Insurance Contract Law Issues Paper 2 Warranties - Law Commission

4.78 However, issues of causal connection can arise for exclusion terms as well as for
warranties. There were cases within the sample in which the FOS overturned an
insurer’s decision to reject a claim, where the breach the insurer relied on did not
cause the loss in question.
4.79 In Case 42, the complainant claimed for a stolen bicycle, but the firm rejected the
claim because at the time of the theft it was not locked to a secure structure. The
complainant argued that this would not have made any difference: many bicycles
were stolen at the same time, including locked bicycles. The ombudsman ordered
the firm to pay the claim, commenting:
The Insurance Conduct of Business (ICOB) rules state that an insurer
should not refuse to meet a claim as a result of a breach of warranty
or condition, unless the circumstances of the claim are connected
with the breach. Although the firm is relying on an exclusion to reject
this claim, it is no different to a warranty in that it requires the
complainant to do something to ensure that the cover applies. As I do
not believe the lock would have made any difference, I am satisfied
that the complainant has provided sufficient evidence to establish that
his failure to lock his bicycle was not connected to his claim.
4.80 Case 8 concerned a travel policy that excluded pre-existing medical conditions.
The complainant had to cut short her holiday when her mother suffered a heart
attack, but the insurer rejected her curtailment claim on the grounds that her
mother had a pre-existing medical condition. The evidence showed that her
mother had suffered from hypertension for the last 50 years, but her condition
appeared to be stable and controlled.
4.81 The ombudsman upheld the complaint and required the insurer to pay the claim.
He commented that the insurers had provided no evidence to show that the
longstanding hypertension caused the heart attack. An internet article suggesting
a general link between the two was not enough.
I do not consider that the firm is able to demonstrate on the balance
of probabilities that [the mother’s] pre-existing medical condition was
directly responsible for the cardiac arrest.
4.82 The decision is noteworthy, as it goes further than the recommendations in the
1980 report. First, it puts the burden of proof firmly on the insurer to show the
causal connection. Secondly, it requires the insurers to show more than a
statistical correlation between hypertension and heart attacks. Instead the insurer
is required to prove that the pre-existing condition is directly responsible for the
event which gives rise to a claim.
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