Insurance Contracts CP - Law Reform Commission

3.65 Although the Financial Services Ombudsman‘s powers and jurisdiction in relation to the
investigation of complaints stand on a statutory footing, there appears to be a significant element of
continuity and uniformity of approach to non-disclosure defences. The following examples show that the
decisions the Financial Services Ombudsman has reached demonstrate both a willingness to uphold the
uberrimae fidei principle and recognise that the principle has implications for proposer and insured.
A life assurance death benefit policy was avoided by the insurer when the proposer completed a
Declaration of Health Form which asked a number of relevant questions in relation to the
proposer‘s health and contained a warning that a failure to detail all material facts ―may invalidate
a future claim‖. The insurer referred specifically to the fact that the proposer had not disclosed a
consultation with his GP in relation to a serious health problem just two weeks prior to completion
of the Form. The Ombudsman found that the Company was entitled to repudiate the claim,
stating that:
―the principal characteristic of an insurance contract is that it is a contract of utmost good faith:
both the insurance company and the person looking for insurance must exercise utmost good
faith in their dealings with each other. If the person looking for insurance fails to disclose
circumstances which would influence the decision of the insurance company in fixing the
premium or in determining whether or not to accept the risk, the insurance company may be
entitled to decline liability under the policy‖. 92
In a guesthouse theft insurance case, the proposer had been asked specific questions relating to
any previous losses and the consequences of non disclosure had been set out in the Proposal
Form. Two questions were incompletely answered. While the facts appear to set out instances
of misrepresentation, the Ombudsman referred to the uberrimae fidei principle and the duty of
disclosure, holding that the insurer was entitled on these facts to avoid the policy from its
inception. 93
In an important ruling on the duty of disclosure in relation to the ill health of an employee to be
covered under a Group Policy, the Ombudsman upheld the duty to make full disclosure of all
relevant information, rejecting an argument that the medical condition of this high profile
executive was a matter of common knowledge. 94
A failure to disclose a medical condition that had arisen out of a road accident that had occurred
after the proposal form was completed but before the cover was commenced gave rise to a right
to avoid the policy. The Ombudsman stressed that the duty to advise of changed circumstances
prior to commencement of cover had been set out on the Proposal Form. 95
3.66 There are however a number of situations in which the non disclosure of material facts has not
been dispositive before the Financial Services Ombudsman. For example, the Ombudsman has been
prepared to hold that the non disclosure relied upon was based on illegal or improper inferences drawn by
the insurer, or that, despite non disclosure, other mitigating circumstances were present.
As a general principle, a decision by an insurance company to decline to meet a claim on the
basis that he insured has committed an unlawful act may, in the absence of a finding by a court
of law, be an improper inference, the Ombudsman citing articles 34 and 38 of the Constitution. 96
In medical treatment insurance contracts the waiting period or pre-existing condition exclusion
may raise issues of non disclosure by the proposer/the proposer‘s medical adviser. There are
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93
94
95
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December 2009, p. 24-5.
July 2009, p. 25-6.
December 2007, p.21-3.
September 2005 – Income Protection Policy – Policy voided for non disclosure not upheld but contributions
refunded.
January 2007. ―Only the courts determine whether an insured person committed or attempted to commit an
unlawful act.‖ See also Case Study 3 in the Annual Report 2010. See also the presumption against crime in
O‟Hagan v Sun Life Assurance Co of Canada [1932] IR 741.
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