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

Case 22 is more surprising. Here the complainant’s car was stolen.
When he made a claim on his motor insurance, the insurer avoided
the policy on the grounds that at the time of application he had not
told them that the police had serious doubts about the car’s history.
The police apparently believed the car to have been stolen. The
insurer had not asked any specific questions about this.
Nevertheless, the ombudsman decided that the insurers’ rejection
was not unreasonable, given the inconsistencies in the complainant’s
version of events.
C.21 Thus it appears that there are still a few cases where insurers attempt to avoid
policies because the policyholder has not volunteered information at application,
even though no specific questions have been asked. However, in the great
majority of consumer cases, the insurer has asked a relevant question. Out of
153 cases where it was alleged that the insured had failed to disclose an issue at
the application stage, a relevant question was asked in 149 (97%).
Non-disclosure between application and the start of the policy
C.22 These 27 cases all involved critical illness cover. It is often a condition of the
policy that the policyholder notifies the insurer of any changes in their health
between completing the application and the date the cover starts.
C.23 For example, in Case 26, the application form stated:
You should inform us immediately of any alteration in your health or
circumstances between you completing the application and the date
the risk is assumed by us.
C.24 After completing the application form, the complainant discovered a lump in her
breast and was sent for a mammogram. The insurer avoided the subsequent
claim for breast cancer because she had not disclosed this. The ombudsman
upheld the insurer’s decision on the grounds that the complainant had been given
a clear warning about the need to notify the insurer of the changes.
C.25 In around half of these cases (14) the ombudsman upheld the insurer’s decision;
in around half (13) the ombudsman found for the complainant.
C.26 Ombudsmen were prepared to overturn an insurer’s decision if the applicant had
not been given a clear warning of the need to notify. In Case 12, for example, the
ombudsman found for the complainant on the grounds that the requirement was
stated only in the conditions and not on the application form. In Case 30, the
requirement had been on the application form, but the complainant had not kept a
copy. The ombudsman found that the complainant could not be expected to
remember what was on a form they had sent to the insurers. Ombudsmen will
also find for the complainant if the requirement to notify is not practical. In Case
12, for example, the complainant visited the Accident and Emergency
Department the day before cover started. He did not leave until after business
hours, when it was too late to notify the insurer of his suspected throat cancer.
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