CR143 Health Insurance – repudiation of claim on grounds of non-disclosure

CR143

Health Insurance – repudiation of claim on grounds of non-disclosure. Should the insured have disclosed a history of an eye problem particularly taking cognisance of the fact that a specific question featured in the application form?

Background

The contract is a health insurance policy catering for hospitalisation benefits and major medical expenses. A question in the application form reads, ”… Have you ever suffered from or been treated for any of the following: growth, tumour, cancer or any physical impairment or injury of any ear, eye, nose, throat or skin disorder?”. This was answered negatively.

Six months prior to completing the application form the complainant had in fact consulted an ophthalmologist and at that time posterior vitreous detachment was diagnosed and treated. Two months after the policy was effected the policyholder submitted a claim for the surgical repair of a detached retina. The insurer denied liability stating that if the history of posterior vitreous detachment had been revealed at the application stage the policy would have been issued subject to an exclusion of any disease or disorder of the eye. This decision was challenged and the complaint to the Ombudsman’s Office was in fact submitted, not by the policyholder, but by the ophthalmologist involved who expressed, in very strong terms indeed, that this was an unfair decision.

Discussion

The test for materiality of non-disclosure is whether a reasonable prudent person would have regarded the information which was not disclosed as being material. The insurer’s Chief Medical Officer stated that in cases of posterior vitreous detachment there is an increased risk of subsequent retinal detachment. We sought specialist advice and the ophthalmologists whom we consulted disagreed with this view. One expressed the opinion that posterior vitreous detachment is a trivial complaint which normally requires no action on the part of the ophthalmologist. A second opinion from another ophthalmologist described posterior vitreous detachment as harmless, a condition which would not normally require any treatment.

It was our view that the information that was not disclosed was not material. The fact that the complainant was informed by his ophthalmologist that posterior vitreous detachment was “a normal occurrence” was also taken into account.

Result

The complaint was upheld and the insurer’s original decision to deny liability was reversed.

DM
April 2006

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