Bobby Murray

On 25 June, Lord Sandison issued a detailed and very interesting decision in a long-running case. 

Cowie v Vitality & others concerned (in grossly oversimplified terms) whether or not a health insurer was obliged to pay £500,000 (the best part of £1m once interest was accounted for) to the widow of a solicitor who had omitted key medical conditions about his medical history “in the last 5 years” when he completed the necessary form to acquire his life insurance policy. Put short: it was not.

There’s a lot of useful guidance in the decision, and no doubt many arguments to be had about its implications will follow over the coming years. I do not propose to forensically examine the vast ground covered here.

Instead, my observations are restricted to one thing that stuck out to me as having potentially serious consequences. That was the court’s view, at paragraph 182, on the distinction between the standard of recall to be expected of a reasonable or honest person and the standard to be expected of a “reasonable consumer” (as per the Consumer Insurance (Disclosure and Representations) Act 2012). 

Lord Sandison said:

This is probably not a surprising outcome, and I am sure it is one that insurers will welcome. They expose themselves to substantial risk when issuing potentially valuable policies and it is hardly unreasonable of them to expect the questions they ask to be answered accurately. I certainly don’t disagree with the decision, but, like the judge, I take that view not without some hesitation.

This case effectively sets a line in the sand about how courts in Scotland are likely to approach whether or not to give consumers the proverbial benefit of the doubt when it comes to the medical history timelines they submit, at least as far as what might be considered “knife-edge” dates are concerned. With this judgment, Scotland’s highest civil court says that a strict approach will be taken.

In practical terms, I anticipate (although cannot be certain) that this means any insurance policy issued in response to an application which failed to make a disclosure that fell within the period asked about by the insurer, even by a day or two, is likely to be voided if that disclosure would have caused the insurer to decline the application in the first place. I expect there will be little-to-no right of reply.

Even if a policy would have been offered, it’s likely that it would have been offered at a higher premium, which could raise questions of underinsurance (and prospective deductions to sums paid out to reflect the percentage by which the policyholder was underinsured).

It may turn out that I am of an altogether different temperament to my peers, but I suspect this finding may set pulses racing other than my own. Of course, one rightly ought to treat the acquisition of insurance as a serious business, but I think most people would agree with the learned judge that the average punter isn’t likely to remember the precise date of events pushing half a decade beforehand with pinpoint accuracy.

Are consumers braced for this? How many people across Scotland have, say, completed travel insurance application forms and failed to disclose a condition not because of any intent to mislead but because they genuinely (but wrongly) assumed that their treatment concluded more than two or five years earlier?

Anecdotal experience tells me that, for example, if people are taking out travel insurance at all they are doing so at the last minute with little true regard to the substance of what is being asked, or the possible consequences of errors. A (slightly alarming) conversation about this judgment with my dear old dad suggests that people who think that fudging it a bit and deciding “oh, that sounds about right” is likely to be enough when completing this sort of exercise certainly do exist. 

How many consumers, right now, assume they are covered by policies doomed to fail? Does there need to be a broader shift in how people think about the seriousness of making absolutely sure their insurance coverage bites? After all, absolutely nobody is immune to bad luck.

It’s probably true that many people view insurance as a formality that they don’t really need to worry about. It certainly won’t feel that way when they suffer a dreadful misfortune that necessitates financial support for them or for their dependents running to five, six, seven or even eight figure sums. Almost nobody has that kind of money to hand without insurance.

As someone who has spent many years strongly urging everybody who will listen to him to be insured to the hilt, I am deeply concerned about how people might avoid finding themselves in such a catastrophic position. It’s awful enough to be in need to major insurance support, but it’ll ruin lives to find that it’s unexpectedly not available because a slapdash approach was taken to the details back in the mists of time.

By what mechanism does the court envisage that the late Mr Cowie ought to have “provided himself with the information needed” to complete the form accurately? Most people – even those with complex medical histories – are unlikely to maintain comprehensive compendiums of just what treatments they have received and the precise dates thereof (just as would be the case with any number of other types of engagement over the passage of time).

Therefore, it seems to me that this judgment does pose the question of how best the reasonable consumer ought to go about guaranteeing their status as an accurate historian when applying for insurance products requiring information on past events with specific backstop dates. I anticipate readers will agree with me that, against the backdrop of this case, they’d be reluctant to complete such an exercise again without certainty that they’ve not unwittingly forgotten something of potential importance. 

So, what are consumers required to do to avoid risk where their recollection fails them? Are they to strain the already over-encumbered NHS with a request to disclose their medical records for the last five years every time they want to take their family on holiday? Are they to navigate the often-cumbersome systems in place to make enquiries of their GP practices, which one might better imagine were used by those in need of immediate clinical attention?

Should we all start keeping a spreadsheet of what medical explorations we’ve had and when, as a point of reference in case we need one? More importantly, whatever the answer, how are the general public to be notified of the grave risks they face by failing to so avail themselves when, in reality, most people will never know this judgment exists? 

The message is loud and clear, so I suggest not only taking painstaking care when completing any future applications for insurance, but also giving your loved ones (or even your clients!) a heads up that they should do the same and a failure to do so is no joke.

It may of course be that readers – more likely than not to be those in the legal profession – will think these concerns are nothing but stuff and nonsense. A solicitor, surely, ought to have had a clearer understanding of the need for documents to be completed accurately than Joe Public, no?

Well, wouldn’t you know, that too was a proposition considered by His Lordship. Perhaps a little witheringly (and I shall leave questions of fairly or otherwise firmly to the side), the court did not agree:

Bobby Murray is a legal director in the Dispute Resolution team at Harper Macleod