The Momentum/Ganas case, which caused a public outcry in November last year, was one of the matters discussed in the Long Term Ombud’s Annual report. According to Ron McLaren, Long Term Ombud, there is no question that the prominent publicity gave the industry and the authorities food for thought.
Impact of the case on the Ombud
“During the aftermath of the public outcry about the non-disclosure issue which arose in a complaint against Momentum, representatives of the office participated in more than 25 press, radio and television interviews”, McLaren mentions in the report. After the publicity surrounding the Ganas/Momentum case in November 2018 the Ombud initially expected to see a spike in complaints, but the numbers stayed the same as in October. However, complaint numbers and trends always remain difficult to predict.
The main principles that the Ombud emphasised in the media
“In our final determination, we applied the law to the facts, as we established them. We also applied our equity/fairness jurisdiction in considering whether the insurer would have issued a policy, had it known all the facts”, the Ombud stated. The Ombud believes that they have correctly applied the law, namely that an insurer is entitled to repudiate a claim on the ground of non-disclosure because it was misled as to the nature or extent of the risk and thus the conclusion of the contract.
The office is further a strong proponent of the view that, in the event of a non-fraudulent misrepresentation, the policy should be “reconstructed” to what it would have been if there had not been a non-disclosure. This is the so-called Didcott principle.
According to the Ombud, Insurers agree to the application of the Didcott principle. Sometimes it happens that an insurer agrees to consider the application of the Didcott principle, but argues or produces evidence that the policy in question cannot be reconstructed because, if the insurer had known the truth, the policy would not have been issued at all. Momentum made this argument in the Ganas case. The Ombud accepted this argument after obtaining an independent reinsurer’s opinion on the underwriting criteria Momentum had applied in this case.
McLaren also recommends that the legislature should reconsider the current non-disclosure legislation. “If it is of the view that an insurer can only escape liability on the ground of a nondisclosure if there is a causal connection between the non-disclosure and the insured event, it is a matter for the legislature to deal with,” he states. He stresses that until there is a change in legislation, the Ombud office will apply the law as it currently stands.
“Our office will not allow an insurer to shut its eyes to the light or to adopt a supine attitude towards information in an application form which should alert the insurer to make its own enquiries. Such inaction on the part of an insurer may be interpreted as a waiver by it of its entitlement to the information”, he underlines.
The Ombudsman strongly advises that prospective applicants must give full information on the application form. “Rather disclose more than only the information required in the application form,” he shares. This is a fundamental principle which is founded on an insurer’s legal right to be informed of all the material facts in order to enable it to properly assess the risk involved in an application.
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In the next edition, we discuss the influence of online consumer activism.
Click here to download the Ombudsman’s review of the applicable principles and the approach thereto.
