When Kelly Lynn had an accident six months ago she thought she was covered but discovered a major loophole in her AMI insurance.

Kelly’s third party insurance cover included an "innocent party protection" clause, which would cover up to $3000 for car repairs if the driver of her car could prove they were not at fault.

And Kelly's police accident report did prove that, and it also provided AMI with the other driver’s name, address, phone numbers and car make, model and rego.

But, AMI also required the other driver to state whether or not they were insured. If they were, their insurance would cover Kelly's damage, if they weren't, AMI would cover it.

And here's the giant loophole.

The other party would not supply the information, would not respond to requests, and basically went to ground.

Kelly thought in this situation, AMI would then just pay her out - but no, AMI said no response from the other party means no insurance cover for Kelly.

AMI say they've made strenuous efforts to contact the other driver, and that they will continue to do everything they can to bring this claim to a close.

They say this situation shows the importance of taking out full insurance cover.

Kelly reckons AMI's "innocent party protection" has actually not protected her, but allowed the at-fault driver to pretty much walk away.

Also, the policy potentially puts the "innocent party" in danger, if, like Kelly, they are required to try to help track down the other driver themselves.

Fair Go reckons AMI is selling a policy which gives a false sense of security, because we think it’s unlikely that an at-fault driver is going to admit to not having insurance.