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

C.62 The classification system is a complex one. It attempts to distinguish between
two forms of negligence: inadvertence and recklessness. The word “reckless” is
often used in a criminal context, and attempts to define it have kept the courts
busy. 10 In 1993 the Law Commission distinguished between acting recklessly in
respect of a circumstance (such as whether you had undergone an MRI scan)
and acting recklessly in respect of a result (such as whether the insurer would act
differently if they knew about it). 11 We provided the following draft statutory
definition:
A person acts “recklessly” with respect to:
(i) a circumstance, when he is aware of a risk that it exists or
will exist and
(ii) a result when he is aware of a risk that it will occur
and it is unreasonable, having regard to the circumstances known to
him, to take that risk.
C.63 It is not absolutely clear whether the FOS is talking about recklessness in relation
to the circumstances or the result. For example, a policyholder may be aware that
the question asks about “any ear disorder” and that they suffer from minor
hearing loss. They may, however, fail to mention it in a proposal for life insurance
because they do not think it would be of any relevance to the insurer. The
misrepresentation would therefore be deliberate as to the circumstances but
inadvertent as to the result (as the applicant is unaware of the risk that the insurer
would think it material).
C.64 At first reading, the description the FOS gives of their approach suggests that
ombudsman will look only at the applicant’s state of mind in relation to the literal
truth of the answer: did they give an answer knowing it to be untrue or without
caring whether it was true? On this basis someone who deliberately states that
they do not have a hearing loss because they didn’t think the insurer had any
reason to know would be classed as acting “deliberately” rather than
“inadvertently”. This can lead to a harsh result where the applicant dies of a
cause unrelated to the hearing loss (such as leukaemia). If the mis-statement is
classified as deliberate or reckless, then the insurer may avoid payment if they
can show that, had they known the truth, they would have done something
differently (such as exclude hearing loss). The insurer does not need to show
that, had they known, they would have excluded the particular claim in question.
10 See in particular, R v G (2003) 22257805 (HL), [2004] 1 AC 1034; R v Caldwell [1982] AC
341; R v Cunningham [1957] 2 QB 396.
11
Legislating the Criminal Code: Offences against the Person and General Principles (1993)
Law Com 218.
372