The Supreme Court today upheld a challenge to an insurance company's refusal to pay out on a IR£265,000 life insurance policy following the death of a businessman's wife 13 years ago.
In an important judgment relating to the scope of liability for negligent mis-statement or inaccurate information given by specialised staff, the court found the complainant had suffered as a result of his merchant brokers, Hill Samuel, being incorrectly told by Norwich Union staff that a direct debit instalment of £227.25 on a life insurance policy had been paid in 1992.
Hill Samuel had said that if it was aware the payment was not made, it would have paid it in order to keep the policy alive as it was holding the policy as security. In those circumstances, Mr Justice Nicholas Kearns, giving the court's judgment, found Norwich Union had a duty of care and a liability towards Mr Harold Wildgust, of The Ward, Coolquay, Co Dublin, and his company, Carrickowen Ltd.
Mr Wildgust was appealing a High Court rejection of his claim against Norwich Union Life Insurance Society.
Mr Justice Kearns rejected claims by the insurance company that inaccurate information was given to Hill Samuel, and not Mr Wildgust and therefore had not breached its duty of care to the complainant.
Mr Wildgust could not lose out because only Hill Samuel was given the inaccurate information when the situation was that, had accurate information been provided, either Hill Samuel or Mr Wildgust could have acted to prevent the loss.
The proximity test regarding negligent mis-statement must include persons who could be expected to rely on information provided by specialised persons and to act in a particular manner on foot of that information, he said.
The judge also noted there was no disclaimer of responsibility for the accuracy of the information provided.
The case arose after Carrickowen was incorporated to hold two commercial units in Coolock Industrial Estate in Dublin.
Mr Wildgust and his wife obtained a £265,000 loan from Hill Samuel to pay a mortgage on the property, which they intended to use to sublet as smaller comemrcial units and to thereby create a pension fund for themselves. The mortgage was backed by a personal guarantee from the couple and, as a secondary security, they were required to, and did, take out a policy of insurance on their lives.
Mr Wildgust later made an arrangement under which the rents relating to the Coolock property were paid into a company account in Bank of Ireland and arrangements were made within the Bank that the premiums on the life policy were to be discharged to Norwich Union by direct debit. However, due to a breakdown in the system, the direct debit payment of March 23rd 1992 was not paid.
After Mrs Wildgust died just months later, on January 1st 1993, Norwich Union refused to pay out on the life policy, claiming it had lapsed. Mr Wildgust subsequently took proceedings against the company to which Bank of Ireland was later joined as a defendant. However, a settlement was reached with the Bank after which it was later struck out of the case.
In the proceedings, it was alleged that Mr Declan O'Hanlon, a manager with Hill Samuel, became aware of a breakdown in the payment of the direct debit to Nowrich Union because Hill Samuel were among those to which a default notice was sent. Mr O'Hanlon phoned Mr Wildgust who told him the premium had been paid and that he had forwarded a cheque to Nowrich Union.
Mr O'Hanlon said he then phoned Norwich Union to inquire about payment of the direct debit and was told the cheque for the premium had been received and everything was "correct and in order".
In reliance on that, Mr O'Hanlon said he took no action. He said if he had known the premium remained unpaid, it would have been paid by Hill Samuel in order to keep the policy alive.
He added he was sure that would have been done because of Mrs Wildgust's ill health at the time. It was alleged the information given to Mr O'Hanlon constituted a negligent mis-statement of fact as a result of which the Wildgusts' life policy was allowed to lapse, therefore causing loss and damage.
Norwich Union had denied that the phone call as described by Mr O'Hanon was ever made and denied liability for any loss or damage.