In two separate recent judgments, the High Court has upheld
decisions of the Financial Services Ombudsman (FSO) in relation to
claims regarding serious illness cover.
In the case of O'Regan v Financial Services Ombudsman, the
appellants were a married couple who believed their mortgage
protection policy included cover for serious illness.
However, a claim for rheumatoid arthritis was refused by their
insurer on the basis that the policy did not in fact include
serious illness cover. The couple complained to the FSO who
found that the complaint was unsubstantiated. The appellants
appealed the FSO's decision to the High Court and the High
Court remitted to the FSO the matter for an oral hearing as there
was conflicting factual evidence.
Having held an oral hearing, the FSO found that the documentary
and oral evidence did not support the allegation that the insurer
had removed serious illness cover from the appellants' policy
without their knowledge or consent. It was clear from the
policy documentation that serious cover illness had not been
provided and the complaint was not upheld. The appellants appealed
the finding to the High Court. In the second appeal, Mr
O'Regan claimed that he and his wife had been misled in
relation to the extent of the cover and in general made the case
that they should have been believed by the FSO. He also
alleged that the paperwork had been "doctored" since the
original complaint was made, that the medical definitions for
serious illness had been altered without medical reason and that
there were inconsistencies in the documents put before the
FSO.
While the High Court expressed sympathy for the misfortunes that
had befallen the appellants, the Court concluded that there was no
serious or significant error in the FSO's approach to the case,
the handling of the oral hearing, the assessment of the case and
the drawing of inferences from the evidence.
In a second case, Geoghgan v Financial Services Ombudsman, the
appellant and her husband had added a critical illness benefit to
their life assurance policy in 1999. From 2006 onwards, the
critical illness cover was described on the annual notices sent to
the appellant and her husband as "accelerated specified
illness cover". The appellant's husband was
diagnosed as suffering from cardiomyopathy in 2008 and sought to
claim under the critical illness policy in 2009. The claim
was declined by insurers on the basis that cardiomyopathy was not
covered under the "heart attack" definition in the
policy.
The appellant complained to the FSO on the basis that she and her
husband believed they were covered for all manner of serious
illness under the policy, rather than only certain specified
illnesses. At the time of making the complaint, they had paid
in excess of €40,000 in premiums. They also alleged that
the policy was mis-sold and at the time of signing of the proposal
form, the appellant was not advised that only specified illnesses
were covered by the policy. However, the FSO was precluded
from investigating the circumstances of the sale of the policy or
the nature of the information provided to the appellants in
relation to the policy at the time it was sold, in circumstances
where this had occurred more than six years previously. The
FSO subsequently carried out an investigation into the balance of
the complaint but concluded that the medical evidence supported the
insurer's decision to decline the claim in dispute and thus the
claim was not substantiated.
During the course of the appeal to the High Court, the appellant
submitted that she and her husband had always understood that all
major illness would be covered by the critical illness policy and
that owing to the high monthly premium, they would not have taken
out the cover had they known it covered only specified
illnesses. It was alleged that the critical illness cover
changed in 2006 and as a result it was subsequently described as
"accelerated specified illness cover". The
appellant also sought to rely on evidence that the insurer had
accepted claims in respect of cardiomyopathy from claimants whose
policies were commenced at the same time as that of the appellant
and her husband.
The Court considered that the case arose from a particularly
unfortunate set of circumstances in that since 1998 the appellant
and her husband had paid considerable monthly premia to the insurer
in respect of the unit link to life assurance policy, to which
critical illness cover was added in 1999. However, while the
Court had a great deal of sympathy for the appellant and her
husband, the Court noted that its role was limited to considering
whether or not the FSO had erred in its decision and that the
relevant test was clear from a long line of case law, namely was
the decision reached by the FSO vitiated by a serious and
significant error or series of errors. The Court was
satisfied that the FSO did not err in his decision on the basis of
the information which was before him and was also satisfied that
the FSO was precluded from considering the alleged mis-selling of
the policy given that the policy had been sold more than six years
previously.
The Court accepted it was clear from the documentation that the
name of the illness cover changed without warning in 2006 from
"critical illness cover" to "accelerated specified
illness cover". The Court accepted however that this
change occurred in order to clarify that the cover at issue was
limited to illnesses specified in the policy rather than covering
all illnesses. While the Court could reasonably draw an
inference from the change that there was some confusion amongst
policyholders in relation to the nature of the policy which would,
at the very least, warrant a pragmatic and equitable response from
the insurer in relation to the appellant's claim, this did not
alter the reality that the appellant and her husband had signed a
proposal form at the time of taking out the cover which expressly
stated which illnesses were covered by the policy.
With regard to the evidence that the insurer had upheld claims
from other policyholders who suffer from cardiomyopathy,
notwithstanding the absence of cover for this illness, the Court
noted that, while this understandably compounded the appellants
sense of unfairness and frustration at the insurer's
unwillingness to engage with her claim in an empathetic manner, it
was clear from the case law that the Court could not compel the
insurer to deviate from the "obstinate stance" it had
adopted. The Court did comment however that, while financial
service providers and institutions have obvious commercial
responsibilities and various duties and obligations, in certain
special circumstances where a patent unfairness arises they should
not be precluded from acting with an appropriate deal of empathy
towards consumers.
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