Woman takes her fight for critical illness payment to High Court

28th July 2015

A woman refused a pay-out for cardiomyopathy on her critical illness policy has taken her case to the High Court. She won sympathy from the court but lost her case.

Mrs Philomena Geoghegan and her husband Thomas had paid more than 40,000 euros in premiums on their joint policy but the company refused to pay out when he was diagnosed with cardiomyopathy in 2008.

However, the court in Ireland said that while financial service providers and institutions have obvious commercial responsibilities and various duties and obligations, in certain special circumstances where patent unfairness arises they should not be precluded from acting with appropriate sympathy towards consumers.  But it added that the court could not compel the insurer to deviate from the "obstinate stance" it had adopted.

Mrs Philomena Geoghegan was challenging the Financial Services Ombudsman’s rejection of her complaint against an insurance company that had refused to pay out on the couple’s critical illness policy.

critical illness policies

The court heard that Mrs Geoghegan and her husband Thomas had added a critical illness benefit to their life assurance policy in 1999 and they had paid more than 40,000 euros in premiums. Mr Geoghegan was diagnosed with cardiomyopathy in 2008 and they sought a claim under the policy the following year.

The claim was declined by the insurer on the basis that cardiomyopathy was not covered under the 'heart attack' definition in the policy.

Mrs Geoghegan complained to the FSO because she and her husband believed that they were covered for all manner of serious illnesses under the policy, rather than only certain specified illnesses. Mrs Geoghegan also alleged that the policy had been mis-sold, and at the time of signing of the proposal form she had not been advised that only specified illnesses were covered by the policy.

However, the FSO was precluded from investigating the circumstances of the sale of the policy as this had occurred more than six years previously. The FSO subsequently investigated the balance of the complaint, but concluded that the medical evidence supported the insurer's decision to decline the claim in dispute and the claim was thus not substantiated.

At the initial hearing in June last year Mr Justice Nicholas Kearns, the president of the High Court, urged financial organisations to show “empathy and understanding” in dealing with critical illness insurance claims.

He said it should not be “impossible” for financial organisations to show empathy and understanding in situations such as where a man diagnosed with cardiomyopathy got no payment from his insurer despite having critical illness cover for conditions including heart attack and stroke.

He said it seemed to him “justice would warrant a restitution” of some degree of the payments made by Philomena and Thomas Geoghegan, “hard-working” people, over 11 years under their joint policy taken out with Progressive Life Assurance in 1998.

After the judge’s remarks, counsel for the company, now Irish Life Assurance plc, said the claim is a reinsured one and he wanted time to take instructions from a reinsurer based overseas.

In announcing its ruling, just reported on the International Law Office’s website, the High Court says that Mrs Geoghegan submitted that she and her husband had always understood that all major illnesses would be covered by the critical illness policy, and that owing to the high monthly premium they would not have taken out the cover had they known it covered only specified illnesses. It was alleged that the critical illness cover changed in 2006 and as a result it was subsequently described as 'accelerated specified illness cover'. Mrs Geoghegan also sought to rely on evidence that the insurer had accepted claims in respect of cardiomyopathy from claimants whose policies were commenced at the same time as that of her and her husband’s.

The court considered that the case arose from a particularly unfortunate set of circumstances. Since 1998 Mr and Mrs Geoghegan had paid considerable monthly premiums to the insurer in respect of the unit link to life assurance policy, to which critical illness cover was added in 1999. However, while the court sympathised with the couple, it noted that its role was limited to considering whether the FSO had erred in its decision.

The court accepted that it was clear from the documentation that the name of the illness cover had changed without warning in 2006 from 'critical illness cover' to 'accelerated specified illness cover'. However, the court accepted that this change occurred in order to clarify that the cover at issue was limited to illnesses specified in the policy rather than covering all illnesses. While the court could reasonably infer from the change that there was some confusion among policyholders in relation to the nature of the policy – which would at least warrant a pragmatic and equitable response from the insurer in relation to the appellant's claim – this did not alter the fact that the appellant and her husband had signed a proposal form at the time of taking out the cover which expressly stated which illnesses were covered by the policy.

With regard to the evidence that the insurer had upheld claims from other policyholders suffering from cardiomyopathy, notwithstanding the absence of cover for this illness, the court noted that while this understandably compounded Mrs Geoghegan's sense of unfairness and frustration at the insurer's unwillingness to engage with her claim in an empathetic manner, it was clear from case law that the court could not compel the insurer to deviate from the "obstinate stance" it had adopted.

However, the court commented that while financial service providers and institutions have obvious commercial responsibilities and various duties and obligations, in certain special circumstances where patent unfairness arises they should not be precluded from acting with appropriate sympathy towards consumers.