IN THE SUPREME COURT OF TONGA
Supreme Court, Nuku'alofa

CV 182/2008

Latu

v

Family Assurance Limited

Laurenson J 
25-27 November 2009; 3 December 2009 

Insurance law – life insurance – non-disclosure of pre-existing medical condition – no insurance cover 

The Plaintiff and her late husband Tevita (the deceased) married in 1996. A life insurance policy had been taken out on the life of the deceased. The deceased died suddenly at home on 30 July 2008. The plaintiff applied for the cover under the policy to be paid to her and provided a medical report (as requested). After receipt of the report the defendant declined liability on the ground that the deceased had failed to make full disclosure of his medical condition. The plaintiff claimed the proceeds of the life insurance policy. 

Held: 

1. The law was well established. An insurer who wished to decline liability where the ground of avoidance was a breach of a condition relating to non-disclosure or misstatement then the insurer was required to show: that by express stipulation the duty of disclosure was contractual; that the non-disclosure or misstatement alleged to have been made was a breach of duty as defined in the stipulation; and that the assured was guilty of the alleged non disclosure or made the alleged misstatement. 

2. The Court was satisfied that the deceased must have known in 2001 that he had medical conditions namely peptic ulcer disease and diabetes and that these should have been disclosed. 

3. The defendant had discharged the burden on it and the plaintiff's case failed. Judgment was entered for the defendant. 

Counsel for the plaintiff : Mr Pouono 
Counsel for the defendant : Mrs Vaihu

Judgment

Introduction

[1] This a claim for the proceeds of a life insurance policy taken out on the life of the Plaintiff's late husband. The claim was rejected by the Defendant on the ground that there had been a failure to disclose pre-existing medical conditions at the time of the proposal. 

Factual Backqround 

[2] The Plaintiff and late husband Tevita (the Deceased) married in 1996. They were both employed by the Ministry of Fisheries at that time. Plaintiff was 24, and the Deceased 43. They had two sons born on 10.11.2000 and 12.10.2002. 

[3] On 4 September 2001 Deceased signed a proposed with the Defendant company for a Medical Personal Accident and Life Insurance Policy. The sum insured was $30,000. This was under a group policy arranged with other employees of the Ministry of Fisheries. Premiums were paid by the Deceased until 2006 when he became redundant. 

[4] The Plaintiff who continued in employment with the Ministry then took over payment of the premium from 26 July 2006. At the same time she also arranged cover for herself of $10,000 and the eldest son for the same amount. In October 2006 a further $10,000 was arranged in respect to the youngest son.

[5] Cover for all 4 members of the family was then transferred to a family policy because the Deceased was no longer employed by the Ministry and hence no longer qualified for a premium based on the lower group rate. 

[6] The original group policy was destroyed in the fires of November 2006. Some correspondence and other papers were saved. Included amongst these were: 

1. Photostat copy of proposal form by Deceased dated 4.9.01. 

2. Disclosure form of same date also signed by Deceased. 

3. Proposal and disclosure form dated 26.7.06 both signed by Plaintiff in respect to her own cover.

4. Further copy of a disclosure statement dated 15.3.2007 signed by Plaintiff but relating to the deceased. 

[7] Counsel could not assist me as to why a further disclosure form was completed by the Plaintiff for her husband on 15.3.2007. It seems reasonable to assume that somehow it became relevant at the time when the near family policy was issued. The failure of the Defendant to be able to provide a coherent explanation in relation to this and other matters has been a cause of frustration. In the final analysis however, I have concluded that the main issues are sufficiently clear to enable this matter to be resolved. 

[8] To complete the narrative, the Deceased died suddenly at his home on 30 July 2008.

[9] The cause of death was 

"Probable cardiac arrest secondary to an acute coronary event". 

[10] The Plaintiff applied to the cover under the policy to be paid to her. She was asked to provide a medical report. She requested Dr Sione Latu (not a relative) to do so. 

[11] In his report the Dr noted the following comorbidities ie. other medical conditions present. 

