UK: Friends Life v Miley: Court Of Appeal Considers Misrepresentation In An Income Protection Policy

[2019] EWCA Civ 261

Court of Appeal rejects appeal from decision that claim was covered by an income protection policy

The claimant sought to claim payment from the defendant insurers under an income protection policy. The insurers alleged that the claimant was faking the seriousness of his illness, but the judge rejected that allegation on the facts. Permission to appeal was given by the Court of Appeal, subject to the proviso that the insurers were not allowed to challenge the judge's finding that the claimant had not acted dishonestly when making representations of material fact (the policy contained a clause providing that untrue statements or omissions during the presentation of a claim rendered the policy void).

The insurers sought to rely on non-disclosure of material facts rather than active misrepresentation by the claimant. That argument was rejected by the Court of Appeal. It had been found at first instance that the claimant had not misrepresented material facts, and so "there was, by definition, noting material for [the claimant] further to disclose which he had not disclosed".

The Court of Appeal also cited, with approval, the finding by the Court of Appeal in Economides v Commercial Assurance [1998] that a statement which is made "to the best of the insured's knowledge and belief" must only be honest and there is no implied representation that there are objectively reasonable grounds for the belief which is expressed (or that there is a warranty of the facts stated).

A further ground of appeal related to the requirement for the claimant to complete financial review forms whilst receiving payments under the policy in order to ensure that he did not receive more than 75% of his pre-incapacity earnings. The forms advised that "income from investments may be ignored". The claimant had declared that he was not receiving any other income.  During the relevant time, he had received "restricted stock awards" ie shares which were subject to various restrictions. At first instance, the judge had concluded that the shares had been "income from investments".

The Court of Appeal has now upheld that finding: "Share are quite commonly described as an investment, even if the money for their purchase has been provided by another". Furthermore, the claimant's disclosure obligations "must be conditioned by the information that he was asked by [the insurers] to provide". The form had stated at the beginning that "income from investments may be ignored": "In other words, such income could be ignored in responding to the questions posed in the remainder of the clause. It is not sufficient for [the insurers] to say that the shares were part of [the claimant]'s bonus and bonuses are mentioned later in the clause. If the shares and income from them were "income from investments", the document stated they could be ignored when dealing with the subsequent questions. This was the obvious sense in which the clause was to be read".

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