Not upheld: misrepresentation in insurance application and proportionate claim settlement complaint against Legal and General Assurance Society Limited

Decision detail

Summary

Miss R, as trustee of a life insurance trust, complained that L&G only paid 66.51% of the £500,000 sum assured when her partner Mr J died, due to a misrepresentation in the application. Mr J had answered 'no' to a question about mental health hospital attendance, but medical records showed he had attended hospital for mental health treatment in 2018-2019. The ombudsman found this was a qualifying careless misrepresentation under CIDRA 2021, as Mr J should have known the answer was incorrect and had been sent the application answers to verify. L&G was entitled to settle proportionately based on the premium actually paid versus what should have been charged. The ombudsman upheld L&G's settlement approach and found the £250 compensation for customer service failures adequate, rejecting the complaint.

The Ombudsman's reasoning

The ombudsman applied CIDRA 2021, which requires consumers to take reasonable care not to misrepresent facts when taking out insurance. The medical records clearly showed Mr J attended hospital for mental health treatment, making his 'no' answer a misrepresentation. Although Miss R completed the form, Mr J was sent a copy to verify and should have corrected the error. The misrepresentation was qualifying because L&G would have charged a higher premium. As a careless misrepresentation, CIDRA permits proportionate reduction of the claim settlement. The ombudsman found L&G's proportionate settlement approach compliant with CIDRA and the £250 compensation for customer service delays reasonable.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website