Misrepresentation, Non-Disclosure and Breach ... - Law Commission

4.70 The issue is further confused by the explanation the FOS has given of the
inadvertence category:
A customer may also have acted in good faith if their non-disclosure is
made inadvertently. These are the most difficult cases to determine and
involve distinguishing between behaviour that is merely careless and
that which amounts to recklessness. Both are forms of negligence. 48
4.71 At times, the way the FOS has used the term “inadvertent” rather than “negligent”
suggests that it meant to cover only mild carelessness. This leaves unclear the
position if a customer has been seriously negligent but not dishonest. Either this
must be within the FOS’s “reckless” category, or there is a gap in the scheme.
Our survey of ombudsman cases suggests that ombudsmen sometimes allow an
insurer to avoid a policy where the consumer “did not give the questions and
answers the care and attention required”, even if they did not act knowingly. 49
4.72 However, in May 2007, the FOS issued a fresh explanation of what it sees as the
distinction between recklessness and inadvertence. 50 It states that:
recklessness denotes a degree of not caring whether a disclosure is true
or false. This contrasts with the situation where a lack of sufficient care
and attention has resulted in an incorrect answer being given –
regardless of how incorrect that answer may be.
The FOS has therefore clarified that it does not see negligence, even serious
negligence, as a form of recklessness. We agree.
4.73 The FOS also confirmed that it would not be reckless to sign an application form
without reading it when the consumer “genuinely believed the intermediary had
accurately recorded” all their answers.
4.74 It is not always easy to keep the proposer’s state of mind separate from the
means of proof. For example, the FOS has written:
We are likely to conclude that non-disclosure is “clearly reckless” if a
policy holder appears not to have had any regard for accuracy when
completing the proposal form. Typically, in such cases, the matters the
policy holder failed to disclose will be of significance, and will be wellknown
by the policy holder. We will find it difficult to believe that the
policy holder could simply have overlooked these matters. But we will
not have found sufficient grounds to conclude that the non-disclosure
was deliberate. 51
48 Ombudsman News (June 2005) Issue 46. The FOS is not the first body to confuse
recklessness and negligence. The SLIP also treats recklessness like negligence as
opposed to fraud.
49
In these cases it was not possible to tell whether the insurer would have accepted the risk
had they known the truth, so we cannot say whether avoidance would have been permitted
under our scheme.
50 Ombudsman News (April/May 2007) Issue 61.
51 Ombudsman News (April 2003) Issue 27.
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