A plant-hire business’s failure to conduct the checks required by its commercial insurance policy proved decisive after an excavator was stolen from a construction site.
The National Financial Ombud Scheme (NFO) upheld the insurer’s rejection of the claim based on a false-pretences exclusion and the business’s failure to comply with a due-diligence warranty. However, the NFO found that a separate security requirement on which the insurer relied did not apply. The case was included in the NFO’s 2025 annual report.
The complainant ran a plant-hire business that leased machinery and equipment to clients. It submitted a claim for the replacement of an excavator that had been stolen from a client’s construction site.
The insurer appointed an assessor to investigate the claim. The investigation found that the hirer of the excavator had disappeared after the theft and had misrepresented that he owned the construction site.
The complainant had also failed to obtain bank-approved confirmation of the hirer’s banking details before entering into the lease agreement. In addition, the construction site was unrestricted and unfenced.
The insurer rejected the claim on three grounds: an exclusion for theft under false pretences, breach of a warranty requiring the complainant to conduct a background check on the hirer before entering the lease, and failure to store the excavator in a fenced-off or access-controlled area.
The complainant argued that the insurer could not rely on the false-pretences exclusion because the hirer had neither been arrested nor identified as a suspect in the theft case. It submitted that any suggestion that the hirer had been involved in the theft was therefore speculative.
The complainant also argued that there had been no need to obtain bank-approved confirmation of the hirer’s banking details because he had paid the full rental amount upfront. In addition, there had been no indication that the hirer did not own the site.
The complainant further submitted that the security requirement did not apply because the excavator was in use on the site when it was stolen.
Security requirement did not apply
The NFO found that the insurer had erred in relying on the requirement that the excavator be kept in a restricted or access-controlled area. The policy requirement applied only when the insured equipment was not in use, whereas the excavator was in use when the theft occurred.
However, the NFO found that the insurer had established, on a balance of probabilities, that the false-pretences exclusion applied and that the complainant had breached the warranty requiring background checks.
The hirer had disappeared after the theft and had falsely claimed to own the construction site. According to the NFO, these facts supported a reasonable inference that the hirer could have been involved in the theft and had intended to steal, rather than lease, the excavator.
The NFO rejected the complainant’s argument that the exclusion could apply only if the hirer had been arrested or identified as a suspect. The complaint did not depend on a criminal conviction or finding by a court. It had to be decided on a balance of probabilities, the standard applicable to the insurance dispute.
The NFO also found that the complainant had breached the policy warranty by failing to obtain bank-approved confirmation of the hirer’s banking details. It had also failed to obtain proof that he owned the construction site.
The NFO therefore upheld the insurer’s rejection of the claim.
The NFO said the case demonstrated the potentially serious consequences for businesses that lease vehicles or machinery if they fail to perform the due diligence required by their insurance policies. It urged policyholders to familiarise themselves with their policy requirements and comply with the applicable terms and conditions.
