CR208 Settlement by insurer – confidentiality

See too: CR, Settlements,

CR208

Settlement by insurer – confidentiality – unforeseen negative spin-off of a generous settlement.

Background

Publicity is good for the office – the more people know about its existence, the better the office can serve its purpose by assisting policyholders and others who have a gripe against their insurers to find out if there is merit in a complaint and if there is, to do something about it.

But a case where positive publicity has had an unfortunate and unforeseen negative repercussion on what we are able as an office to offer consumers is one to which we drew attention when our 2005 Annual Report was released to the press. We cited it as an illustration of how insurers are sometimes commendably generous in settling cases where there is obvious hardship but the law is clear and there is no room for invoking our equity jurisdiction.

Discussion

The insured was a pilot who was killed when his aeroplane crashed one day after the inception date of his policy. A claim on the policy was declined on the grounds that the insured indicated, when applying for the insurance, that he was in possession of a “commercial” pilot’s licence, whereas the insurer’s investigation revealed that, although qualified, he only held a “private” pilot’s licence. There was a dispute about this issue and the probabilities were fairly evenly balanced. The insured’s widow could not afford to take the matter to court. We were asked to approach the insurer for an ex gratia payment and the insurer, having considered all the circumstances of the case, made a generous offer which the widow accepted in full and final settlement.

The case was mentioned in the week-end press. Consistent with our policy of confidentiality, we had not disclosed the names of either the complainant or the insurer but in the newspaper report the identity of the insurer was revealed. The newspaper had its own source of information. We were not unduly perturbed when we read the report because we thought that the insurer would be pleased with the accolade which came its way.

Result

We were wrong. The insurer informed us that as a result of this report it was flooded with demands for ex gratia payments from other policyholders when claims were declined. In the result the insurer decided, in a later case which was deserving of consideration for an ex gratia payment, that, although sympathetic to the complainant, it could no longer consider an ex gratia payment for fear of creating a precedent for the future. The case can serve as one more example of how the best of intentions can turn into the worst of results.

PMN
November 2006

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