Insurance policy still valid despite previous convictions

The First Hall of the Civil Court decided on 12 March 2014 in the names Fogg Insurance Agencies Limited for an on behalf of the overseas company Argus Insurance Company (Europe) Limited –v– Trevor Francis Vassallo and following a decree of 12 October 2012 Aneuren Rodney Meli who intervened, that although an insurance applicant was not truthful on his previous convictions, the insurance policy was still valid towards third parties involved in a motor accident.

Fogg Insurance asked the Court to declare that the fact that Vassallo in his insurance application did not state that he was convicted twice of criminal offences on 21 May 2007 and 29 January 2010 and therefore this fact was of a substantive nature. The insurance company also asked the court to declare that the insurance policy which was issued in Vassallo’s favour was null and void from the beginning of the coverage. This action was based on Article 10(3) and (5) of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Chapter 104 of the Laws of Malta).

Vassallo filed a statement of defence and held that an employee of the company did not ask whether he had any previous convictions and she had filled it in. In the accident he was involved in he was not under the influence of drugs or alcohol. 

Mr Justice Anthony Ellul who delivered the judgement examined the facts of the case and established that Vassallo was convicted on two occasions of crimes related to drug possession. On 28 May 2010 he had signed an insurance proposal form. Question 6 of the form specifically asked if he had been convicted of a crime and he replied in the negative. The insurance policy was issued, but on 22 July 2010, he had an accident in Siggiewi and hit Aneuren Rodney Meli with his car. In another court case, Vassallo was order to pay Meli damages.

From the examination of evidence, the Court had no doubt that Vassallo had left out vital information for the insurance company, which would determine whether they would accept to insure him or not. It was irrelevant whether on the day of accident Vassallo was not under the influence of drugs. One of the witnesses was the clerk who filled in the form who confirmed that she explained each question. Furthermore, when the defendant signed the form he declared the following: “I declare that I have read over the contents of this completed proposal form and I declare the above statements are to the best of my knowledge and belief correct and complete and will form the basis of the contract between me and the Insurer.” Mr Justice Ellul agreed that this withheld information was substantial.

The Court then examined whether Article 10(3) of Chapter 104 applied, that stipulates that the insurance company has seven days from when the action is filed to file a judicial act against the third party that suffered damages in the accident. This action was instituted on 6 July 2012, however, Meli was notified on 14 July 2012, eight days after and as a result the exemption to liability provided in Article 10(3) cannot be made use of, which would give the right of the insurance company to annul the policy. 

The insurance company held that Meli should be compensated from the fund set up under Legal Notice 425/2003, since the insurance policy was acquired by fraud or after information was withheld

In fact, the insurance company held that Meli should be compensated from the fund set up under Legal Notice 425/2003, since the insurance policy was acquired by fraud or after information was withheld. The Court held that this piece of legislation does not make the distinction of when a policy is annulled by the court or else if the insurance company does not take any legal action. The Legal Notice gives four instances when there is no coverage as for example when the insurance is withdrawn by means of an agreement or when the insurance policy would have lapsed. Mr Justice Ellul held that these do not fall under the circumstances of this particular case. Therefore, this would effectively mean that Meli would not be compensated. In a previous judgement, Middlesea Insurance plc –v– Emanuel Ciantar decided on 17 February 2014, it was held that Art 10(3) was an exception to insurance coverage as provided in Art 10(1) of the Act.

According to Article 3 of EU Directive 103/2009, which codified the directives on motor insurances, including Directive 72/116 which states that each Member State is to take all appropriate measures to ensure that civil liability is covered by insurance in their territory. In a European Court judgement Wilkonson & Evans (C 442/10) it was held that the court “precludes an insurer from relying on statutory provisions or contractual clauses in order to refuse to compensate third parties who have been victims of an accident caused by the insured vehicle”. 

Mr Justice Ellul concluded by stating the policy is valid for third party only with regard to the accident that took place on 22 July 2010 and therefore, ordered the insurance company that it cannot avoid its responsibility towards Meli, however, retains all its rights against Mr Vassallo.

Malcolm Mifsud is a partner at Mifsud & Mifsud Advocates