What does the question “Have you been involved in criminal or civil litigation” mean? This was discussed in a decision by the Ombudsman with regards to the disclosure or non-disclosure during the underwriting of a policy!
Case Study: Mr S submitted a claim to his insurer following a motor vehicle accident which took place in October 2017. The insurer rejected the claim on the grounds that during the initial sales conversation, during which the policy was underwritten, Mr S had failed to disclose that he had previously been involved in criminal or civil litigation.
The insurer provided this office with a recording of the sales conversation where the questions posed to the insured were “Have you been involved in criminal or civil litigation in the past 5 years or have you had a civil judgment against you?” and “Have you been convicted of any offence other than stated in the motor application?” Mr S answered “No” to both questions.
The insurer submitted that during the validation of the claim it discovered that there were three previous charges laid against Mr S. All three charges were for drunk driving between October 2016 and April 2017. The insurer argued that all three charges were laid against Ms S prior to the sales conversation and there was, therefore, a duty on Mr S to disclose these charges during the underwriting of the policy.
The insurer argued that Mr S failed to inform it during the sales conversation that he had been arrested on allegations of drunk driving and that his failure to do so prejudiced the insurer as it was unable to underwrite the risk correctly.
The insurer submitted that the drunk driving charges were clearly offences that Mr S should have disclosed to the insurer to enable it to make an informed decision when underwriting the risk. The insurer further submitted
that had Mr S disclosed these previous charges, the insurer would not have accepted the risk in terms of its underwriting criteria.
Mr S did not agree with the insurer’s rejection of the claim and submitted that whilst he had been previously charged with drunk driving, none of the cases ever proceeded to court and were instead withdrawn due to a lack of evidence. Mr S argued that he understood the word “litigation” in the sales conversation to refer to the process of being taken to trial in respect of the criminal charges against him. Mr S thus maintained that he had answered the insurer’s underwriting questions correctly and to the best of his knowledge.
In considering the submissions made, OSTI listened to the sales recording on which the insurer relied in rejecting the claim. OSTI noted that the questions put to Mr S specifically referred to litigated cases and convicted cases and did not extend to charges made against him. OSTI also considered the dictionary meaning of “litigation”, which refers to the process of taking a case to a court of law in order to obtain a judgment.
In this regard, OSTI agreed with Mr S that as none of the charges brought against him ever proceeded to a court of law, and were instead withdrawn. Accordingly, it was true that he had never been a party to criminal or civil litigation. Mr S had, therefore, answered the insurer’s questions correctly when the policy was underwritten.
OSTI found that the insurer could not rely on charges made against Mr S which had been withdrawn to support the rejection of the claim on the grounds of undisclosed litigation.
The insurer agreed to abide by OSTI’s decision and settled the claim.
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