Insurers proving material non-disclosure

Donald Dinnie

An insurer who wants to avoid a policy must prove a material non-disclosure by the insured on a balance of probabilities.

That is normally done by way of leading oral evidence and the process of cross-examination. It is unusual, although not unheard of, for oral evidence to be dispensed with and questions of non-disclosure to be determined by way of a stated case, or admitting documents and exchanging further particulars.

In the Irish High Court case of McCabe v Irish Life Assurance Plc and Danske Bank the insurer sought to avoid the life assurance policy for material non-disclosure by the deceased of prior medical history. The defendant insurer sought to resolve the matter without oral evidence and through the process of delivery of interrogatories.

South African civil procedure does not have an equivalent process. the insurer sought to avoid the life assurance policy for material non-disclosure by the deceased of prior medical history.

The insurer had obtained extensive discovery of the deceased’s medical record which enabled the insurer to phrase interrogatories with some precision relating to the facts in issue. Interrogatories are answered with a yes/no response on affidavit to be used as evidence at trial.

The co-insured husband of the deceased argued that the issues were too complex for yes/no answers and required oral evidence.

The court found that it was unfair to order the insured to furnish answers on affidavit and accepted that the questions posed relating to the deceased’s medical conditions and treatment during her lifetime did not tend themselves to the simple use of yes/no the answers.

The issue of the deceased’s prior medical records and her treatment would be crucial issues at the trial of the action.

Accordingly the insurer was required to prove the alleged non-disclosure by oral evidence.

The South African process of exchange of further particulars is not done under oath and in similar circumstances an insured would probably be permitted to decline to answer the questions on the basis that they are matters for evidence to be dealt with at trial.

First published by: Financial Institutions Legal Snapshot