David Robert Zeller v British Caymanian Insurance Company Ltd
| Jurisdiction | UK Non-devolved |
| Judge | Lord Bingham of Cornhill |
| Judgment Date | 16 January 2008 |
| Neutral Citation | [2008] UKPC 4 |
| Court | Privy Council |
| Docket Number | Appeal No 44 of 2006 |
| Date | 16 January 2008 |
[2008] UKPC 4
Privy Council
Present at the hearing:-
Lord Bingham of Cornhill
Lord Hope of Craighead
Baroness Hale of Richmond
Lord Carswell
Sir Henry Brooke
[Delivered by Lord Bingham of Cornhill]
The issue in this appeal is whether the respondent company ("the insurer") was entitled to repudiate liability to the appellant, Mr Zeller, under a health insurance contract made between Mr Zeller's employer and the insurer. At trial in the Grand Court, Levers J held that the policy, so far as it related to Mr Zeller, was voidable for non-disclosure. She accordingly dismissed his claim and gave judgment for the insurer on its counterclaim on 7 March 2005. Her judgment was upheld by a majority of the Court of Appeal of the Cayman Islands (Zacca P and Forte JA, Taylor JA dissenting) on 22 July 2005. Mr Zeller challenges that decision, and claims to be indemnified under the policy.
Mr Zeller is a United States citizen born on 30 October 1951. In November 2001 he moved from the United States to Grand Cayman to work for Pool Patrol Limited. He had spent his working life up to then in the swimming pool business in the US and was fully insured under a health insurance contract with no exclusions. He moved to Grand Cayman because his hobbies were scuba diving and sailing, and Grand Cayman seemed to him the ideal place to pursue those activities in addition to holding down a good job. Cayman law, subject to certain exceptions, provides that an employer shall effect and continue a standard health insurance contract on behalf of each of its employees. Mr Zeller accordingly sought to be covered by his employer's group policy. His evidence was that had health insurance cover not been available to him in Grand Cayman he would probably never have moved there, but he would in any event have maintained his existing cover, which it was open to him to do.
To be included in his employer's contract it was necessary for Mr Zeller to complete the insurer's "Group Enrollment Information Form with a Health Questionnaire". He filled in the form showing himself to be a tall, single man seeking individual inclusion. He disclosed details of his existing health policy.
The Health Questionnaire was divided into three sections. Section A, drafted in terms appropriate for an individual or a family proposal, was prefaced by a direction:
"Check each item Yes or No… To the best of your knowledge and belief, has any person named in this application had, within the last seven years, or does such person now have, any of the following?"
There follows a list of specified medical conditions (a) to (o), mostly described in untechnical language, with beside each a box in which to signify Yes or No. Examples are (a) "Cancer, tumor or other growth" and (f) "Substance abuse (drugs or alcohol dependency, abuse or addiction)". Relevant for present purposes are "(d) Goiter, thyroid trouble, diabetes", against which Mr Zeller signified Yes and wrote in "Thyroid", and (k) "heart trouble, abnormal blood pressure (hypertension or hypotension), anaemia, rheumatic fever", against which Mr Zeller signified No.
Section B was prefaced by a direction: "In addition to the conditions listed in Section A, to the best of your knowledge and belief, within the past five years, has any person named in this application …" Three questions follow, (a) (b) and (c), with in each case a box in which to signify Yes or No. Question (a) was: "Had a physical examination?" To this question Mr Zeller signified "Yes". Question (b) was: "Excluding physical examinations, consulted a physician, health care provider, or other individual or facility for medical or surgical treatment, advice, or screening for any condition not listed in Section A?" Mr Zeller signified "No". Question (c) was: "Had any departure from good health not previously mentioned in any of the above questions for which treatment or advice may or may not have been sought?" Mr Zeller again signified "No".
Section C was prefaced by a direction: "If you have checked "Yes" to any part of Section A or Section B, please provide complete information on this Section and provide medical report (if you need more space please attach a separate sheet of paper)". There followed a box with several columns. In the first Mr Zeller gave his name. In the second (headed "Diagnosis and Treatment") he entered "Thyroid (hypo)". In the next two columns he gave the dates of treatment as from 1980 to the present. In the last column (headed "Physician's Name and Address or Hospital's Name and Address") he mistakenly entered the prescription for the medication prescribed for his thyroid condition.
