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Serious illness cover misunderstood, but not mis-sold

DATE: 28.07.2015

In two separate recent judgments, the High Court upheld the Financial Services Ombudsman's (FSO) decisions in relation to claims regarding serious illness cover.

Serious illness cover

In O'Regan v Financial Services Ombudsman the appellants were a married couple who believed that their mortgage protection policy included cover for serious illness. However, a claim for rheumatoid arthritis was refused by their insurer on the basis that the policy did not in fact include serious illness cover. The couple complained to the FSO, which found that the complaint was unsubstantiated. The appellants appealed the FSO's decision to the High Court and the High Court remitted the matter to the FSO for an oral hearing as there was conflicting factual evidence.
Having held an oral hearing, the FSO found that the documentary and oral evidence did not support the allegation that the insurer had removed serious illness cover from the appellants' policy without their knowledge or consent. It was clear from the policy documentation that serious cover illness had not been provided and the complaint was not upheld. The appellants appealed to the High Court. In the second appeal, O'Regan claimed that he and his wife had been misled in relation to the extent of the cover and in general made the case that they should have been believed by the FSO. He also alleged that:

  • the paperwork had been doctored since the original complaint was made;
  • the medical definitions of 'serious illness' had been altered without medical reason; and
  • there were inconsistencies in the documents put before the FSO.


While the High Court expressed sympathy for the misfortunes that had befallen the appellants, it concluded that there was no serious or significant error in:

  • the FSO's approach to the case;
  • the handling of the oral hearing;
  • the assessment of the case; and
  • the drawing of inferences from the evidence.

Specified illness cover

In a second case, Geoghegan v Financial Services Ombudsman, the appellant and her husband had added a critical illness benefit to their life assurance policy in 1999. From 2006 onwards, the critical illness cover was described on the annual notices sent to the appellant and her husband as "accelerated specified illness cover". The appellant's husband was diagnosed as suffering from cardiomyopathy in 2008 and sought to claim under the critical illness policy in 2009. The claim was declined by the insurer on the basis that cardiomyopathy was not covered under the 'heart attack' definition in the policy.

The appellant complained to the FSO on the basis that she and her husband believed that they were covered for all manner of serious illnesses under the policy, rather than only certain specified illnesses. At the time of making the complaint, they had paid in excess of €40,000 in premiums. She also alleged that the policy had been mis-sold, and at the time of signing of the proposal form the appellant had not been advised that only specified illnesses were covered by the policy. However, the FSO was precluded from investigating the circumstances of the sale of the policy or the nature of the information provided to the appellant in relation to the policy at the time it was sold, in circumstances where this had occurred more than six years previously. The FSO subsequently investigated the balance of the complaint, but concluded that the medical evidence supported the insurer's decision to decline the claim in dispute and the claim was thus not substantiated.


During the course of the appeal to the High Court, the appellant submitted that she and her husband had always understood that all major illnesses would be covered by the critical illness policy, and that owing to the high monthly premium they would not have taken out the cover had they known it covered only specified illnesses. It was alleged that the critical illness cover changed in 2006 and as a result it was subsequently described as 'accelerated specified illness cover'. The appellant also sought to rely on evidence that the insurer had accepted claims in respect of cardiomyopathy from claimants whose policies were commenced at the same time as that of the appellant and her husband.

The court considered that the case arose from a particularly unfortunate set of circumstances. Since 1998 the appellant and her husband had paid considerable monthly premiums to the insurer in respect of the unit link to life assurance policy, to which critical illness cover was added in 1999. However, while the court sympathised with the appellant and her husband, it noted that its role was limited to considering whether the FSO had erred in its decision and that the relevant test was clear from a long line of case law – namely, whether the decision reached by the FSO was vitiated by a serious and significant error or series of errors. The court was satisfied that the FSO had not erred in its decision on the basis of the information before it and was also satisfied that the FSO was precluded from considering the alleged mis-selling of the policy given that the policy had been sold more than six years previously.

The court accepted that it was clear from the documentation that the name of the illness cover had changed without warning in 2006 from 'critical illness cover' to 'accelerated specified illness cover'. However, the court accepted that this change occurred in order to clarify that the cover at issue was limited to illnesses specified in the policy rather than covering all illnesses. While the court could reasonably infer from the change that there was some confusion among policyholders in relation to the nature of the policy – which would at least warrant a pragmatic and equitable response from the insurer in relation to the appellant's claim – this did not alter the fact that the appellant and her husband had signed a proposal form at the time of taking out the cover which expressly stated which illnesses were covered by the policy.
With regard to the evidence that the insurer had upheld claims from other policyholders suffering from cardiomyopathy, notwithstanding the absence of cover for this illness, the court noted that while this understandably compounded the appellant's sense of unfairness and frustration at the insurer's unwillingness to engage with her claim in an empathetic manner, it was clear from case law that the court could not compel the insurer to deviate from the "obstinate stance" it had adopted. However, the court commented that while financial service providers and institutions have obvious commercial responsibilities and various duties and obligations, in certain special circumstances where patent unfairness arises they should not be precluded from acting with appropriate sympathy towards consumers.

For further information on this topic please contact April McClements.

This article appeared in the International Law Office on the 28 July 2015.

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