Earls v Financial Services Ombudsman and Another

• Jurisdiction: Ireland
• Judge: Mr Justice Max Barrett
• Judgment Date: 09 July 2015
• Neutral Citation: [2015] IEHC 536
• Docket Number: Record No. 506 MCA/2014
• Court: High Court
• Date: 09 July 2015

Earls v Financial Services Ombudsman & Anor

IN THE MATTER OF THE CENTRAL BANK ACT 1942 AS AMENDED AND IN

THE MATTER OF PART VIIB THEREOF AND

IN THE MATTER OF AN APPEAL PURSUANT TO SECTION 57CL THEREOF

DEIRDRE EARLS

Appellant

- and -

THE FINANCIAL SERVICES OMBUDSMAN

Respondent

- and -

FBD INSURANCE PLC

Notice Party

[2015] IEHC 536

Record No. 506 MCA/2014

THE HIGH COURT

Insurance – Denial of insurance claim – S. 57CL of the Central Bank Act, 1942 – Appeal against the decision of the Financial Services Ombudsman –Onus of proof – Uberrimae fidei – Duty of disclosure of information – Test of materiality – Over-the-counter insurance

Facts: The appellant sought to challenge the finding of the first named respondent affirming the recommendation of the notice party thereby denying the insurance claim of the appellant arising out of damage to her property due to fire. The appellant contended that the first named respondent had erred in law by making a finding that non-disclosure by the applicant about her house being hit by a bullet incidentally by some criminals shooting down her street was a material fact, ignoring that no claim had ever been filed by the appellant regarding that incident as there was not real damage caused to the property.

Mr. Justice Max Barrett granted an order for setting aside the finding of the first named respondent and remitted the matter for review. The Court held that the power of Court to review the decisions of the first named respondent was limited and the onus was on the appellant to show that the decision was vitiated by significant error. The Court observed that it must have regard to the defendant's knowledge and expertise. The Court after discussing Chariot Inns Limited v. Assicurazioni Generali S.p.a. [1981] I.R. 199; Aro Road and Land Vehicles Limited v. The Insurance Corporation of Ireland [1986] I.R. 403; and Kelleher v. Irish Life Assurance Company Limited [1993] 3 I.R. 393, held that the duty of utmost good faith must be exercised both by the insured and the insurer. The correct answering of questions would not be the sole criterion to judge the disclosure of information and the insured must disclose all the relevant facts pertaining to her claim. The Court held that if the insurer had made genuine efforts to show that the sources from where the information was given was reasonable, it would be deemed to be a proper exercise of duty of disclosure of information, which could not be set at an impossible level of performance. The Court further held that the form of questions asked in a proposal form would limit the duty of disclosure; therefore, from the perspective of a reasonable man, it had to be ascertained whether information over and above it was required or not. The Court observed that the final person to determine materiality would be the arbiter, not the insurer. The Court found that the first named respondent was vitiated by serious errors as it failed to consider the level of duty exercised by the notice party and genuine efforts made by the appellant in advance of her claim. The Court found that the first named respondent failed to consider whether the subject insurance was over-the-counter insurance, where the insurer was not entitled to repudiate the contract on the ground of non-disclosure.

PART I

BACKGROUND

1 If a couple of random bullets graze 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 disavow my home insurance policy when my house is years later destroyed by fire? Ms Earls does not think so. FBD does. The court does not have to resolve this issue. However, it does have to consider whether the Financial Services Ombudsman erred in law when addressing a complaint brought by Ms Earls against FBD in respect of the dispute arising between the two.

2 In March 2008, a taxi was stolen somewhere in Limerick City, driven into St Mary's Park, and a machine-gun used to spray bullets indiscriminately. Apart from the criminals involved, nobody knows why this event happened, or who the intended target was. It is not clear whether the bullets were fired at houses in St Mary's, some of which were hit by bullets, or whether the intended target was a person walking in the area. It is possible that the shooting was connected with a criminal feud which was then on-going in Limerick City. But even this is not certain. What is certain is that neither Ms Earls nor her house was the target of the shooting.

