Aviva has avoided a £0.5m fire damage claim apparently due to the non-disclosure of a bad debt from 2004 worth a few hundred pounds.
Last week's decision by the insurer follows a 17-month investigation into Edward Gibbs' claim after his hotel was damaged in a fire.
It came a day after draft legislation was published aimed at tightening non-disclosure rules across all types of insurance, through the Consumer Insurance Law: Pre-Contract Disclosure and Misrepresentation draft Bill.
Gibbs, who paid £4,000 a year in premiums since 2005, put in a claim to Aviva after an accidental fire last year causing £500,000 of damage, the Daily Mail reports.
However, he involved his MP when the insurer asked to see his 2007 divorce settlement, and in March Aviva boss Andrew Moss wrote to MP Julie Kirkbride saying: "I trust we will be able to restore Mr Gibbs' confidence in Aviva."
After a further-nine months, Aviva finally threw out his claim.
Edward believes Aviva's main reason was his 'non-disclosure' of a County Court Judgment (CCJ) against him for £604, the cost of a Christmas lunch he served in 2004 and for which the guests paid, then demanded a refund and took him to court.
Aviva's application requires CCJs to be declared and Edward failed to do this.
Gibbs' solicitor, Neil Jones, of Rudzki & Jones in Derby, says: "Edward had taken out insurance in the reasonable belief that this would protect him.The law unfairly favours insurers and I welcome the Law Commission's recommendations."
Aviva refuses to say precisely what Gibbs failed to disclose and will not explain why it needed so much information.
Instead it states: "Aviva's decision was based on non-disclosure and misrepresentation. Based on the information we now know, Aviva would not have offered insurance to Mr Gibbs."
"This matter now appears destined to go to court," it adds. "With that in mind, we are unable to provide further details."
Last week's draft bill would restrict how insurers could decline similar cases but an insurer would still be able to investigate policyholders' circumstances after a claim, as opposed to before a policy is entered into.
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