Your "Good Health"

On March 6, the Irish financial regulator issued a reminder to consumers about their duty to disclose when proposing for an insurance policy.

By one of those wonderful co-incidences, I read about it just after learning of what, at first sight, seemed a somewhat remarkable decision by the Privy Council in Zeller. There is a good summary of it hereby Davies Lavery, who were the first of several to inform me of the case.

I am generally pro-policyholder, but this one I had to read twice. Zeller was over 50, had had high cholesterol (and a family history of same), heart murmurs, and even elevated blood pressure. Yet he declared that he had never had health difficulties (apart from a thyroid problem). When, a short time after taking out the policy, he asked the insurer to pay for very expensive heart surgery, the insurance company wanted to not only refuse the claim but to avoid his health coverage policy ab initio. The insurer succeeded in the Cayman Islands Grand Court. The Islands' Appeal Court reversed by a majority, and the Privy Council (per Lord Bingham) decided that they were right.

It was held that Zeller honestly did not regard these problems as "heart trouble" or a "departure from good health". He had been aware that his cholesterol had sometimes been high, but there was some family history of it and he had been warned of the dangers and advised on diet and exercise. No medication or treatment had been prescribed. A heart murmur had also been detected on two previous occasions, and Mr Zeller had not thought his doctor was worried about them (the doctor had subsequently described the heart murmur as asymptomatic and not sounding significant).

Davies Lavery sum up:

The test was whether Mr Zeller's answers were true to the best of his knowledge and belief. On the issue of whether the heart murmur or raised cholesterol were a departure from good health they held that Mr Zeller did not need to answer yes. He had never taken medication, nor been treated in any other way, and he had not been off work for either condition. Overall, he had answered the proposal questions truthfully and therefore the insurer was not entitled to repudiate liability and the claim should be paid.

I would add that Mr Zeller was clearly entitled to regard himself as being in very good health, and he probably would not have abandoned his job in the U.S. and its associated health insurance, if there had been any doubt about it. (See paragraph 2 of the judgment).

The full report is well worth reading.

Finally, and remarkably, this is another case (to add to this one) where blatantly wrong recording of medical information nearly had disastrous consequences for the patient:

For reasons which are obscure, both Dr Coy and Dr Lamelas made reports in which they referred to Mr Zeller as having "a history of aortic and mitral valve regurgitation" and a "long history of known valvular pathology". These statements were not true and were corrected, but it appears that they prompted the insurer to make a detailed investigation of Mr Zeller's medical history before November 2001. It obtained from Mr Zeller's US doctor, Dr Pecsok, the notes which he had made at a number of consultations from 1997-2001 but which Mr Zeller had never seen. It read these notes as identifying five medical conditions: hypothyroidism, elevated cholesterol, heart murmur, elevated blood pressure and a fifth condition which has never been pleaded or relied on even though, as it seems, it featured in the insurer's decision to avoid. Mr Zeller's disclosure of his thyroid condition was noted, but the insurer's draft internal memorandum of its decision to cancel stated that had he disclosed conditions 2-5 his application would have been rejected. The view was expressed that "Mr Zeller was disingenuous in statements made on the enrolment form and he did not disclose medical conditions for which he was diagnosed and received treatment".

That is from paragraph 9.