Case Alert ‐  EWHC 2415 (QB)
Judge considers meaning of "investment" income in a form submitted to support a claim under an income protection policy
The claimant sought to claim payments from the defendant insurers under an income protection insurance policy. Much of the case turns on its particular facts and whether the claimant was faking, or significantly over-stating, the seriousness of his illness. The judge concluded that he was not. In reaching that conclusion, he commented on the volume of evidence adduced by the insurers to support their allegations as follows: "there is a risk in cases such as this that too close a scrutiny of the trees risks losing sight of the wood. With each, and ever more closely observed, layer of inspection and analysis, the law of diminishing returns takes a heavier toll. It is for this reason that I have resisted the temptation to rehearse and resolve every issue of primary fact which has arisen; concluding that the demands of both justice and clarity are best served by an analysis involving a more generic and broader textured approach".
One other issue which arose in the case was whether the insurer was entitled to avoid the policy on the ground of misrepresentations made by the claimant concerning his income from other sources during the period when he was receiving payments under the policy (Weekly Update 24/17 reported an earlier decision in this case and referred to Clause 5 of the policy, which provided that "if in connection with the happening or purported happening of any event insured by this Policy, the Member makes an untrue statement…or omits to disclose a Material Fact, the cover provided by the Policy…will immediately become void.." The state of mind required of the assured under common law for a breach of the post-contractual duty of utmost good faith is unresolved by prior caselaw).
The claimant was required to complete financial review forms whilst receiving payments under the policy in order to ensure that he did not receive more than 75% of his pre-incapacity earnings. The forms advised that "income from investments may be ignored". The claimant had declared that he was not receiving any other income. During the relevant time, he had received "restricted stock awards" ie shares which were subject to various restrictions.
The issue was therefore whether sums received under the restricted stock agreements were "income from investments". The insurer sought to argue that they were not, since they were part of his employment remuneration. Having reviewed the dictionary definition of "investment" and prior caselaw commentary (that this is a "vague term"), the judge concluded that the sums were income from investments. Although they were originally part of his remuneration package, "When it was vested in the claimant it gave rise to income from an investment".
Accordingly, the judge was not required to determine the claimant's state of mind, although he did appear to suggest that an innocent mistake might not have allowed the insurer a defence, since he said: "In any event, I am not satisfied that, even if the defendant's interpretation of the form were correct, the claimant provided deliberately fraudulent information when filling it out".