What happens if an insurance company does not mention a critical clause of a policy during a telephone purchase?

Question

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.

Answer 1

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 france, 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.

Answer 2

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.

Answer 3

washington

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.