My car insurance claim was denied because my teenage son was driving. Is this legal?

What the Law Says

Australian insurance law allows insurers to impose reasonable conditions on motor vehicle policies, including restrictions on who may drive the vehicle. These conditions must be clearly disclosed and not contrary to the Insurance Contracts Act 1984.

Insurers can lawfully deny a claim if a driver is not listed on the policy or falls under an exclusion — for example, drivers under 25 or unlisted family members. Such exclusions are valid if they are transparent, unambiguous, and brought to the insured’s attention before the contract begins.

Section 54 of the Insurance Contracts Act 1984 prevents insurers from denying claims solely because of a breach of a policy condition — but only if the breach is not relevant to the loss. If your son’s age or unauthorised driving directly relates to the incident (e.g., inexperience contributing to the crash), the insurer may rely on the exclusion.

Importantly, insurers must comply with the duty of utmost good faith (s. 13) and cannot rely on obscure or unfair terms. However, standard exclusions for unnamed or underage drivers are routinely upheld if properly disclosed.

Statutory Text

Where the insurer is entitled to refuse to pay a claim… because of a breach of a provision of the contract, the insurer may not refuse to pay the claim if the breach did not increase the risk of the loss that occurred.

— Insurance Contracts Act 1984 (Cth), s. 54 — Effect of breach of duty of disclosure or warranty

Statutory Text

A contract of insurance is a contract of the utmost good faith.

— Insurance Contracts Act 1984 (Cth), s. 13 — Duty of utmost good faith

What to Do

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