The First Hall of the Civil Courts upheld the cancellation of a medical insurance after it was discovered that the plaintiff had broken his leg when he was 15 years old. This was held on 14 May 2019 in a judgement delivered by Madame Justice Anna Felice in Wilfred Tops -v- Laferla Insurance Agency Limited and Middlesea Insurance plc.
The plaintiff explained in his sworn application that he and his wife took out a medical insurance policy a number of years ago. The policy was cancelled by the insurance companies because the plaintiff withheld relevant and important information. In the proposal form filled in 2007, the plaintiff failed to say that when he was 15 years old, he suffered a fracture to his ankle. In 2007 the plaintiff was 63. The application further explained that in 2007, he could not have known that his fall when he was 15 years old was a material fact.
He claimed that he had no repercussions and was very active by climbing mountains, sailing, playing golf, going to white water rafting and doing other activities. The insurance company is basing their cancellation on the legal principle uberrime fides, meaning utmost good faith. Tops asked the Court to declare that was cancelled illegally and there does not exist any non-disclosure of a material fact and also to order the company to pay the insurance coverage.
The insurance companies filed a statement of defence and held the cancellation was justified, as the plaintiff gave incorrect information, which would have meant that the insurance company would not have issued the policy. Furthermore, the plaintiff accepted the cancellation, since he stopped paying the premium.
The Court analysed the evidence presented before it. It was proved that on the proposal form, Tops failed to mention his injuries to his ankle when he was 15 years old. In 1996 and 2006, he had to undergo an operation on his ankle. However, in 2010 he was diagnosed with cancer and he went to Switzerland to receive treatment. He was feeling some pain in his right ankle and his surgeon advised him to undergo an operation for a surgical fusion. It was here that the insurance company discovered his 50-year-old injuries. The insurance policy was cancelled in 2013.
As for the legal considerations, the Court held that the principle of utmost good faith binds both the insured and the insurer. The principles of an insurance contract was discussed in a previous judgement Marco Tanti -v- OF Gollcher & Sons Limited noe, decided on 30 April 2002 where the Court had held that the insurer prior to the conclusion of the contract must disclose all material facts within his knowledge.
A failure to disclose, however innocent, entitled the insurer to avoid the contract. In another judgement Joseph Rizzo -v- John Formosa noe decided on 3 October 2002, held that the risk on the insurance policy is on the insurance company and expects that the insured would be honest. Therefore, there should be an ultimate good faith. In other judgements it was held that the proposal form is an integral part of the insurance policy and therefore, if there are false declarations, it would be equivalent to a false policy. In Salvu Briffa -v- Walter Camilleri noe decided on 9 February 2001, the Court of Appeal held that the doctrine of duty of disclosure in insurance contracts, has been regarded as rigid, inflexible and out of date. The expression “contracts uberimmae fidei has been too frequently and almost indiscriminately used by insurers and judges as a excuse for ignoring insurance claims. Consequently, the insured’s duty of disclosure of material facts become one of the most onerous burdens on the insured in insurance contracts.”
In this particular case, the plaintiff had given negative replies on questions on whether he was prescribed with medication in the last two years or whether he was in hospital for the same period. The plaintiff argued that the pain in his leg was caused by osteoarthritis and he had surgery in 2013, which had nothing to do with his accident 50 years before. However, from the notes of the Swiss hospital there was a mention that there were several operations.
The plaintiff accused the clerk at the insurance company of filling in the form and leaving details out. However, this was not pointed out in his sworn application and was only made when his wife filed his affidavit. However, the Court pointed out that in the proposal form, the plaintiff left our recent operations. Furthermore, Tops spent some time as an underwriter at Lloyds in London and therefore, he should have been aware the importance of the proposal form.
The Court concluded by rejecting the plaintiff’s claims, since an insurance company is in a bilateral agreement and the payment of the premium by the insured kicks off the obligations on future damages. The Court cannot impose upon the insurance company to renew a policy, which is not a right that the plaintiff can claim.
Av. Malcolm Mifsud
Mifsud & Mifsud Advocates
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