Insurance advice: I bought a bike with outstanding finance

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Q. I bought a 2007-model Honda Fireblade in a private sale on eBay in July last year. I was told by the original owner that it had been with a dealer over a few months, but hadn’t sold, so now he was selling it privately.

Having been told that the bike had been advertised for sale at a dealer I did not do an HPI check.

I took delivery of the bike and paid the original owner in cash in August.
When I paid and took delivery of the bike I received a receipt, V5 and the old service receipts.

Unfortunately my bike was subsequently stolen a month later. I reported the theft to the police and my motorbike insurance company the same day. The insurance company sent out a third party assessor a week later and I was told that my claim was in order and that I should hear from the insurance company in “two to three weeks”.

Apparently, the company misplaced my claim and I had still not had offer eight weeks later, so I phoned them again. This time they said they could not make me an offer as they had found out that there was outstanding finance on the bike from the original owner whom I bought the bike from.

I was not told by the original owner that there was outstanding balance on the bike and there was nothing in the sale advertisement, nor in the documents that I received that indicated that there was outstanding balance on the bike.

I contacted the finance company who told me that they would look into the matter, and that they might consider releasing the bike if “I had a case”.

I tried to find out explicitly what that meant, but the finance company could not answer that question.

I understand that the finance company have a hold on the bike, but surely the finance agreement is between them and the original owner.

I bought the bike in good faith and I have the receipts and documents to prove it. How can the insurance company not compensate me when I have an insurance agreement with them?
Karl Foden, Birmingham


A. As you’re not a motor trader, and bought the bike in good faith without knowing finance was present, you're in a reasonably good position, especially as the finance outstanding is HP and not a lease.

The Consumer Credit Act 1974 gives “good title‚ to the innocent private purchaser of a bike which later turns out to be subject to a claim by a finance company because of a previous, unpaid hire-purchase agreement”.

This means that the finance company would not be entitled to repossess the bike from you if you still had it and you can make a claim for its loss with your insurer.

You need to get back in touch with your insurers telling them there is a title dispute and they are NOT to pay anyone out just yet.

Get back in touch with the finance company to confirm that you had the bike, and then answer their questions so that they are able to conform that you are an innocent purchaser. At that point you should acquire title and the insurer can pay you.

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