The recent Queensland Court of Appeal decision of
Michail v Australian Alliance Insurance Company Ltd 
QCA 138 reinforces that clear and consistent underwriting
guidelines are essential for all insurance agencies.
In this case, Mr Michail had insured his Aston Martin for
$250,000 with Australian Alliance Insurance Company Ltd's (AAI)
agent, Shannons. The vehicle was subsequently damaged and deemed a
'total loss' under the insurance policy.
When taking out the policy, Mr Michail failed to disclose
relevant aspects of his traffic history. Shannons, relying on the
underwriting guidelines, claimed that, if they had been made aware
of Mr Michail's undisclosed traffic history, they would not
have entered into the policy.
The guidelines categorised matters as either 'referable'
risks or 'unacceptable' risks. The guidelines stated that
'where a risk is deemed to be 'unacceptable' it
must be declined unless it is referred to a staff
member with Regional Manager and above underwriting
Traffic history was generally classified as a
'referable' risk under the guidelines. However, as Mr
Michail had additional 'referable' risks that he had
disclosed, the undisclosed traffic history became an
Mr Michail argued the equivocal wording of
'unacceptable' risk within the guidelines left the Regional
Manager discretion to accept the application.
Counsel for Shannons argued that the apparent discretion only
allowed 'unacceptable' risks where they did not directly
impact the intended insured risk.
The Court of Appeal found that a discretion might have existed
if the matters that resulted in the risk being deemed unacceptable
under the guidelines would in fact not impact on the risk that was
being proposed. However, this discretion was not enlivened in these
circumstances as the risk arising from the undisclosed traffic
history directly impacted upon the risk insured by the relevant
AAI successfully outlined the reasons behind their underwriting
guidelines and explained the relevant discretions to step outside
of those guidelines and the reasons why the facts relating to Mr
Michail's proposal did not merit stepping outside of those
guidelines. AAI were not required to pay Mr Michail under the
policy and the appeal was dismissed.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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