The Supreme Court allowed an appeal by Harold Wildgust and Carrickowen Ltd in a dispute over a life insurance policy that lapsed after a premium was not paid. The court held that Norwich Union could owe a duty of care to Mr Wildgust for an inaccurate assurance given to Hill Samuel, the bank holding the policy as security, even though he did not hear or rely on the assurance himself.
The judgment, delivered by Mr Justice Kearns on 22 March 2006, concerned a premium of £227.25 due on 23 March 1992. Hill Samuel received notice that it had not been paid. Its manager, Declan O’Hanlon, said he later telephoned Norwich Union to check whether payment had been received and was told that it had and that the policy was in order. Hill Samuel took no further steps to keep the policy in force.
Norwich Union denied that the call took place. The trial judge accepted Mr O’Hanlon’s account, based on a note he made at the time, and found that the insurer’s staff gave inaccurate information. He also found that Hill Samuel would have paid the premium had it known it remained outstanding. Mr Wildgust learned of the problem in June 1992, after the policy had lapsed. His wife, whose life was insured, died on 1 January 1993, and Norwich Union refused payment on the ground that the policy had lapsed.
At trial, the President of the High Court rejected the claim for negligent misstatement, reasoning that Mr Wildgust had not known of or relied on what Norwich Union told Mr O’Hanlon. The appeal therefore concerned whether a duty could extend to someone beyond the direct recipient of the statement.
The Supreme Court said that, in a business inquiry about a specific transaction, a duty may extend to a limited and identifiable group whom the insurer could reasonably expect might rely on the answer. Hill Samuel held the policy as security, while Mr Wildgust retained an equity of redemption; either could have acted to prevent the loss. The court concluded that the inaccurate assurance could therefore give rise to a duty to Mr Wildgust despite the fact that it was communicated only to the bank.
The court rejected Norwich Union’s argument that the claim improperly displaced the parties’ contractual arrangements. It treated the assurance as a separate representation about whether a premium had been paid, rather than an attempt to change the policy’s payment terms. The judgment allowed the appeal. It did not state a damages award or specify any further order, and it did not determine the amount of any loss.