3 Fortunately, Ms Earls was away on holiday with her partner at the time of the incident. On her way home from her holidays, Ms Earls made a preliminary call to AXA, her then home insurers. But when she and her partner returned to St Mary's, they discovered that the damage which had occurred to Ms Earls' property was minimal. One bullet had struck the front wall. Another had struck the border-wall that marks the boundary with her neighbour's house. But the damage was limited and Ms Earls, an honest woman, made no claim. As she puts it in her affidavit evidence, "[T]here was nothing to claim for."

4 The court does not wish in any way to diminish the fact that, when it comes to the shooting incident, Ms Earls and her neighbours were clearly the hapless victims of a random and vicious incident that evinced no respect for human life. However, the court cannot but note, indeed Ms Earls emphasises in her affidavit evidence, the trivial nature of the damage that was occasioned to her property as a result of the incident. Indeed, had Ms Earls not been away on holiday when the incident occurred, had she seen the damage herself immediately after it happened, it seems implicit in her affidavit evidence that she would not even have troubled AXA with a telephone call. As it was, she chalked up the event to experience. It was nothing to do with her, it was not targeted at her, and she had suffered next-to-no damage. That was the end of matters as far as she was concerned.

5 After 2008, Ms Earls' home insurance premium increased year-on-year but in truth it had done so since she bought her home back in 2002. She had no reason to think that the incident of March 2008 was anything to do with the hike in insurance premia, and there is nothing in the evidence that would lead the court to conclude otherwise. When, in November 2010, Ms Earls' partner found cheaper home insurance being offered by FBD on the internet, Ms Earls switched her home insurance to FBD.

6 When asked on the FBD website "How many accidents or claims have you had in the past 5 years?" Ms Earls' partner entered "0". Based on the inputted information, a policy documentation pack arrived a couple of days later. Ms Earls signed the necessary policy documentation and sent it back to FBD.

7 Almost three years later, in August 2013, Ms Earls and her partner were away on an overnight visit that included a trip see Ms Earls' mother in Kileely. While they were away someone set Ms Earls' house on fire. The fire caused serious damage to Ms Earls' house. Structurally, the building remains intact. However, the inside was very badly damaged. The fire seems to have burnt itself out internally but there was a lot of smoke damage.

8 As a result of the fire, Ms Earls was left homeless. She was reduced to a peripatetic existence, staying at her partner's house in Pallaskenry, and with friends and relatives. She had no clothes to her name apart from the clothes she had with her when she visited her mother. All her belongings were destroyed in the fire. But her troubles were only beginning.

9 Ms Earls had paid for the 'Home Emergency Assistance' package offered by FBD. Under that package, FBD was supposed to provide an emergency repair service to secure Ms Earls' home and prevent any further loss or damage occurring. FBD, however, denied that Ms Earls had taken this package and indicated further that if Ms Earls did not board up the house herself they might not indemnify her for the loss occasioned by the fire. So Ms Earls secured her home at her own expense. She avers: ''FBD later acknowledged that my policy covered emergency assistance but refused to refund me the cost of securing my home even then." Presumably this was because, as will be seen hereafter, FBD was to decide that in fact Ms Earls was not covered by it at all.

10 FBD appointed Thornton Loss Adjusters as their investigator. Ms Earls asked First Call Assessors to assist her with her claim. In September 2013, Ms Earls, her partner, and a representative of First Call attended a meeting with FBD at the latter's offices. During the course of the conversation, Ms Earls avers in her affidavit evidence, "[T]hey asked why I had [not] told FBD about the shooting and we answered 'because we weren't asked". A question was asked why no claim had been made to AXA and an answer apparently volunteered by an FBD representative before Ms Earls had a chance to answer. The representative suggested that it was because of the paperwork involved. Ms Earls regrets now that she did not challenge this answer at the time, though we could all likely do some things better if we were to do them again. Ms Earls avers:

"Mistakenly, we didn't dismiss this answer or fight our ground as we didn't think much of it and the meeting just went on. To my limited knowledge there is not a lot of paperwork involved and in any event what could we have claimed for. I can distinctly remember pointing out during that meeting that there was no real damage caused by the bullets anyway although [the FBD representatives] look no notice of this."

11 FBD appears to have had two attempts at voiding Ms Earls' home insurance policy. The first time around it appears to have been unconvinced that Ms Earls had in fact been living at her...