SERVICE: Trauma
OUTCOME: Not upheld
Issues: Non-disclosure; Scope of cover
Summary: Ms H’s* complaint was not upheld, because the insurer correctly applied the terms and conditions of the policy to the claim. As such, the insurer did not have to increase the claim payment.
In October 2019, Ms H took out health, income protection, trauma and life cover.
In 2023, Ms H made trauma claims to the insurer, after being diagnosed with an occipital lobe infarction, loss of sight and patent foramen ovale.
The insurer said, when Ms H arranged cover, she did not tell it about her focal nodular hyperplasia of the liver (FNH), tinnitus, back pain and atypical naevi. As a result, the insurer applied 50% loadings to the life and trauma covers and removed the provision under the trauma cover for hepatocellular carcinoma within any malignant tumour provision.
The insurer said it accepted the stroke claim and paid Ms H a reduced amount, to take into account what it would have charged her for the trauma cover (with the retrospective loading).
The insurer said there was no amount payable for the sight claim or the heart claim, because the policy criteria had not been met (the loss of sight was not total and irrecoverable loss of sight, the vision was not less than 6/60, and patent foramen ovale is not a heart valve). Further, all of the claims related to one event and, as such, there was only one amount payable.
Ms H complained that her answers on the application were true at that time. She also said the insurer made representations about the requirements to obtain severity level 2 and, when she satisfied those requirements, it told her that severity 2 level did not exist for a stroke claim.
The case manager’s assessment
· Non-disclosure
The law says that there is an obligation on insureds to disclose all material information when they arrange an insurance policy. That obligation was set out in the policy.
When Ms H completed the application, she answered “No” to a question asking whether she had signs or symptoms of “Liver disease or disorder, e.g. Hepatitis”.
In 2018, Ms H had a liver ultrasound for a liver lesion, which was diagnosed as FNH. That was a liver disorder and, as such, Ms H should have answered “Yes”. Even if she had been unaware of the name of the condition at the time, she knew that she had an ultrasound, and that there was a liver lesion.
However, Ms H said she honestly and accurately answered “No” because, applying the legal principle of ejusdem generis, the general words are limited to things of the same class as the specific ones. Ms H interpreted the question to mean that the words liver disease or disorder were limited to things of the same class as Hepatitis.
The case manager disagreed with Ms H’s interpretation. The phrase “Liver … disorder” was not limited to Hepatitis and the case manager believed it was reasonable to interpret the question to include other liver disorders, such as FNH.
The case manager made enquiries, and independent underwriters confirmed that they would not have offered cover without further medical information. The insurer also confirmed, if it had been aware of the FNH, it would have applied the loadings to the trauma and life covers. This meant the insurer was able to alter the terms upon which the cover was provided.
· The claims
The amount payable under the policy depended on the severity level of the insured’s condition. Severity level 1 meant a payment of 100% of the sum assured, level 2 was a payment of 75%, level 3 was a payment of 50%, level 4 was a payment of 25% and level 5 was a payment of 10%.
Ms H did not complain about the insurer’s decision in respect of the loss of sight claim or the heart claim. Rather, in respect of the stroke claim, Ms H referred to an email from the insurer, which set out the requirements to meet each of the severity levels. Ms H said she had fulfilled the requirements of severity level 2, as set out in the email. She wanted the insurer to stand by its representation in its email to pay out the stroke claim for severity level 2.
In the email, the insurer set out the requirements for level 1, level 2, and level 4, and said it had assessed Ms H’s condition as severity level 4 (later revised to level 3).
There was no dispute that Ms H met the criteria for stroke cover. The dispute arose over whether stroke cover fell under severity level 2 or 3.
The insurer said there was no provision for stroke under severity level 2 and that the claim was correctly accepted under severity level 3. The layout of the policy meant it was slightly confusing to determine which severity level corresponded to which criteria. However, the case manager found that the policy did set out that there was no provision for a level 2 payment for stroke, which fell under level 3. As such, the insurer correctly applied the terms and conditions of the policy to the claim.
*Name has been changed.
Complaint No: 00231184