Everyone who has concluded an insurance contract surely remembers those more or less “uncomfortable personal questions”, where the insured is asked to respond with details and accuracy. How old are you; Do you have a chronic condition; How often do you leave the buildings unattended; Have you filed any prior claims against your insurance company;
Whether a distortion of the truth or a ‘convenient’ omission is it ever okay to lie to your insurance company in order to get lower premium(s)?
Although it seems harmless or innocent, nevertheless even if we simply hide some years of our age, this may very well lead to the cancellation of our insurance policy or even render us responsible for fraud.
In particular, the insurance contract is a contract between the insurer and the insured in which the insurer undertakes, in exchange for payment, known as the premium, to pay to the insured or to a third person damages of monetary value when a specific incident occurs (covered perils). The insurance contract is by its nature contingent to one condition-the occurrence of the covered peril-the fulfillment of which also depends, to a greater or lesser extent, on some objective facts which are known at the time of the execution of the contract and which relate to the insured. These objective facts are the answers to the above “uncomfortable personal questions” that need to be answered by the insured. It is therefore obvious that these elements however small and insignificant they may seem, nevertheless they affect the occurrence of the insured peril and consequently the amount of the premium.
What happens if I lie or conceal information?
Generally a basic principle of insurance law is that the insured is entitled to payment of damages upon the occurrence of the secured peril.
But if one reads the fine print in the insurance policy, one will find that with the signing of the contract he also undertakes and/or guarantees the correctness, accuracy and completeness of what has been stated in the insurance policy. The wording in such cases is particularly important, as very often the insured is found to have “guaranteed” that everything he stated is true and accurate and he has not omitted any facts. Such guarantee on the part of the insured allows the insurer, in case of breach, to terminate the insurance contract and even to ask for compensation, which in several cases is interpreted to mean the non-return of premiums.
Indicatively, in the case Pan Insurance Company Limited vs. Eretria Leisure Cruises Limited the fact that the defendants omitted to indicate, when completing the insurance policy, a prior claim towards their then insurance company for a fire that was caused nearly three years prior to the execution of the current insurance contract by a lit cigarette which had caused limited damages to a sofa and the vessel’s wall was the main point of dispute between the insured ship-owner whose ship was destroyed by fire, and the insurance company. The insurance company’s main claim was that “the withholding of material information renders insurance contracts invalid. Even if such withholding was due to an error and without any deceptive intention, the insurer has been misled and the insurance contract is void because the insured peril involved is different from that perceived at the time of the agreement”; Nevertheless after intense litigation the court ruled that “the fact concealed was not material and therefore the appellants are not exempt, since the obligation on claimants under the insurance contract was to only reveal material information»
Furthermore, upon the occurrence of the insured peril, if the insurer discovers inaccuracies or omissions he may refuse to pay damages and / or terminate the insurance contract. Indicatively we may refer to the case of Dimitri and Maria Miltiadous vs. Alpha Insurance Ltd 3428/2006 (2011). In this case, the payment of damages to the insured on medical expenses suffered for medical care was decided by the courts. The case was decided inter alia on the basis of whether the insured had revealed her entire medical history at the date of the insurance policy. Indeed, the Court relied on the wording of an insurance policy which provided:
“Please note that the Alpha Insurance Ltd, will not accept any responsibility for any medical condition that existed prior to the entry date or could be foreseen at the time of the insurance policy, unless such medical condition was previously made known to Alpha Insurance Ltd and the latter had accepted same.
Non-disclosure of a medical condition to Alpha Insurance Ltd can lead to refusal to pay claims.
Declaration & Signature
I declare that all answers given above are true and complete and I have not omitted to report any information or fact that may affect the study and acceptance of this Policy. I agree that this Policy and any others that I have signed form the basis of the insurance contract”.
In this case, the failure of the applicant to disclose her condition (fibroid) at the time of signing the insurance contract was sufficient to enable the Court to rule in favor of the defendant insurance company and allow it not to pay compensation for the medical expenses of the applicant despite the collection of relevant premium.
Even more picturesque is the decision of the Athens Court of Greece (159/2009) which ruled in favor of a private insurance company, which canceled an insurance policy on the basis of a false declaration of the insured. In particular, a fifty five year old woman had in her insurance contract stated she smoked a pack of cigarettes, when in fact she smoked three packs a day. Hence, when she asked her insurance company to cover hospital expenses for a lung related problem, the company refused to compensate her. It follows from the above cases and in accordance with textbook Shawcross on Motor Insurance 2nd edition, pp. 668 the insurance company is not liable to cover the insured in case there was a breach of an express term contract.
On page 670 states:
«Breach of an express term – .. The breach of these may, as has been seen, entitle the insurers to repudiate liability in respect of any claim – past, present or future – under the policy or in respect of all claims arising after the breach, or only in respect of the claim with which the breach is connected “Cf. Minerva Insurance Company Public Ltd vs. Aristokles Abraham 4027/2006 (2009)
Of course, as has been held by the Supreme Court (See Intersys Computer Ltd vs. Laiki Insurance Company Ltd No. 7996/2005 (2009)) generally insurers must certainly not act ‘arbitrarily’ having excessive or atypical requirements. The measure of the average reasonable person applies also in this case.
On the other hand the Courts have ruled that where the insured is required to provide full details of the proof of his loss, this means at best to give the best information the insured may reasonably give and such information which will be enough to assist insurers to clarify the nature, extent and type of the loss (see Ministry Mason V. Harvey (1853) 8 Ex. 819). The insured’s obligation to furnish such evidence and information as reasonably may be required by the insurer falls within this context.
Hence even if there is a specific question make sure not to conceal any fact which may affect the judgment of the insurer vis a vis the acceptance of peril and the terms foe same. Otherwise, and if your answers form the basis of your insurance contract, you may be left without insurance cover!
Apart from the risk to miss the damages from the occurrence of the peril and cancel your contract without being able to claim back the premiums, in some more severe cases may also be faced with accusations of fraud.
The definition of fraud as a tort, is given by Article 36 of the Civil Wrongs Law, Cap 148. It consists of a misrepresentation, i.e. a statement made knowingly that it is a lie, or without belief in the truth or recklessly indifferent whether it is true or false, f with the purpose that the deceived person acts on the basis of such statement.
Provided that the above conditions can be established, one may be found guilty for the tort of fraud. Furthermore if there is acquisition of property using fraudulent artifice or contrivance (e.g. to conceal a prior defect so as to present it at a later time to obtain compensation) one can also be found guilty for the criminal offense of fraud.
• Do not sign contracts not FULLY COMPLETED or with ERRONEOUS DETAILS
• Initialize manual changes that exist in the contract
• DO NOT sign any contract UNDER PRESSURE