PC 16 January 2008

An insurer was not entitled to repudiate liability under a health insurance contract where the insured had answered the questions on the health questionnaire completely and correctly to the best of his knowledge and belief. An insured could not be guilty of non-disclosure if he honestly believed he was answering the questions truthfully.

In 2001 Mr Zeller completed a health questionnaire in order to be included in his Cayman Islands’ employer’s health insurance contract. The questionnaire asked for “Yes” or “No” answers to a list of medical conditions. He wrote “Yes” next to “goitre, thyroid trouble and diabetes” and wrote in “thyroid” but “No” next to “heart trouble, abnormal blood pressure (hypertension or hypotension), anaemia, rheumatic fever”. The questionnaire also asked for details of any other departures from good health. Following Mr Zeller’s claim under the policy following major heart surgery in 2003, the insurers purported to avoid the policy on the ground that Mr Zeller had not disclosed the fact that his cholesterol level was slightly above normal and that a minor asymptomatic heart murmur and raised blood pressure had been noted on two previous occasions but no treatment had been prescribed.

The questionnaire did not ask for details of minor problems – the applicant was expected to exercise his judgment as to what appeared to be worth disclosing. He would not lose his cover if he failed to disclose a complaint which he thought to be trivial but turned out later to be a symptom of a more serious underlying condition. Mr Zeller genuinely believed himself, thyroid and minor complaints apart, to be in excellent health. He had not taken any medication for the heart murmur or raised cholesterol and his doctor had given him a clean bill of health. In these circumstances, the insurers were liable to him under the policy.

Comment: the wording of questionnaires and proposal forms is a tricky issue for insurers. In Doheny v New India Assurance Co Ltd the court considered when a waiver could arise out of the wording of a proposal form. By asking certain questions, an insurer might show that he was not interested in certain other matters and could, therefore, be said to have waived disclosure of them. The question to ask is “would a reasonable man reading the proposal form be justified in thinking that the insurer had restricted his right to receive all material information, and consented to the omission of the particular information in issue?” At present this approach applies equally to business and consumer policies but consumers are likely to be treated differently once the Law Commission’s review of insurance contract law is transformed into legislation. Under the present proposals, the duty to disclose material facts will be replaced by an obligation on insurers to ask questions. This case illustrates the importance of the wording used when framing such questions.