The Supreme Court has upheld a challenge by a businessman to the refusal of an insurance company to pay out a £265,000 (€336,550) life insurance policy following the death of his wife 13 years ago.
The three-judge court yesterday upheld an appeal by Harold Wildgust, The Ward, Coolquay, Co Dublin, and his company, Carrickowen Ltd, against the High Court's rejection of his claim against Norwich Union Life Insurance Society.
In an important judgment on the scope of liability for negligent misstatement or inaccurate information given by specialised staff, the court found Mr Wildgust had suffered as a result of his merchant brokers, Hill Samuel, being incorrectly told by Norwich Union staff that a direct debit instalment on a life insurance policy had been paid in 1992.
Hill Samuel had said if it was aware the payment of £227.25 was not made, it would have paid it to keep the policy alive as it was holding the policy as security. In those circumstances, Mr Justice Nicholas Kearns found Norwich Union had a duty of care and a liability towards Mr Wildgust.
He rejected claims by the insurance company that the fact that the inaccurate information was given to Hill Samuel, and not Mr Wildgust himself, meant the company had not breached its duty of care to Mr Wildgust.
The judge said Hill Samuel and Mr Wildgust were "neighbours" in the legal sense. 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 misstatement 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 case arose after Carrickowen was incorporated to hold two commercial units in Coolock Industrial Estate in Dublin.
Mr Wildgust and his wife took out a £265,000 loan from Hill Samuel to pay a mortgage on the property, which they intended to use to sublet and thereby create a pension fund for themselves.
The mortgage was backed by a personal guarantee from the couple and they were required to take out life-insurance policies.
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, Ballsbridge. 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, on January 1st, 1993, Norwich Union refused to pay out on foot of the life policy, claiming it had lapsed.
Mr Wildgust took proceedings against Norwich Union 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.
In the case, it was alleged that Declan O'Hanlon, a manager with Hill Samuel, became aware of a breakdown in the payment of the direct debit to Norwich Union because Hill Samuel was among the persons 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 Norwich Union. Mr O'Hanlon then phoned Norwich Union to inquire about payment of the direct debit and was told the cheque had been received and everything was "correct and in order".
It was alleged the information given to Mr O'Hanlon constituted a negligent misstatement as a result of which the Wildgusts's life policy was allowed to lapse, therefore causing Mr Wildgust loss and damage.
Norwich Union had denied the phone call as described by Mr O'Hanlon was made and denied liability for any loss or damage.