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

The role of intermediaries
C.102 In eight out of the 12 cases, the complainant had raised issues about the role of
the intermediary, claiming either that the intermediary failed to pass on
information, or that they failed to check information with the policyholder. In all but
two cases, the ombudsman rejected this argument, stating that even if the
intermediary was at fault, the insurer could not be held responsible for the
intermediary’s mistake.
C.103 For example, in Case 14 farmers had failed to declare all the previous straw fires
they had experienced. When they claimed for another fire, the insurer avoided
the policy. The policyholders said they had given full details of previous losses to
their insurance intermediary, who failed to pass on the information to the insurer.
The ombudsman concluded that the intermediary had acted as the policyholder’s
agent, so any disclosure to the intermediary was irrelevant.
Classifying the policyholder’s behaviour
C.104 We have already discussed the way in which the FOS classifies consumers’
behaviour as innocent, inadvertent, reckless or deliberate. This classification is
relevant where the FOS applies consumer principles to small business, but not
where an insured is of a sufficient size and sophistication for normal insurance
law to apply. Table 5 shows how the small business cases were classified.
Table 2: small business cases: how did the ombudsman classify the
answer (compared to consumer claims)
No. %
Innocent 1 8
Inadvertent 0 0
Reckless 2 16
Deliberate 1 8
Did not classify in this way
of which:
8 67
Policy avoided
6
75
Policy not avoided
2
25
All cases 12 100 100
C.105 Two thirds of cases were not classified. 13 For example, in Case 190, the
ombudsman simply said that it was unreasonable for the policyholder to have
given the answer they did. In Case 62, the policyholder claimed to have the
wrong sort of alarm. The ombudsman stated that the complainant may well have
believed this to be an honest mistake, but even so it is generally the case that the
policyholder must suffer the consequences of such failure.
C.106 There were no cases in the sample where the ombudsman held that a small
business had behaved inadvertently; or where the insurer or ombudsman
attempted to apply a proportionate outcome to a small business complaint. These
are relatively rare events, and would not necessarily be represented in such a
small sample.
13
This appears higher than for consumer claims but, given the small numbers, the difference
is not statistically significant.
382