1. Complicated type II diabetes mellitus

2. Chronic renal failure with normocytic anaemia and fluid retention 

3. Chronic gout with past NSAIDs abuse 

4. Complicated duodenal ulcer with history of bleeding 

5. Coronary artery disease-old anteroseptal MI and with occasional ventricular premature complexes (VPCs) 

6. Congestive heart failure 

7. Hypertension 

8. History of dyslipidaemia 

9. Helicobacter pylon infection 

[12] Following receipt of this report the Defendant declined liability under the policy on the ground that the Deceased had failed to make full disclosure of his medical condition in 2001 and nor had his wife done so in 2007. 

Discussion 

[13] The law in cases such as this is well established. An insurer wishing to decline liability where the ground of avoidance is a breach of a condition relating to non-disclosure or misstatement (as was the case here) then the insurer is required to show 

(i) That by express stipulation the duty of disclosure is contractual; 

(ii) That the non-disclosure or misstatement alleged to have been made is a breach of duty as defined in the stipulation; and 

(iii) That the assured was guilty of the alleged non disclosure or made the alleged misstatement. 

[14] The Policy in this case includes the following: 

Non disclosure. "If you fail to comply with your duly of disclosure we may be entitled to reduce our liability under the Contract in respect of a claim, or we may cancel the contract. 

If your non-disclosure is fraudulent we may also have the option of avoiding the Contract from its beginning."

The Defendant undertook the onus upon it by relying on the following matters referred to the Dr Latu's report. 

(a) He was first diagnosed in 1974 with peptic ulcer disease when he was admitted to this hospital. In 1989 he was investigated in Hawaii for this undergoing abdominal ultrasound and getting a Barium meal done which confirmed that he has Peptic Ulcer Disease. Another Barium meal in 1990 confirmed scarring of his of the duodenal cap consistent with chronic DU. He had another admission in 1990 for ulcer related pain. In 1993 he was again admitted for abdominal pain. In 1999 he had gastroscopy which showed superficial gastric erosions. By this stage he has received multiple empirical H. pylori eradication regimens in addition to acid reduction therapy. In 2002 he showed evidence of upper GI bleeding presenting with melaena and another gastroscopy was done with antral biopsies showing active gastritis and presence of Helicobacter pylori. No follow up of his ulcer is noted after 2003. 

(b) He was first diagnosed with diabetes in 1997 but was initially diet controlled. There is a strong family history of diabetes with his father having had diabetes. In 1999 he had a total cholesterol level of 6.4 mmol/L. The last record with regards to his diabetes we have is in 2000 as he was leaving to go overseas before his acute admission again to us in 2007. 

[15] The Plaintiff said she suspected the Deceased may have diabetes in 2001 because of his Father's involvement with this disease. She said that she noted the Deceased was careful with his diet but accepted from him that this was a precaution to avoid the same problems as his Father.

[16] So far as the ulcers were concerned she was not aware of any problem prior to and including 2001. 

[17] When one comes to consider the Dr's evidence in relation to peptic ulcer decease in relation to the Deceased's knowledge of this it seems very clear to me that he must have been aware of this condition in 2001. 

Even if he did know that he was suffering from was a "digestive disorder" (question 1 of the disclosure form) he must have known on 4.9.2001 that he had consulted a doctor for medical or surgical advice on treatment of any ailment injury on sickness during the past five years. 

[18] Plaintiff's Counsel submitted that the Deceased may not have been aware of the English words involved in the proposal. He was a senior official with the Ministry therefore I find it difficult to accept this. The present manager for the Defendant said the Defendant could speak English. 

[19] The Plaintiff's final submission was that the authority at the foot of the proposal form amounted to a disclosure. I disagree. This is simply an authority to the Defendant to get access to medical records of disclose has been made of a medical condition. 

[20] I note that the Plaintiff conceded that the combination of illness suffered by the Deceased had ultimately caused the heart condition which was the proximate cause. 

[21] I am satisfied that the Deceased must have known in 2001 that he had medical conditions namely peptic ulcer disease and diabetes and that these should have been disclosed. The record supplied by the Dr Latu speaks for itself. 

For those reasons I find that the Defendant has discharged the burden on it and accordingly the Plaintiff's case must fail. 

Judgment should therefore be entered for the Defendant together with costs and disbursements including witnesses' expenses all according to scale. 

[22] For the sake of completeness I should mention one final matter. A great deal of time was taken in trying to decide who was at various times the beneficiary under the policy. I have come to the conclusion that this issue was and still is, irrelevant to the determination of this case.