Zeller v British Caymanian Ins Company Ltd
| Jurisdiction | Cayman Islands |
| Judge | (Zacca, P., Forte and Taylor, JJ.A.) |
| Judgment Date | 22 July 2005 |
| Court | Court of Appeal (Cayman Islands) |
| Date | 22 July 2005 |
(Zacca, P., Forte and Taylor, JJ.A.)
A. Turner and Ms A.J. Dunsby for the appellant;
Ms. I. Pierce and T.M. Cooke for the respondent.
(1) Bates v. HewittELR(1867), L.R. 2 Q.B. 595, considered.
(2) Brownlie v. CampbellELR(1880), 5 App. Cas. 925, considered.
(3) Economides v. Commercial Union Assur. Co. Plc., [1998] Q.B. 587; [1997] 3 All E.R. 636, referred to.
(4) Hair v. Prudential Assur. Co. Ltd., [1983] 2 Lloyd”s Rep. 667; (1982), 6 I.L.R. 104, referred to.
(5) Joel v. Law Union & Crown Ins. Co., [1908] 2 K.B. 863; (1908), 99 L.T. 712; 24 T.L.R. 898, dicta of Fletcher Moulton, L.J. applied.
(6) Zurich General Accident & Liability Ins. Co. Ltd. v. Morrison, [1942] 2 K.B. 53; [1942] 1 All E.R. 529, referred to.
Insurance-misrepresentation and non-disclosure-uberrima fides-insurance contract uberrima fides-parties under duty to disclose any material information voluntarily before contract-standard of duty that of reasonable man-irrelevant insured subjectively believes that fact not material
Insurance-misrepresentation and non-disclosure-insurer avoiding policy-insurer entitled to avoid policy for misrepresentation or non-disclosure of material fact-in health insurance policy failure to disclose complete diagnosis and treatment following physical examination is material non-disclosure
The appellant sought a declaration in the Grand Court that the respondent”s cancellation of his contract of health insurance was invalid, and damages for breach of contract.
The appellant joined his employer”s health insurance scheme operated by the respondent (‘BCIC’), for which he had to complete a health questionnaire. Under the first section, which referred to the previous seven years, the appellant declared a thyroid problem but denied having heart trouble. The second section asked, in relation to conditions within the previous five years not already mentioned, if he had had (a) a physical examination; (b) consultation(s) for any condition(s) not already listed; and (c) any departure from good health, whether treatment or advice was sought or not, not previously mentioned. The appellant answered ‘Yes’ to (a) and ‘No’ to (b) and (c), effectively claiming that apart from his thyroid problem he was otherwise in good health. The questionnaire also contained a clause stating that the answers were to be complete and correct to the best of the appellant”s belief, or the contract might be cancelled by the insurer.
Between June 1997 and December 2001, however, the appellant had visited a doctor in the United States approximately 10 times and had been informed that whilst he was asymptomatic for any type of heart disease he did have a heart murmur, which was heard on two of the visits. The heart murmur would require him to take antibiotics if he were to undergo any kind of surgery. Doctors had also told him that he had high
cholesterol and advised him to work on his diet and exercise to reduce it, though it did not require medication.
On the basis of his answers to the questionnaire, BCIC agreed to cover him, excluding anything in relation to hypothyroidism, from December 1st, 2001. In April 2003 a doctor detected the appellant”s heart murmur, which after various consultations, all approved by BCIC, culminated in expensive heart surgery. BCIC, having requested and received the appellant”s medical reports, discovered that he had had a heart murmur and high cholesterol which it considered were pre-existing conditions he should have disclosed on his health questionnaire. Consequently BCIC wrote to the appellant cancelling the cover retroactively to the original effective date of December 1st, 2001 and sought to reclaim the benefits, in excess of US$7,000, which they had already paid, following which they would refund to the company all premiums collected.
The appellant then commenced the present proceedings for a declaration that the respondent”s cancellation of his contract of health insurance was invalid, and damages for breach of contract.
The Grand Court (Levers, J.) held that the insurance contract was uberrima fides and the appellant was in breach of his duty to disclose voluntarily, before the contract was concluded, any information that a reasonable man would have thought material. It was not necessary for the insurer to ask a specific question about a condition for it to be material and the appellant”s belief that his conditions were not material was irrelevant, the heart murmur and high cholesterol being material conditions. The health questionnaire was not ambiguous and anything discovered following a physical examination should have been declared. The appellant”s misrepresentation or non-disclosure, which induced the respondent to insure the appellant, rendered the contract of insurance avoidable. The proceedings in the Grand Court are reported at 2004–05 CILR 283.
