These case studies have been modified so as not to identify any actual cases at FIDReC. They are provided for purposes of learning and are not necessarily indicative of outcomes at FIDReC.
Sally purchased a hospital and surgical insurance policy from her brother-in-law a year ago when she was 40 years old. Because she trusted him, she left him to fill out all the details and signed where he told her to. Her brother-in-law went through with her a list of questions at the end of the proposal form and the terms and conditions of the policy, but Sally did not pay much attention at the time.
Unfortunately, Sally was diagnosed with a tumour on her breast. She was admitted to the hospital for surgery. Sally chose a private hospital. After her surgery and hospital stay, Sally submitted a claim for reimbursement to the insurer. As part of its usual process, the insurer contacted Sally’s doctor to request information on Sally’s condition. It was then that the insurer found out that Sally had a history of diabetes. Sally had failed to disclose the information in the insurance proposal form.
The insurer informed Sally that they would have to void the policy because she had not disclosed material information. Sally appealed to the insurer without success and later turned to FIDReC for help.
At the mediation, the insurer’s representative showed Sally the proposal form she had signed where she had answered “no” to the question asking if she had diabetes. The insurer’s representative also showed Sally the warning in red font on the form that said that if the proposer did not fully and faithfully give the facts known or ought to be known by them, they may receive nothing from the policy. Sally tried to explain that she was not aware that she had to declare her diabetes diagnosis. Her diabetes was very mild and was well managed. She also stated that diabetes did not have any connection with the tumour on her breast. The case manager suggested that Sally could provide a medical report and history of her diabetes. This information would help the insurer to assess her claim. The insurer agreed to consider the medical report if Sally could provide it.
After some further exchanges of correspondence, including a new medical report, the insurer agreed not to void the policy on a goodwill basis. However, the insurer revised the premiums and policy exclusions. The insurer was not able to reimburse Sally’s claim because there had indeed been a material non-disclosure. Sally accepted the arrangement as it was important for her to remain insured.
Key Learning Points
• Mediation is a process that can help both parties effectively resolve a dispute. When a dispute arises, there are naturally a lot of emotions and feelings of unhappiness. Separating the people from the problem can you help you present your case more effectively and persuasively.
• There is no guarantee that you will be able to achieve a settlement at mediation. If a case is not settled at mediation, the FIDReC mediator will offer you an opportunity to refer your case for adjudication.
• It is important to carefully read and understand the questions in the insurance proposal form and answer them truthfully. At the end of the day, the policy applicant is the one responsible for the answers in the insurance proposal form.
• Insurance contracts are a special type of contract that rely on utmost good faith. It is better to declare all your pre-existing conditions to avoid disputes later. If you are unsure whether a condition should be declared, the insurance proposal form would
often advise that you declare it. When in doubt, ask the insurer for clarification. What is material to the insurer may be perceived as not material to you.
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