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The Court of Appeal, composed of Chief Justice Mark Chetcuti, Judge Joseph R Micallef and Judge Tonio Mallia, on June 30, 2021 in the case “Ambrose Mackay, Jessica Eddelston Mackay and Doris Mackay vs Citadel Insurance plc” held , among other things, that if there had been full disclosure of all material facts, in particular, that his insured was inflicted by a terminal illness, Citadel Insurance would not have proceeded to issue the life insurance policy. The insurance company was deceived into believing that its insured was in good health.
The facts of this case were as follows:
The applicants, Ambrose Mackay, Jessica Mackay and Doris Mackay were the heirs of Jesmond Mackay, who died at the age of 45 on August 26, 2008.
Jesmond Mackay purchased a life insurance policy from Citadel Insurance to secure a loan of EUR 193,337 from Bank of Valletta.
The insurance policy was signed on February 6, 2008 and came into effect on January 12, 2008.
On his death, however, the insurance company refused to pay and alleged that the insurance policy was tainted with a serious omission: the non-disclosure of a substantial and material fact by the insured, in violation of the principle of the greatest good faith, the
The insurance company claimed that the deceased, Jesmond Mackay, gave false answers on his application form. He failed to inform them that he was suffering from abdominal pain at the time. Nor that he had consultation visits with his family doctor, and that he was referred to the general hospital and to a private clinic where a series of tests and an ultrasound of the abdomen were performed to verify any serious illness. All this at the same time that Citadel Insurance was about to issue the life insurance policy.
The deceased Jesmond Mackay hid the results of an ultrasound on his stomach, where he was later diagnosed with liver metastases.
His answers to certain questions on the insurance company’s application form as well as during his medical examination by the doctor at the Citadel were found to be dishonest and incorrect.
The fact that the family doctor initially did not suspect cancer but only intended to conduct further investigations and tests could not be taken as a justification, the insurance argued.
Faced with this situation, the applicants brought legal action against Citadel Insurance, asking the court to order them to pay the sum it liquidated as due under the insurance policy. They also asked the court to hold the insurance company liable for the damages they suffered, which consisted of additional interest accrued for the benefit of the Bank of Valletta.
The plaintiffs argued that Citadel Insurance should be ordered to pay such damages.
The insurance company should not be allowed to shirk its responsibilities under the banner of the principle of the greatest good faith which is required in insurance contracts.
“The phrase uberrimae fidei ‘has been too frequently and almost indiscriminately used by insurers and judges as an excuse to ignore insurance claims“: re: candidate Mario Mizzi against candidate Mario Grech (Civil court of the first room, October 3, 2003)
Citadel Insurance, in response, raised the preliminary objection that the applicants had no legal interest in bringing this action and even if the courts were to reject this exception, that their claims could not be made without the presence of Bank. of Valletta in this procedure.
The insurance company argued on the merits that the insurance policy was invalidated by the failure of its insured, Jesmond Mackay, to disclose material facts on its application form, which released it from any obligation to pay compensation.
He said the late Jesmond MacKay had violated one of the cardinal principles of insurance law: to act with the utmost good faith.
Citadel’s first two preliminary rulings were dismissed by the court of first instance on July 1, 2011 and confirmed on appeal on September 28, 2012. The insurance company was ordered to pay the costs relating to these two pleas.
On May 18, 2016, the Court of First Instance decided without hesitation that the life insurance contract was null and void for non-disclosure of an important fact by its insured.
She considered that the insurance contract was based on the principle of the greatest good faith. A claimant had to act honestly. He was to disclose all the information relevant to the case: re: Paul Grech and vs Middlesea Insurance plc and as of July 28, 2014, reference was made to the Rozanes vs Bowen case, 1928, where the English courts ruled “It has been for centuries in England the law in matters of insurance of all kinds, that as the policyholder knows nothing and the man who comes to him to insure knows everything, it is the duty of the insured, of the man who desires to have a policy, to make full disclosure to insurers, without being questioned about all the material circumstances. This is expressed by saying that it is a contract of the greatest good faith … it is the duty of the insured to inform the insurer of everything that he does not have taken as knowing, so that the contract can be concluded with an equal footing“.
A “material” fact was such that it could influence the decision of a prudent insurer whether or not to cover the risk. A false declaration of an important fact entailed the nullity of the contract.
The Court of Appeal, in the “Paul Grech” case, also referred to the “Arterial Carowners Ltd v Yorkshire Insurance Co in 1973 (Chapman J) case, where the English courts stated:”the primary obligation was an obligation to disclose on the part of the insured, and not to investigate the insurer. “
In the court’s opinion, a false answer amounted to a false statement of a material fact which could invalidate the policy.
Our Courts of Justice have also adopted this principle: Camilleri noe v Bartolo of March 22, 1982, First Hall Civil Court. An insured had a duty to give a clear answer on the proposal form and to make full disclosure of all facts that they reasonably believed to be relevant even if they were not requested.
Damaged by the decision of the First Court Civil Hall, the applicants appealed, requesting its dismissal. According to them, the court of first instance did not take into account the element of incentive, namely whether the insurance company was misled by its insured Jesmond MacKay and would not have agreed to underwrite the risk. under the circumstances.
The applicants also appealed against the award of legal costs. An insurance contract should only be terminated for serious reasons of fact and law.
The Court of Appeal agreed with the decision of the first chamber of the civil court. His insured, Jesmond Mackay did not act according to the standards of the principle of the highest good faith.
According to the Court, it was likely that if there had been full disclosure of all material facts, in particular that its insured had been inflicted by a terminal illness, Citadel Insurance would not have proceeded with the issuance of the police. The insurance company was deceived into believing that its insured was in good health. In the Court’s view, this constituted an “inducement”. The insurance company’s consent to cover the risk was flawed, the Court of Appeal noted.
Regarding the legal costs, it was clear that when the Court of First Instance ordered the appellants to bear these costs, but this did not include the determination of Citadelle’s first two pleas. This case had already become res judicata at the time, the First Hall Civil Court rendered its decision.
For these reasons, on June 30, 2021, the Court of Appeal ruled by dismissing the applicants’ appeal and upholding the decision of the first chamber of the civil court with costs.
This report was first published in the Malta Independent.
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