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

THE NEWSHOLME PROBLEM
Introduction
9.58 It is common practice for intermediaries to complete proposal forms on behalf of
applicants. Applicants may well be deterred by the length or complexity of
proposal forms, and find it easier to be led through the questions by the
intermediary, either face to face or over the telephone. Typically, the intermediary
records the answers on the proposal form, which is then signed by the
applicant. 33
9.59 Problems arise when an intermediary introduces inaccuracies when completing a
proposal form. Such inaccuracies may arise in different ways — for example:
(1) The correct information is given to the intermediary, who fails to record it
accurately.
(2) An intermediary completes the proposal form based on their own
knowledge, and gives it to the applicant to sign. The answers are
inaccurate or incomplete. However, the applicant either fails to check the
answers, or checks but does not notice the errors.
(3) An intermediary asks the applicant to sign a blank proposal form, which it
later completes inaccurately from its own knowledge or from information
supplied by the applicant.
(4) The intermediary wrongly interprets a question when putting it or
explaining it to the applicant. Although the applicant accurately answers
the question as interpreted — and the answer is correctly recorded —
information required by the insurer is omitted.
9.60 The question then arises — who is responsible for these inaccuracies? There are
two issues to consider. First, would the intermediary normally be considered as
acting for the insured rather than the insurer? As we discussed above, an
independent broker or intermediary is normally considered the agent of the
insured. This means that any remedy the insured may have lies against the
intermediary, not the insurer. The insurer is entitled to avoid the policy and leave
the insured to bring an action for professional negligence against their own
professional adviser.
33 According to CWC Research, The Protection Report 2005, this remains the most common
way in which protection insurance is sold. It reports that in 2005 three-quarters of
applications were completed face to face, usually on paper (p 2). There is also a
reluctance to abandon signatures (p 6).
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