Applicants were instructed to read carefully, sign and date the next section, which provided:
"IT IS UNDERSTOOD AND AGREED THAT:
(a) The coverage will become effective the first of the month following approval of the application by British Caymanian Insurance Co. Ltd. (hereafter "Insurer") which reserves the right to reject or accept any enrollment application. Coverage provided by Insurer is not effective until receipt and approval of the application by Insurer. The coverage will become effective the first of the month following approval of the application by Insurer.
(b) The statements and answers made herein are complete and correct to the best of my knowledge and belief. Should any statements or answers contained in this application be untrue (if such statements are fraudulent or material to the acceptance of this application) then the contract(s) may be cancelled by the Insurer and their obligation shall consist only of the return of any subscription charges actually paid, less the amount of any benefits paid under the contract;
(c) The employee shall repay to the Insurer the amount of any payment made in error to the employee on behalf of the employee or any covered family member as the result of a claim.
(d) Upon presentation of the original or a photocopy of this signed questionnaire I authorize any medical, professional, hospital, clinic, other medical or medically related facility, governmental agency or other person or firm to provide the Insurer information including copies of records concerning advice, care or treatment provided to me and/or my dependents including without limitation, information related to mental illness or use of drugs or alcohol.
IMPORTANT: PLEASE VERIFY THAT ALL THE INFORMATION ON THIS APPLICATION IS PROVIDED. ALL INCOMPLETE APPLICATIONS WILL BE RETURNED TO THE APPLICANT FOR MORE INFORMATION, THIS WILL CAUSE A DELAY IN THE PROCESS OF ENROLLMENT.
The form concluded:
"I hereby authorize my employer to deduct from my earnings, at such intervals as agreed upon, such amount needed to cover my contribution toward the premium charges for the coverage applied for. And I certify that all data furnished on the front and back of this form is true to the best of my knowledge" [ sic]
Mr Zeller and a representative of his employer signed the form on 21 November 2001. Mr Zeller was included in the group scheme as from 1 December 2001, with an exclusion of his hypothyroidism and all related conditions.
On 28 December 2001 Mr Zeller was examined by Dr Madden for immigration purposes. He found him to be in good health, with no evidence of cardiac valve disease and normal blood pressure. Until March 2003 Mr Zeller lived a full and active life, indulging his hobby of free diving to a depth of 70 feet. In that month Mr Zeller visited Dr Last, his general practitioner in Grand Cayman, to obtain a repeat of his thyroid medication. Because it was his first visit she examined him and heard a loud heart murmur. She was concerned, examined him again a few days later, and referred him to a local cardiologist. Further referrals to a physician (Dr Coy) and a surgeon (Dr Lamelas) in Miami followed, and culminated in May 2003 in major surgery to replace the aortic valve and effect a complex repair to the mitral valve of Mr Zeller's heart. This surgery was successful, but very expensive, and Mr Zeller sought payment of the medical and hospital charges by the insurer.
For reasons which are obscure, both Dr Coy and Dr Lamelas made reports in which they referred to Mr Zeller as having "a history of aortic and mitral valve regurgitation" and a "long history of known valvular pathology". These statements were not true and were corrected, but it appears that they prompted the insurer to make a detailed investigation of Mr Zeller's medical history before November 2001. It obtained from Mr Zeller's US doctor, Dr Pecsok, the notes which he had made at a number of consultations from 1997-2001 but which Mr Zeller had never seen. It read these notes as identifying five medical conditions: hypothyroidism, elevated cholesterol, heart murmur, elevated blood pressure and a fifth condition which has never been pleaded or relied on even though, as it seems, it featured in the insurer's decision to avoid. Mr Zeller's disclosure of his thyroid condition was noted, but the insurer's draft internal memorandum of its decision to cancel stated that had he disclosed conditions 2-5 his application would have been rejected. The view was expressed that "Mr Zeller was disingenuous in statements made on the enrolment form and he did not disclose medical conditions for which he was diagnosed and received treatment". On 24 December 2003 the insurer wrote to Mr Zeller to repudiate liability to him under his employer's policy, but neither then, nor at any time before its defence in these proceedings, did the insurer identify in writing the grounds upon which it was relying.
Mr Zeller issued proceedings seeking indemnification under his employer's group policy. The insurer served a defence and counterclaim dated 4 May 2004. In this (para...
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