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20 October 2015
In the recent case of Earls v Financial Services Ombudsman, the High Court considered whether the Financial Services Ombudsman (FSO) had erred in law in determining that an insurer was entitled to avoid a home insurance policy for material non-disclosure.
In March 2008 a taxi was stolen in Limerick City. It was driven into St Mary's Park and a machine gun used to fire bullets indiscriminately from the car. Although the complainant's house was not the target of the shooting, it was struck by the bullets. The complainant was on holiday at the time of the incident and made a preliminary call to AXA, her home insurer at the time. On her return, she discovered that the damage to her property was minimal and did not proceed to make a claim.
In November 2010 the complainant switched her home insurance to FBD. When asked on the FBD website "how many accidents or claims have you had in the past five years?", the complainant's partner entered zero. The policy documentation arrived a couple of days later, which the complainant signed and returned to FBD.
In August 2013, almost three years later, the complainant's house was set on fire while she was away. In October 2013 FBD avoided the policy on the basis that the complainant had failed to disclose a previous claim with AXA in respect of damage caused to her property by gunfire in March 2008. However, the complainant complained to the FSO and in August 2014 the deputy FSO concluded that the shooting incident was a material fact which ought to have been disclosed to FBD at the time of proposing cover in November 2010. The complaint was not upheld.
Judge Barrett posed the question:
"if a couple of random bullets grazed my property and the damage is so utterly trivial that I never make an insurance claim, and the event is so haphazard that I put it from my mind, is that a fact that my new home insurer can rely upon lawfully to disallow my home insurance policy when my house is years later destroyed by fire?"
However, Barrett also noted that this question was not to be determined by the court; rather, the question to be determined was whether the FSO had erred in law.
In considering whether the FSO had erred in its finding, the court examined previous case law on the duty of disclosure and in particular the cases of Chariot Inns Limited v Assicurazion Generali, Aro Road and Land Vehicles Limited v The Insurance Corporation of Ireland and Kelleher v Irish Life Assurance Company Limited. The court also noted that the case concerned a consumer contract and thus all comments and findings of the court were made exclusively in that context.
The court summarised the principles arising from Chariot Inns, Aro Road and Kelleher as follows:
The court concluded that the deputy FSO had erred in law on at least five grounds:
The appeal was upheld and the complaint remitted to the FSO.
For further information on this topic please contact April McClements at Matheson by telephone (+353 1 232 2000) or email (firstname.lastname@example.org). The Matheson website can be accessed at www.matheson.com.
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