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

3.47 In eight cases, the insurer said that had it known the information, it would have
inserted an exclusion. In five cases, the exclusion would not have affected the
claim that had arisen, and the insurer was ordered to pay the claim. 26
Case study: the exclusion did not apply to the claim
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.
3.48 In other cases however, the exclusion would have applied to the claim in
question.
Case studies: the exclusion did apply
In Case 96, the complainant failed to mention an upcoming opthalmological
referral, in a way that was classified as inadvertent. He later developed a
serious eye problem. The ombudsman reinstated the policy, but subject to an
exclusion for eye conditions, which meant that his claim would not be paid.
In Case 188, the complainant failed to disclose stress and mild depression and
suffered a brain haemorrhage. The ombudsman found that if the insurer had
known about the stress it would have withdrawn the waiver of premium benefit.
Thus the claim for waiver of premium was rejected. However, the rest of the life
policy was reinstated, and the claimant was given £500 for the distress and
inconvenience caused by the insurer’s maladministration in avoiding the policy.
3.49 Where the insurer would not have written the policy at all, then the whole policy
may be avoided, even if the policyholder had been only slightly careless. For
example, in Case 109, the claimant wrongly stated that he did not suffer from
depression and went on to develop a thyroid disease. The ombudsman decided
that the non-disclosure could not be considered innocent. There was no need to
consider whether it was reckless or merely inadvertent, as in any event the
insurer would not have accepted the risk had it been aware of the facts.
26 Another example is give in para 1.12 above.
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