In Zeller v British Caymanian Insurance Company  UKPC 4, Mr Zeller sought indemnification under his employer's health insurance policy in respect of his costs of having major heart surgery. Prior to the inception of cover, he had completed a questionnaire requiring him to answer questions concerning his health to the "best of [his] knowledge and belief". Mr Zeller had had several consultations with his doctor in respect of a thyroid condition, for which he had received treatment. Mr Zeller disclosed his thyroid condition in the questionnaire. The consultations also revealed a heart murmur and a raised level of cholesterol but Z received no treatment for these, which he believed to be minor ailments, and essentially considered himself in excellent health.
BCI had repudiated the policy on the basis of Mr Zeller's non-disclosure in respect of the heart murmur and raised cholesterol. BCI submitted that this was a material non-disclosure which had induced it to enter into the contract, when it would not have done had it had the requisite knowledge. The Privy Council found against BCI. It found that the obligation on Mr Zeller was that of honesty in the answers given in the questionnaire. On a construction of the completed questionnaire, it was clear that Mr Zeller had answered BCI's questions completely and correctly to the best of his knowledge and belief. As the Board noted, "he honestly believed himself to be and to have been in excellent health". The heart murmur and high cholesterol levels were therefore not material facts to be disclosed and BCI was not entitled to repudiate the policy.
This case is of particular interest in the context of the English and Scottish Law Commissions' current review of insurance contract law, one aspect of which is the law on non-disclosure. For consumers, it is proposed that the duty of disclosure be abolished, with the onus to be on insurers to ask the relevant questions. More information on the review and the Commissions' proposals can be found here.