In Friends Life Limited v Miley, the Court of Appeal (CA) upheld a claim by Mr Miley under a group income protection insurance policy (the “Policy”) through a scheme operated by Friends Life Limited (“FL”). The CA did not accept arguments from FL relating to non-disclosure of material facts. The judgment provides useful discussion on the construction of claimant declarations and the scope for conditioning disclosure obligations.
Miley was employed at an investment bank where he became entitled to the cover under the Policy. After repeated illness and sign off from work, he made a claim that he was unable to do his job owing to the effects of chronic fatigue syndrome (“CFS”).
The claim was originally admitted by FL, however four years later FL stopped making payments, contending that Miley had faked, significantly misrepresented or overstated his symptoms.
The lower court found that Miley had discharged the burden of demonstrating that he suffered from CFS at a level sufficiently debilitating to entitle him to the benefits under the Policy. Miley’s subjective assessment of his condition was not materially worse than the objective truth.
FL argued that the Policy was void as Miley had made an untrue statement/omitted to disclose a “Material Fact.”
(1) Non-disclosure of facts relating to Miley’s medical condition and presentation
As FL was not given permission to challenge the lower court finding that Miley had not acted dishonestly, FL first sought to rely on material non-disclosure relating to Miley’s condition rather than active misrepresentation.
In construing the declarations made by Miley in the forms required by FL, the CA endorsed precedent that declarations “to the best of the insured’s knowledge and belief” only import a requirement of honesty and do not act as a warranty of the facts or as an implied representation that there are objectively reasonable grounds for the belief expressed. Given that the lower court had decided that Miley had not acted dishonestly, this gave little room for FL to make out its case.
The CA did not accept the arguments advanced by FL. It held that, on all the evidence including the alleged non-disclosed information and inconsistencies relied upon by FL, Miley’s condition was not materially different from the objective truth and therefore his claim was still made out. In other words, there was nothing material for Miley to disclose further.
(2) Non-disclosure of a source of income
FL contended that the lower court had erred in holding that sums received by Miley, by virtue of shares vested in him (as part of a bonus package), were only “income from investments” that did not have to be declared and should be considered an omission of a “Material Fact”.
This argument centred around the interpretation of the following question contained in the Financial Review Forms required by FL:
“Other Income (income from investments may be ignored)
(a) Are you receiving or have you received any other income during the course of this claim? (You should include any continuing salary, bonus, pensions, commissions, etc.)”
The CA first pointed to the relevant declarations, and held that income from investments could be ignored and that “was the obvious sense in which the clause was to be read”.
In any event, the CA upheld the finding of the lower court that Miley genuinely did not believe that his income derived from the shares needed to be disclosed, and accordingly rejected this ground of appeal.
The CA notably went on to comment that shares are “quite commonly described as an investment, even if the money for their purchase has been provided by another”.
The appeal was dismissed unanimously.
The CA’s endorsement of the view that declarations ‘to the best of the insured’s knowledge and belief’ only import a requirement of honesty and do not act as a warranty of the facts is an important reminder that an active approach should be taken by insurers to seek any information and supporting evidence required to assess a claim. Similarly, the possibility of disclosure obligations being conditioned by the information claimants are asked to provide highlights the importance of well-drafted policies and a rigorous approach to claim management.
This article was co-written by Trainee Solicitor James Davies.