The inhaler that never made it onto the form
Declan's mother Mary, 58, applied for a €300,000, 22-year level term policy to cover a new mortgage. The quoted premium was €48 a month. Their broker, Niamh, completed the online application during a 40-minute meeting, reading each question aloud and typing the answers; Mary signed the declaration by e-signature. To the question 'Have you ever suffered from asthma, bronchitis or any other respiratory condition?' Niamh entered 'No'. Mary had been diagnosed with asthma six years earlier and had two inhaler prescriptions on her GP record. She says she 'didn't think it counted'. Four years later Mary died of respiratory failure and the estate claimed. Underwriting has confirmed that, had the asthma been disclosed, the policy would have been rated at €86 a month. The policy has been in force 47 months and €2,256 of premium has been paid.
1. Advise the estate whether the insurer can refuse the death claim outright, and if not, calculate what is payable.
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Step 1 – Identify the duty. This is a consumer insurance contract, so the Consumer Insurance Contracts Act 2019 governs. Mary owed a duty to answer the insurer's questions honestly and with reasonable care. She did not: the question was specific and unambiguous, she was present when it was read, and she knew of the diagnosis.
Step 2 – Classify the breach.
- Deliberate or reckless – she knew the answer was untrue, or did not care whether it was true. If so, the insurer may avoid the contract from inception, refuse the claim and return the premiums (€2,256), unless the non-disclosure was fraudulent.
- Careless – an honest but unreasonable failure. The insurer must then apply a proportionate remedy, not avoidance.
On these facts 'careless' is the realistic reading: she did not conceal treatment, and the GP record was disclosable. The broker typing the answer without probing is a strong indicator against deliberateness on Mary's part.
Step 3 – Quantify the proportionate remedy. The claim is reduced in the proportion the premium paid bears to the premium properly payable:
€300,000 × (€48 ÷ €86) = €300,000 × 0.5581 = €167,442
The €23,040 of premium already paid is retained, but the difference between €48 and €86 a month for the period in force should be considered when settling. The estate should expect roughly €167,000, not €300,000.
2. The insurer blames Niamh for completing the form. Does that change the consumer's position, and what are Niamh's own obligations?
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The consumer's duty is personal and non-delegable. Mary's state of mind is what is measured, not Niamh's. Signing a declaration that she had read and that the answers were true does not cure an inaccurate answer, and it does not transfer the duty to the intermediary. Equally, an adviser cannot be used by an insurer as a shield: the insurer must show the consumer failed to take reasonable care.
But Niamh's conduct is a separate regulatory matter. Under the Consumer Protection Code she must act honestly, fairly and professionally in the client's best interests and make full disclosure of relevant information. Reading questions and typing answers without exploring an obvious 'respiratory condition' question is poor practice; the fact-find and any notes evidencing the questions asked and the client's replies should exist and be retained for at least six years. She also has a Minimum Competency Code obligation to hold the appropriate qualification and to keep her product and regulatory knowledge current.
Practical consequences for Niamh:
- The insurer will request her file; a contemporaneous record is her defence.
- If the estate suffers a €132,558 shortfall because of how the form was completed, a claim against her firm and its professional indemnity cover is foreseeable.
- A pattern of completing declarations on clients' behalf is a fitness and probity and conduct-risk issue, not just a claims issue.
3. How would your answer differ if the application form had asked only: 'Have you ever had chest pain, heart disease or high blood pressure?'
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The analysis would change completely, because the duty is to answer the questions actually asked, honestly and with reasonable care. Asthma is not chest pain, heart disease or high blood pressure, so a 'No' would be a true answer to the question posed.
Consequences:
- There is no misrepresentation at all, so no remedy is available to the insurer and the full €300,000 is payable.
- The fact that asthma was material to the underwriter is irrelevant if the insurer did not ask about it. Irish consumer law places the burden of asking clear, specific questions on the insurer; it cannot later complain of a fact it never enquired about.
- The insurer's only route would be to argue the question was so broadly understood in the market that a reasonable consumer would have disclosed asthma anyway. That argument is weak against a closed, specific list of conditions.
Lesson for the file: Niamh should still have recorded the asthma in the adviser notes, and would have been professionally obliged to raise it with the underwriter even though the form did not ask. Failing to do so is bad advice to the client (a later claim could still be disputed on materiality grounds in an unclear case) even where it is not a legal misrepresentation. The distinction between legal disclosure and prudent disclosure is exactly what the exam tests.