Concealment on your insurance application form can prove costly

The claimant, a courier company, took out car insurance with (a predecessor of) Nationale-Nederlanden. The car was stolen two years later, and the courier company filed a claim for forty-three thousand euros. Nationale-Nederlanden refused to compensate for the theft damage because the courier company had provided incorrect information when applying for the insurance. The company had stated that they had not had any claims for three years, while they should have reported twenty claims, including one for theft.

When is something considered concealment?

When entering into an insurance contract, the policyholder has an obligation to disclose information to the insurer. The policyholder must share relevant information if requested by the insurer, such as a history of damages, criminal records, policy cancellations, or previous coverage disputes. If the duty of disclosure is not fulfilled, it is considered concealment. If something is intentionally withheld or if something is withheld that would have led the insurer to decline the insurance, then the insurer is not obligated to pay out in case of a claim.

Concealment is not easily established. "There is only concealment if you knew or should have known the truth, if the undisclosed facts were important, if you knew that the insurer wanted to know them, and if the insurer made every effort to acquire the necessary knowledge", says Van Tiggele-Van der Velde. Therefore, inaccuracies in the initial application form might have an impact on the insured several years after the insurance takeout. "That may seem harsh, but insurers are only required to investigate when there is a claim. And concealment also strikes at the heart of trust", says Van Tiggele-Van der Velde.

The timeframe as the key to the ruling

The courier company went to court to get the claim paid but lost both in the district court and the Court of Appeal. The Supreme Court had to decide whether the insurer had started the concealment process too late. According to the law, an insurer can only use concealment as a basis for consequences if its discovery and potential consequences are communicated to the policyholder within two months.

The core of the recent ruling is the question: when does the two-month period start in which an insurer can rely on concealment? According to the courier company, that two-month period's starting point was when the insurer should have discovered the concealment. In that case, the insurer would have been too late.

It is clear that the insurer must inform the policyholder in a timely manner, but there has been a longstanding debate about which timeframe should be upheld and when it starts. Van Tiggele-Van der Velde explains: "Does the period start when the insurer actually discovers the concealment – as explicitly stated in the law – or when the insurer should have known about it? The Supreme Court opts for the former but states that you must consider the circumstances to determine when the insurer had sufficient certainty."

The Supreme Court rules that the insurer must report the discovery of concealment within two months to prevent the policyholder from remaining unnecessarily uncertain. However, that timeframe only starts running when the insurer has 'sufficient certainty' that there is concealment. It depends on the circumstances if that is the case. "The requirement for sufficient certainty is not surprising; it was also present in lower court rulings. However, the Supreme Court introduces a new element by imposing a duty of investigation on the insurer 'after receiving indications.' That seems to lean towards a somewhat more objective approach", says Van Tiggele-Van der Velde.

"How that will play out in practice remains to be seen. In this particular case, the ruling does not offer any relief to the insured party", concludes Van Tiggele-Van der Velde.