In Richardson v Financial Services Ombudsman & anor  IEHC 560, (High Court, Hunt J, 14 July 2016), the High Court upheld a finding of the Financial Services Ombudsman (FSO) that an insurance company was entitled to void a life insurance policy for material non-disclosure. The High Court held that, given the wording of the policy, the onus was clearly on the insured to disclose all matters even if they believed them to be irrelevant. The High Court also held that the fact that there was no intent to mislead was not determinative of the issue as to whether there had been material non-disclosure.
Mrs Richardson and her late husband purchased life cover from Irish Life in 1996. When completing the proposal form they both indicated that they had not suffered from any medical condition, illness or injury requiring medical or psychiatric attention in the past five years (other than colds, flu and minor limb injuries). They also indicated that they had not undergone or been advised to undergo any special investigations, blood or laboratory tests or had a surgical operation.
The proposal form made it clear that a failure to disclose all material facts could render the contract void. It specified that a material fact was one which an insurer would regard as likely to influence the assessment and acceptance of a proposal for insurance and was not confined to matters raised in the form. It stated that if applicants were in doubt as to whether certain facts were material, such facts should be disclosed.
The policy conditions also stated that if any questions were not correctly answered, or if any answer was misleading, they would be entitled to avoid the policy.
Mr Richardson died in June 2013, and Mrs Richardson applied to Irish Life for payment of the sum assured under the policy. In September 2013 Irish Life informed Mrs Richardson that they were refusing the claim due to non-disclosure of certain matter in the deceased's medical history including an alleged an admission to hospital for treatment of alcohol excess and a hospital review for assessment of chest pain which noted elevated cholesterol. Irish Life asserted that, had these medical details been disclosed to them, they would not have offered cover to Mr Richardson.
Decision of the FSO
Mrs Richardson referred the decision of Irish Life to the FSO. She argued that although Mr. Richardson did attend with his general practitioner in 1991, after “a weekend of enjoyment which did involve drinking alcohol”, he did not require or receive additional treatment. Furthermore, while he attended hospital with chest pains, he did so after receiving a kick to the chest from a horse. Mrs Richardson stated that Mr Richardson did not disclose this information because he did not consider it relevant, and there was no intention to mislead Irish Life.
The FSO rejected the complaint. It concluded that, having regard to the history disclosed by the medical records of Mr Richardson, he ought to have declared these matters and the failure to answer the questions correctly amounted to a breach of the duty to make full disclosure which was neither insignificant nor immaterial in the light of the medical history.
Mrs Richardson appealed to the High Court arguing that the refusal to indemnify was groundless and illogical as Mr Richardson did not mislead or untruthfully withhold any medical information in his proposal, the incidents alluded to in the medical history were trivial, and that they did not result in any particular diagnosis or follow up treatment.
The FSO and Irish Life submitted that there was no serious or reviewable error on the part of the FSO, and that Irish Life had acted within its legal rights in refusing to provide indemnity under the policy.
The High Court held that the task of the Court was not a wholesale reconsideration of the matter, but rather an appraisal as to whether, on an examination of the adjudicative process as a whole, the finding in question was vitiated by a serious and significant error, or a series of such errors.
The Court noted that the only real issue before it, was whether the FSO committed a serious error by finding that Irish Life was entitled to repudiate the policy, in circumstances where there was no suggestion that the answers to the questions on the proposal form were deliberately dishonest or deceitful, and where the issues underlying the repudiation could be regarded as relatively trivial in nature, as well as significantly distant in time from the death giving rise to the claim on the policy.
The Court pointed out that it is well established that a policy may be avoided if the insurer proves that there has been misrepresentation or concealment of a material fact. The test of materiality is purely objective, and a fact is material if it would have reasonably affected the mind of a prudent insurer in determining whether it would issue a policy and if so, at what premium and on what conditions.
The Court accepted that the non-disclosure by Mr Richardson was not wilful or deliberate. However, the proposal form carefully and correctly defined a material fact and the obligation of the insured was to answer questions “fully, correctly and truly”. The Court noted that this obligation was not qualified by reference to it being discharged according to the best of the insured’s knowledge (had it been so, the Court indicated that it might well have taken a different view). The fact remained that the questions, which were not ambiguous or open-ended, were not answered fully and/or correctly. As the Court was satisfied that the material not disclosed would have impacted on a reasonably prudent insurer assessing the risk in the case, it upheld the finding of the FSO and dismissed the appeal.