"Generally speaking contracts of life insurance are contracts uberrimae fidei, which means that utmost good faith, must be shown by the person seeking the insurance. Not alone must that person answer to the best of his knowledge any question put to him in a proposal form, but he is also bound to divulge all matters within his knowledge which a reasonable and prudent insurer would consider material in deciding whether to underwrite the risk or to underwrite it on special terms"
Selection of life insurance case studies: insurance case studies – non-disclosure, reckless or inadvertent?
These are case studies where, when applying for (or renewing) a life insurance, a customer fails to answer a question to the best of their knowledge and belief, and as a result fails to reveal a relevant fact, or misrepresents their situation.
As we use it in this context, derives from the meaning it has in law. It is a familiar and well-used term that arises in civil and criminal cases as well as in legislation. There is no statutory definition but the term has been applied in the courts on a consistent basis for many years. In a 1967 case, Lord Diplock offered the following definition:
'It must be at least reckless, that is to say, made with actual recognition by the insured himself that a danger exists, and not caring whether or not it is averted.'
The important point is that recklessness denotes a degree of not caring whether a disclosure is true or false.
To conclude that a consumer's non-disclosure or misrepresentation when applying for a policy was reckless rather than inadvertent, one must be satisfied from all the evidence (including that relating to any conversation, marketing documentation, other advice or paperwork available at the time to the consumer), that in answer to a clear question the consumer:
- did not care whether their answer was true or false and
- understood, if only in a limited way, that an answer was required, that it was important to the insurer and that there was a consequence to it.
Signing an application form without reading it, and then leaving it with someone else to fill in, would be an example of recklessness. But it would not be reckless to sign an application form without reading it if it had been filled in by an intermediary, when you genuinely believed the intermediary had accurately recorded all of your answers.
Mr F took out life and critical illness cover in June 2002. Just five months later, in November 2002, he suffered a heart attack and submitted a claim to the insurer. However, the insurer refused to meet the claim, on the grounds that Mr F had been reckless in failing to disclose basic information on the application form. » read more
In April 2002, Mr J applied for income protection insurance. He answered 'no' in response to a question on the application form about whether he had received any medical treatment or had any medical consultations in the previous two years. He gave the same answer when the question was put to him during the medical examination that the insurer arranged for him in June 2002. » read more
Mrs B applied for life and critical illness cover in March 2000 during a face-to-face meeting with a representative of the insurer, who completed the application for her. Several years later, after Mrs B developed breast cancer, the insurer declined her claim on the grounds of reckless non-disclosure. And it avoided the policy (in other words, treated it as if it had never existed). » read more
When Mr L applied for life assurance in July 2005 he stated that he had not smoked within the previous 12 months. Asked about any medical consultations, he said he had sought advice about a hernia that had subsequently required surgery. He also disclosed that there was a history of hypertension in his family. » read more
Mrs M took out two life assurance policies in November 2002. One was in her sole name and the other was a joint policy with her husband. Both application forms contained the questions: 'Do you consume alcoholic drinks?' 'Are you currently receiving any medical treatment or attention?' 'Have you ever sought or been given medical advice to reduce the level of your drinking?' Mrs M answered 'No' to each question. » read more
When Mr K took out life assurance, he stated that he was 6 feet tall and weighed 16 stone. Following his death from a blood clot at the age of 37, just five months after taking out the policy, the insurer discovered that Mr K's actual height was 5'9" and his weight was over 21 stone. » read more