Beware the exclusion clause that allows insurer to reject claim if your car left with third party

Stephen Grootes is joined by consumer ninja Wendy Knowler on The Money Show.

Did you know that if you hand your car and its keys to a third party and it then gets stolen, there's very likely a clause in your insurance policy that allows the claim to be rejected?

There are a number of scenarios where this could happen - you give your car to a valet, take it to the car wash or for a service, perhaps.

Wendy Knowler warns that this exclusion clause appears in many standard policies.

"It goes something like this: The policy doesn't cover loss directly arising from or caused by or resulting from any fraudulent scheme, trick or device practised on your or any person having custody of your property."

Wendy Knowler, Consumer Journalist

While she's been covering insurance issues for more than two decades  she didn't know this existed, Knowler exclaims. 

The consumer journo relates the experience of Caroline Woodley, who also discovered this to her horror five months ago after she'd left her car and keys with the manager of a nearby car wash, as she'd done several times before.

Woodley's almost-new Ford Everest, worth around R1.3 million, was taken by a man claiming to have been sent by her to collect the vehicle, and her insurance claim subsequently rejected.

"CCTV footage shows the man liaising with the manager, paying for the service and then driving off in the car."

Wendy Knowler, Consumer Journalist

An expert Knowler consulted with, said that with such a clear clause in a policy, there was no prospect of successfully claiming for  the loss.

"He said that it’s a very common exclusion for the past 15 years or so, 'the more common context being theft by pretending to be a buyer, usually of a motor vehicle' but other items were also involved.”

Wendy Knowler, Consumer Journalist

Knowler's advice is to find out whether your insurance policy covers you if someone other than yourself has possession of your car keys at the time of what's called 'a claim event'.

If it doesn't, best to shop around for an insurer with a policy that has a more consumer-friendly approach, she says.

"To my mind, regulators should compel insurers and brokers to specifically bring to consumers’ attention a clause like this which has such major financial implications for policyholders."

Wendy Knowler, Consumer Journalist

The consumer ninja promise to be making 'a bit of noise' about the issue, as it can't be considered fair treatment of customers if this clause is hidden somewhere in a very long policy document.

For more detail, listen to the interview audio at the top of the article