The High Court has confirmed that insurers will not
be limited to the initial reasons listed for declinature, and
may rely on misrepresentations subsequently made by an
insured.
In the recent case of Houlihan v Friends First Life Assurance
Company Limited, the High Court has confirmed that an insurer
was entitled to rely on additional reasons for declining liability
under a policy, which were not included in the original declinature
letter and were only raised in the context of the coverage
proceedings.
The policy at the centre of the dispute was an income protection
plan which provided cover for disability if the insured was totally
unable to carry out his normal occupation due to a recognised
illness or accident and was not involved in carrying out any other
occupation for profit, reward or remuneration. The plaintiff
ceased work in April 2009 due to medical difficulties after
approximately 19 years of continuous employment and submitted a
claim in September 2009. In December 2010, the insurer
declined cover on the basis that on the evidence presented, the
insured was not totally disabled by reason of sickness or accident
from his occupation as insurance broker as required by the scheme
conditions. This decision was challenged by the insured who
brought High Court proceedings in 2012.
The High Court accepted that the insured must prove he was totally
unable to carry out his normal occupation due to a recognised
illness. There was broad agreement on the legal principles and the
factual evidence between the parties with some
exceptions.
Counsel for the insured had submitted that the insurer was not
entitled to rely on an allegation of misrepresentation arguing that
it was not open to the insurer having declined liability under a
policy for a particular reason to rely on one or more reasons
which, even if they could have been relied on as a ground for
declining payment, were not relied on in making that
decision. The Court disagreed and found that a
misrepresentation by an insured person can be taken into
consideration by the Court, even if it arises subsequent to the
initial claim being made and its initial refusal. The Court
considered that if, during the course of a review of the claim, a
misrepresentation is made which the Court finds to be consciously
or recklessly made to mislead the insurer, it should be taken into
account.
However, on the basis of the factual evidence and the expert
evidence produced in the case, the Court concluded on the balance
of probabilities that the insured had not misled the insurer and
was entitled to cover.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.