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

Different ways in which policyholders may act reasonably
4.102 The change would affect two types of case. The first is where the consumer gives
information that they honestly and reasonably believe to be correct when in fact it
is not. The second is where they answer a question incorrectly or incompletely
because, reasonably, they do not appreciate that the information they state
inaccurately or fail to give is relevant to the insurer. We discuss each in turn.
Not knowing that the statement is inaccurate
4.103 A proposer who in answer to a question says that they have had no symptoms of
a specified illness, because their doctor had not told them that the problem they
have experienced is a possible indication of the illness, is acting reasonably. Our
survey of FOS cases suggests this was a particular problem for those
experiencing the early signs of multiple sclerosis. Doctors may not tell patients
that they suspect a slight numbness in the fingers may be serious because they
do not want to worry the patient.
4.104 Another example would be a consumer who says that their house does not suffer
from subsidence, when in fact it does, because the signs of subsidence are not
obvious to the untrained eye and the consumer has not spotted them. Similarly,
they may give incorrect information because they have been misled by a third
party, for example, they have relied on a survey report that the property shows no
signs of subsidence.
4.105 In cases of this kind, the FOS would not permit the insurer to refuse to pay the
claim or to avoid the policy. The law should provide the same.
Not knowing that the information is relevant
4.106 Our survey of FOS cases suggests that the most common form of reasonable
misrepresentation is the second type. The consumer knows that their answer is
not literally accurate, or was incomplete, but they quite reasonably think they
have provided all the information the insurer wanted. Consumers may not realise
that a question about hospital treatment is asking them to disclose tests that were
entirely negative; or that a general question about health matters seeks
information about minor issues such as colds, moles and ingrowing toenails as
well as serious illnesses. They may not understand the concept of “an uninsured
loss”, or may not think that “psychiatric illness” includes stress. They may
therefore give inaccurate or incomplete answers.
4.107 Much depends on how the question was asked. If the question was clear and
specific, the consumer who does not reveal the relevant condition will almost
certainly have been careless, at least. But if the question was vague or too
general, even an honest and careful consumer may give an inaccurate or
incomplete answer because they do not think the information withheld is relevant.
If their understanding was reasonable, then again both the FSA Rules and the
FOS require the insurer to pay the claim.
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