complaint upheld
Our general approach, in cases where the insurer has said the consumer failed to take reasonable care, is to decide whether the insured person identified that there was a risk - and then took what they considered to be reasonable steps to guard against it.

In this case we did not think there was any evidence that Mr E had failed to take reasonable care of the keys. He had identified that it was important to take care of them and he had decided that - in the circumstances - the safest place for them was in his bag, which he kept by his feet while he was watching the match.

We noted that he had provided consistent accounts of what had happened, both in his initial reporting of the theft to the police and subsequently, when answering questions put to him by the insurer and the loss adjuster.

We upheld the complaint and said the insurer should pay the claim.

90/8
motor insurer refuses to pay claim for damage to stolen car because policyholder left keys in the car

Mr D's insurer refused to meet the claim he made for damage to his car after it was stolen. The insurer said the policy only provided cover in cases where the car had been locked and the keys "removed from its vicinity". In this instance it thought that he had left the car unlocked with the keys still in it.

Mr D strongly denied this and he eventually referred his complaint to us.

complaint not upheld
Mr D told us that the car had been stolen while he was visiting his local leisure centre. He said he had not brought a bag with him, so had nowhere to put his keys, wallet and mobile phone while he was in the leisure centre. He had placed these items in the door pocket on the driver's side of the car. He had then locked the car with his spare key.

He stressed that he had taken particular care to ensure his belongings would not have been visible to any passers-by - and he said he thought the insurer was being unreasonable in the circumstances.

We noted that when Mr D first reported the loss of his car he had not mentioned having left the keys and other items in the car. When asked to hand over his car keys he had only been able to produce the spare key, as he said he had "temporarily mislaid" the main set of keys. He was not subsequently able to find them.

When Mr D's car was eventually found there was no sign of forced entry or of any damage to the lock. It was only when faced with this evidence that Mr D had told the insurer that he had left the main set of keys - together with his other belongings - inside the car. However, he still maintained that he had locked the car with his spare key. He said he could "only conclude that whoever stole the car must have used a self-made key".

We noted that the policy wording stated clearly that cover was only offered if "the vehicle is locked and the keys removed from its vicinity when no one is in it."

In view of the inconsistencies in Mr D's version of events, and the lack of any evidence to the contrary, we thought it more likely than not that he had left his keys in the car and had forgotten to lock it. We did not uphold the complaint.

90/9
consumer disputes fairness of the price offered by motor insurer for vehicle it considers uneconomic to repair

Miss J complained about the actions of her motor insurer after her campervan was seriously damaged in a road traffic accident.

The insurer did not think it would be economical to carry out repairs, so it offered her £3,575, which it estimated to be the vehicle's "full value". Miss J disputed the insurer's view that the campervan could not be repaired - and said she was more than willing to arrange the repairs herself. But she said that, in any event, the campervan was worth more than the sum offered.

Miss J was distressed to discover, at this stage, that the insurer had already disposed of the vehicle. When she complained about this, the insurer offered to pay her an additional £500 as "compensation for premature disposal". However, it refused to accept that the campervan was worth more than the amount it had already offered.

Unable to reach agreement with the insurer, Miss J referred her complaint to us. She said she had been treated unfairly because the sum offered was not enough to enable her to replace the campervan on a "like-for-like" basis. She thought £5,000 would be a "more realistic valuation".

complaint not upheld
After considering the available evidence, we concluded that the amount the insurer had offered was not unreasonable, in view of the vehicle's age and condition.

We noted from the information Miss J supplied that she had bought her campervan at a higher price than the market rate at the time. She had subsequently spent a considerable amount of time and money refurbishing the interior.

Although she clearly had a strong sentimental attachment to the vehicle, it did not have as high a market value as she thought it did. We explained to her that the insurer was only liable to pay the current trade value. We told her we thought that its offer to pay £3,575, together with £500 as compensation for the premature disposal of the vehicle, was a fair one. We did not uphold the complaint.

image of ombudsman news

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.