On appeal, the appellant submitted that (a) the heart murmur and high cholesterol were not material facts; or (b) if material, he honestly believed they were not material; (c) they were not pre-existing conditions, the heart murmur not being an illness or condition and having no ill effect on his health and his high cholesterol not requiring medication; (d) had these matters been material, specific questions should have been asked about them; (e) the questions as constructed were ambiguous and the ambiguity should be construed contra proferentem the maker of the document; and (f) he had completed the questionnaire to the best of his knowledge and belief, honestly believing that he was not ill, and BCIC was therefore not entitled to cancel the contract.
The respondent submitted in reply that (a) the heart murmur and high cholesterol were pre-existing conditions and had it known of them, one in conjunction with the other, it would not have taken the risk of insuring the appellant; (b) the appellant knew about the pre-existing conditions and should have disclosed them and was therefore in breach of his duty not to make misrepresentations or material non-disclosure; (c) the appellant”s
obligation was to disclose what he knew whether or not he thought it material and he could not wilfully shut his eyes to the truth; (d) the appellant was dishonest as he knowingly gave untrue answers to questions at the time of application; and (e) it would be too onerous to tailor every questionnaire to suit the individual being insured and it would be unrealistic to expect it.
Held, declaring the insurance policy avoidable for non-disclosure:
(1) The insurance contract was a contract uberrima fides, depending on the utmost good faith of the appellant who was under a duty to disclose all that a reasonable man would have considered material, being disclosure of all that he ought to have realized was material and not what he did in fact realize was so. It was clear and unambiguous from the questions asked in the health questionnaire that the insurers were concerned to ascertain whether the appellant had any medical history, not specifically asked about in the earlier questions, which might have been relevant to their accepting the appellant as an insured (per Zacca, P. and Forte, J.A., at paras. 2–3; para. 7; para. 16; Taylor, J.A. dissenting, at paras. 31–37; paras. 52–55).
(2) Having answered ‘Yes’ to having had a physical examination, the appellant set out his diagnosis and treatment only in relation to his hypothyroidism, even though it was as a result of the examination by his physicians that he was alerted to his heart murmur and high cholesterol. Any reasonable person, acting in the utmost good faith, attending as the appellant did for physical examinations which resulted in his being told of a heart murmur and high cholesterol, would have disclosed that information when detailing the diagnosis of the physical examination (per Zacca, P. and Forte, J.A., at paras. 10–13; para. 16; Taylor, J.A. dissenting, at para. 56; paras. 58–60).
(3) It was irrelevant whether the appellant believed that his heart murmur and high cholesterol were diseases or illnesses as he was asked to declare his physical examinations and his diagnosis at each but did not do so. He had notice of the consequences of any deception practised in the giving of the requested information. As his statement and answers were not complete and correct to the best of his knowledge and belief, the respondent was entitled to cancel the policy (per Zacca, P. and Forte, J.A., at para. 11; para. 15; para. 16; Taylor, J.A. dissenting, at paras. 32–33; paras. 63–66).
1 FORTE, J.A.: I have had the opportunity of reading in draft the judgment of Taylor, J.A. and unhappily, because of my opinion in respect of one aspect of the appeal, find myself unable to agree with his conclusion. As Taylor, J.A. has admirably summarized the evidence in the case, it will be unnecessary for me to do so, except in relation to those aspects upon which my conclusion will be founded.
2 I begin by emphasizing that insurance contracts, such as that in the instant appeal, are governed by the principle of uberrima fides. They depend on the utmost good faith of the applicant. In my view, the issues in this appeal ought to be decided on that basis.
3 In this regard, I agree with the learned trial judge in her reliance on the quoted dicta from the cases of Brownlie v. Campbell (2), Bates v. Hewitt (1) and Joel v. Law Union & Crown Ins. Co. (5). In particular, I reproduce hereunder the dicta of Fletcher Moulton, L.J. in the Joel case with which I agree. He states ([1908] 2 K.B. at 883–884):
‘There is, therefore, something more than an obligation to treat the insurer honestly and frankly, and freely to tell him what the applicant thinks it is material he should know. That duty, no doubt, must be performed, but it does not suffice that the applicant should bona fide have performed it to the best of his...
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David Robert Zeller v British Caymanian Insurance Company Ltd
...of insurance was held to be voidable and the appellant”s appeal was dismissed. The proceedings in the Court of Appeal are reported at 2004–05 CILR 464. On further appeal, the appellant submitted that (a) his duty to BCIC was one of honesty and, since he had answered the questions completely......