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

The complainant’s state of mind
3.40 Most cases in our study turned on the complainant’s state of mind. The crucial
issue was whether the policyholder had acted deliberately or recklessly on the
one hand or only inadvertently or innocently. We were interested to see how
ombudsmen applied these concepts in practice. As we explain in Part 4, there is
some confusion over the meaning of “recklessness”. Some statements by the
FOS suggest it is part of the common law definition of fraud, and implies
dishonesty – giving an answer without caring if it is true or false. 24 However,
some statements by the FOS suggest it is a form of negligence. 25
3.41 It was clear from our survey that ombudsmen are reluctant to accuse consumers
of dishonesty. We found no cases in which the insured was said to act
fraudulently, and only six in which the misrepresentation was described as
deliberate. It was more common for the ombudsman to say that the conduct “was
at least reckless” (applied in 31 cases). However, in many cases the ombudsman
allowed the insurer to avoid the policy without accusing the consumer of acting
either deliberately or recklessly. The study included 59 cases in which
ombudsmen upheld the insurer’s decision to avoid the policy without classifying
the complainant’s behaviour into one of the four categories.
3.42 In some cases, ombudsmen put the point negatively, saying they were unable to
conclude that the misstatement was innocent or inadvertent. In other cases, the
ombudsman merely said the information was inaccurate, without a specific
finding on the claimant’s state of mind. However, the most used form of words
was that the policyholder did not give the questions and answers the care and
attention they required:
Mr X did not give the questions and answers the care and attention
they required. (Case 2)
She did not give the questions the careful attention they required
and provided misleading information. (Case 71)
24 See Derry v Peek (1889) LR 14 App Cas 337
25
In Ombudsman News (June 2005), Issue 46, the FOS described both inadvertent and
reckless behaviour as forms of negligence. A more recent article in Ombudsman News
(April/May 2007) Issue 61, clarifies that recklessness denotes a degree of not caring
whether a disclosure is true or false. This contrasts with not giving the answer sufficient
care and attention.
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