In this judgment, the insured had two life policies with the insurer, which included life cover, severe illness benefits, and income continuation benefits.
The insured amended the policies a number of times, but on none of these occasions did the insured disclose that he had been diagnosed with and treated for clinical depression.
The court found that the depression diagnosis and treatment was material to a life insurance policy and should have been disclosed, in order for the insurer to form its own view as to the effect of the diagnosis on the risk.
The policy forms specifically required disclosure of “seeing a medical professional for any reason whatsoever” and depression is a notifiable diagnosis under the policy.
The consideration of risk in respect of life cover is fundamentally affected by the risk of suicide. The insurer’s evidence established that if the insured had disclosed his depression diagnosis, the result would have been a special assessment of risk. In such a case, the underwriter would usually decline the request for an increase in benefits.
Therefore the court upheld the insurer’s right to avoid the contracts by which the insurance policies were amended after the insured was treated by psychiatrists.
The amending contracts to the policies were void with effect from the conclusion of each such contract.
The original policies otherwise remained in force, subject to payment by the insured of outstanding premiums (the insurer having rejected tenders of premiums), the amounts of such outstanding premiums to be computed after set-off against the insured’s rights to repayments of premiums paid to and accepted by the insurer in respect of the void amended contracts.
The insured was held liable and ordered to pay the difference between the amounts paid on claims premised on the validity of the amended contracts, and the amounts that would have been calculated under the provisions of the original policies, to the insurer.
The insured’s claim for the payment of severe illness benefits was upheld to the extent that the claims were covered by the original policies.