The Undisclosed Hypertension and the Agent's Pen
Mr Okafor, aged 42, takes out a 20-year endowment assurance policy with a sum assured of ₦25 million. The proposal form asks: 'Have you ever suffered from high blood pressure, heart disease, diabetes or any disorder of the circulatory system?' and 'Do you smoke?' Both answers are recorded as 'No'. Mr Okafor signs the declaration that the answers are true and complete. Eighteen months later he dies of a myocardial infarction. The insurer obtains his medical records, which show a diagnosis of hypertension three years before the proposal and a recorded habit of about 15 cigarettes a day. The beneficiary says the agent completed the form, Mr Okafor only signed where shown, and the insurer never sent him for a medical examination.
1. Can the insurer avoid the policy for non-disclosure and misrepresentation?
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Step 1 - Materiality. Hypertension, heart disease and smoking are classic life underwriting factors. A prudent life underwriter would at minimum have loaded the premium, and might have declined or postponed. The questions asked were specific and unambiguous, so materiality is clear.
Step 2 - Inducement. The insurer must show that correct answers would have changed its decision. The underwriting manual and the medical officer's evidence should establish the likely rating or declinature. The gap between the standard rate charged and the rate that would have applied is the evidential anchor.
Step 3 - Whose knowledge? The fact that the agent wrote the answers does not automatically save the beneficiary:
- A proposer who signs a declaration that the answers are true is generally bound by them, even if he did not read them.
- But where the agent completed the form without the proposer's knowledge or connivance, the agent's knowledge may be imputed to the insurer, and the insurer may be estopped from avoiding. Much turns on whether Mr Okafor knew what was written and whether the agent acted dishonestly.
Step 4 - 'No medical examination'. The absence of a medical does not transfer the duty of disclosure to the insurer. The insurer is entitled to rely on the answers unless it had actual knowledge of the true position.
Conclusion: if the insurer can show that Mr Okafor knew the answers were false, or signed recklessly without reading a form he knew dealt with his health, avoidance is likely to succeed. If the agent deliberately inserted false answers unknown to Mr Okafor, the insurer's position weakens considerably and a compromise may be the realistic outcome.
2. Does any incontestability period affect the outcome, given death occurred at 18 months?
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Check the policy wording first. Nigerian life policies commonly include a clause providing that the policy is incontestable after two years (sometimes one) from commencement or from reinstatement. If the policy here contains a two-year clause, death at 18 months falls inside the contestable period, so the insurer may still investigate and avoid.
If there is no incontestability clause, the insurer's right to avoid for non-disclosure is not time-barred by statute in Nigeria. It can be exercised whenever the non-disclosure comes to light, subject to limitation periods for bringing action.
If the clause exists and the period had expired, the insurer could not avoid for non-disclosure or misrepresentation, but could still rely on:
- fraud (a deliberately false answer is generally outside the protection of an incontestability clause);
- non-payment of premium;
- suicide exclusion, if relevant.
Practical point: the clause is a policy term, not a statutory rule. Do not assume a two-year rule applies; read the wording and record the contestable-period dates in the claim file. Here, at 18 months, the insurer remains within the contestable window on either a one-year or two-year clause.
3. The insurer suspects the agent inserted the false answers. What should it do before deciding the claim?
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Investigate, do not assume. The claim decision turns on Mr Okafor's knowledge, so the insurer needs evidence about what happened at the point of sale.
Evidence to gather:
- The original proposal form - handwriting, ink, alterations, whether the health answers are in the agent's hand and whether Mr Okafor initialled them.
- The agent's file and statement, taken in writing and separately from the beneficiary.
- Medical records confirming diagnosis dates and the smoking history.
- The beneficiary's account of whether Mr Okafor discussed his health with the agent.
- Any prior applications by Mr Okafor to other insurers, which may show a pattern.
Legal analysis to apply:
- If the agent acted dishonestly and without the proposer's knowledge, the insurer may be estopped from relying on the answers, and its remedy may lie against the agent rather than the beneficiary.
- If the agent acted negligently but the proposer knew the truth, the insurer can avoid.
- If the proposer signed without reading, the outcome depends on whether a reasonable person would have read the declaration; courts are not uniform, and a compromise is often sensible.
Decision framework:
- Avoidance if knowledge and inducement are clear.
- Proportionate or ex gratia settlement if the agent's conduct is the dominant cause.
- Refer the agent to the compliance and disciplinary process either way; do not let the claims decision be used to protect an agent.
Document everything, because NAICOM or a court may review the file and the fairness of the process.