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Case Review: Insurance
Summary of some of the decisions made by the Mediators on some of the complaints received by FMB.
This summary is for information only and should not be used for other purpose.
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FMB/LI 0294 Non-Disclosure of Pre-Existing Illness
The assured was diagnosed with cancer and submitted a claim for dread disease benefit. The insurers declined the claim on the ground of ' non-disclosure of history of epigastric pain since February 2000 ' in the proposal form dated 19.5.2003.
Based on the medical records the assured had consulted the doctor for epigastric / gastric pain for only three occasions ( 25.2.2000, 13.4.2001, 14.10.2001 ) prior to completing the proposal form on 19.5.2003. To a layman the condition is simply a stomachache, a common / trivial ailment.
The law on non-disclosure is based on the ' reasonable insured ' test under the Insurance Act 1996. Section 150(1) of the Act reads as follows :
" (1) Before a contract of insurance is entered into, a proposer shall disclose to the
licensed insurer a matter that :
(i) he knows to be relevant to the decision of the licensed insurer on
whether to accept the risk or not and the rates to be applied ; or
(ii) a reasonable person in the circumstances could be expected to
know to be relevant "
In Joel v law Union and Crown Insurance Company [1908] 2 KB 863, Fletcher Moulton LJ stated as follows ( S Santhana Dass, Law of Life Insurance in Malaysia ) :
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" But the question always is : was the knowledge that you possess such
that you ought to have disclosed it ?. Let me take an example. I will
suppose that a man, as in the case with most of us, occasionally had
a headache. It may be that a particular one of these headaches would
have told a brain specialist of hidden mischief. But to the man it was an
ordinary headache indistinguishable from the rest. Now, no reasonable
man would deem it material to tell an insurance company of all the
casual headaches he had in his life, or if he knew no more as to this
particular headache than that it was an ordinary casual headache, there
would be no breach of his duty towards the insurance company in not
disclosing it ".
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Similarly in the matter under reference it is unreasonable to expect the claimant ( or a reasonable person ) to disclose the gastric pain which she only experienced once in 2000 and twice in 2001. As a layman who is not medically trained, the claimant would consider the condition as occasional stomachache which she ( or a reasonable person ) could not be expected to know to be relevant to disclose.
Based on section 150(1) of the Insurance Act 1996 the Mediator held the insurers were not entitled to decline the claim on the ground of non-disclosure of pre-existing illness.
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