The recent judgment in
Viantha Naidoo v Discovery Limited and Another[1] highlights the potential consequences of misrepresenting facts to insurers, particularly the negative impact on coverage when a claim under the relevant insurance policy is later lodged.
In this case, the policyholder under a life insurance policy (the Policy) failed to accurately disclose the income derived from her 'nominated occupation' at the application stage. Additionally, she did not disclose that she had applied for life insurance with another insurer around the same time she applied for the Policy.
Following the policyholder's death, her nominated beneficiary (the plaintiff in the action) lodged a claim under the Policy. The insurer rejected the claim based on misrepresentation and a breach of an express warranty requiring the policyholder to provide true and correct information. This rejection led to legal action.
During the proceedings, the insurer presented evidence from its underwriting team and an expert regarding the materiality of the misrepresented information. The court accepted this evidence, which demonstrated that had the correct income been disclosed, the indemnity limit under the Policy would have been significantly lower than the limit ultimately issued.
The plaintiff argued that the policyholder had additional income beyond that received from the 'nominated occupation' and disputed the claim that she had simultaneously applied for another life policy. However, the court did not accept this evidence.
Based on the available evidence, the court ruled against the plaintiff, concluding that the insurer had been induced into issuing the Policy due to a material misrepresentation and failure to disclose material information. As a result, the insurer was entitled to avoid the Policy, and the action was dismissed with costs.
It remains unclear whether the judgment will be appealed. Regardless, this case underscores the importance of providing accurate information when applying for insurance.
For insurers, it highlights the necessity of presenting clear evidence regarding misrepresentations and demonstrating how coverage would have been affected had accurate information been disclosed.
