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

(2) W failed to disclose an eating disorder and depression. The ombudsman
said that the question was oddly worded and that W found the issue
particularly difficult to talk about. She was later diagnosed with multiple
sclerosis. The insurer said that their standard practice where there was
evidence of depression was to increase the premium by 50%. On this
basis, W received two thirds of the normal claim. (Case 23)
(3) X failed to mention a minor eye infection and underestimated the number
of cigarettes she smoked. The ombudsman found that the eye infection
non-disclosure was innocent. The insurer used standard rates to assess
the level of smoking. The Ombudsman asked them to look at the case
again, taking into account the premium they would have charged for that
level of smoking. (Case 89)
(4) Y had failed to disclose that his father had died of a heart attack. He later
developed Parkinson’s disease. The ombudsman found that the nondisclosure
was “slightly careless… but this does not amount to
recklessness”. The case was sent back to the insurer, for them to
calculate how much they would have charged if they had known about
Y’s father’s heart attack. (Case 138)
(5) Z failed to mention that he suffered from Crohn’s disease. He later
developed multiple sclerosis. The ombudsman found that had the insurer
been aware of the problem they would have charged double the
premium. On this basis the insurer was ordered to pay half the claim.
(Case 171)
Applying an exclusion
C.83 In other cases, the insurer stated that they would have charged a similar premium
but would have added an exclusion to the policy. Clearly, this helps those
complainants whose claims would not be caught by the exclusion – though is of
no use to those whose claims would be caught. In five cases the exclusion did
not affect the claim. For example:
(1) In Case 15, an intermediary filled in the form and failed to mention the
complainant’s hearing loss. The complainant later died of leukaemia. The
insurer admitted that if they had known of the hearing problem they
would have issued the policy at the same premium, but would have
excluded hearing-related problems from the cover. The ombudsman
found that the non-disclosure was inadvertent, and required the insurer to
re-instate the policy, subject to this exclusion. The effect was that the
claim was met in full.
(2) In Case 55, the proposal form contained an extremely wide question,
which, among other things, asked if the complainant had ever suffered
from back pain. She did not mention her back pain following pregnancy
five years earlier. She later developed (unrelated) breast cancer. The
ombudsman categorised the answer as only slightly careless, and
decided that had the insurer known about the backache, they would have
simply have excluded back conditions from cover. They were required to
reinstate the policy subject to a back exclusion, and to pay the claim for
cancer.
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