Friends Life Ltd v Miley

An insurer’s declaration made to the best of the insured’s knowledge and belief imports honesty, not an objective warranty that every answer is correct. A non-disclosure clause must be read with the questions asked by the insurer; it does not require every potentially material fact to be volunteered. Where the insured’s reported incapacity is materially consistent with the underlying condition, alleged inconsistencies do not establish material non-disclosure. A form permitting income from investments to be ignored may encompass income from shares, even where the shares originated as remuneration. Tax treatment does not determine that contractual meaning.

The respondent claimed benefits under a group income protection policy after the insurer stopped payments, alleging that he had fabricated or exaggerated chronic fatigue syndrome. The High Court, in [2017] EWHC 2415 (QB), found that his condition was sufficiently debilitating and dismissed the insurer’s counterclaim.

Permission to appeal was limited to whether objectively untruthful statements or non-disclosure triggered clause 5.1(b), and whether share-related income should have been declared on financial review forms. A challenge to the trial judge’s finding of no dishonesty was excluded. The central issues concerned the scope of the declarations, the meaning of income from investments, and the effect of the trial findings.

The appeal was dismissed.

1. The appeal was confined to the grounds for which permission had been granted. The order granting permission expressly excluded any challenge to the finding that the respondent had not acted dishonestly. The court nevertheless observed that the trial judge’s conclusion would have been unchanged under the later dishonesty formulation in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67.
2. A declaration that information is true to the best of the insured’s knowledge and belief imports a requirement of honesty. It does not imply a warranty that the belief had objectively reasonable grounds or that every fact which might be material to the insurer had been disclosed. This was consistent with Economides v Commercial Assurance Co Plc [1998] QB 587. Holmes v Scottish Legal Life Assurance Society (1932) 48 TLR 306 was distinguishable because it concerned an express warranty of the truth of the facts stated.
3. The materiality of a fact under clause 5.1(b) was conditioned by the questions asked in the relevant forms. The trial judge had found, on the surveillance and other evidence, that the respondent’s medical condition was materially as he had described it and satisfied the policy threshold. There was therefore no material undisclosed fact concerning his medical presentation capable of defeating the claim.
4. The financial review form expressly permitted income from investments to be ignored. Shares could constitute an investment even though awarded as part of remuneration. Their tax treatment under the Income Tax (Earnings and Pensions) Act 2003, s.426(1), did not determine the contractual meaning of income from investments. The respondent had also genuinely believed that the income need not be disclosed, so there was no material misstatement or omission.
5. The court declined to entertain arguments extending beyond the pleaded and permitted case. Fraud allegations should be distinctly alleged and distinctly proved, as stated in Davey v Garrett (1878) 7 Ch.D. 473 at 489. The appeal was accordingly dismissed.

1. Court of Appeal (Civil Division): Appeal from the High Court dismissed.
2. High Court of Justice, Queen’s Bench Division: Judgment for the respondent under [2017] EWHC 2415 (QB); the insurer’s counterclaim was dismissed.