On 5 February 2025, the Court of Appeal (in its inferior jurisdiction), delivered its final judgment in the case of 'D.M. v X Insurance' which related to an appeal filed by X Insurance (the "Insurer").

Facts of the case

The case in question related to a travel insurance policy issued by the Insurer to D.M. D.M. had purchased a travel package with Britannia Services Ltd for a trip scheduled to take place between 24 August and 30 August 2022, which included the above-mentioned travel insurance policy. One day prior to her trip, D.M. injured her leg, and due to significant blood loss, was rushed to hospital. She was advised not to travel the next day due to the accident.

D.M. accordingly proceeded to cancel her trip and asked the Insurer to satisfy its obligations in terms of the insurance policy, i.e. to reimburse D.M. for the travel costs that she had incurred. The Insurer refused to reimburse D.M. for said travel costs.

Merits of the case

D.M. lodged a complaint before the Arbiter for Financial Services on 4 August 2023, requesting the Insurer to pay the sum of €1,029 (i.e. the travel costs she had incurred in relation to the cancelled trip). The Insurer stated that it was exempted from making such a payment in terms of the insurance policy (see below).

The Arbiter for Financial Services, in its analysis, noted that the Insurer was arguing that D.M.'s condition of varicose veins was tantamount to a 'pre-existing medical condition', and that accordingly, it was exempted from making such a payment in terms of the insurance policy. D.M, on the other hand, explained that while she had visited hospital in January 2022 as an outpatient for a consultation regarding varicose veins, this was merely precautionary, and that she had been advised that there was no need to schedule a follow-up precautionary check-up. She furthermore claimed that while she had read the policy documents issued by the Insurer (despite not understanding all the terms), she was never asked to declare whether she had any medical problems.

The Insurer quoted certain clauses from the policy, namely the following:

1.     The policy clearly stated that 'any pre-existing medical conditions that exist or have existed within the 12 months from the date of application for cover' would fall within the list entitled 'What is not insured?'

2.     The hospital discharge note dated 23 August 2022 clearly stated that D.M. 'is a 69 year-old known case of varicose veins'

3.     The doctor's certificate dated 18 September 2023 clearly stated that D.M. suffered from 'chronic varicose veins' and that he had sent D.M. for a check-up in 2020

4.     The medical history record presented by D.M. showed that D.M. had attended a number of consultations between 2020 and 2022 in relation to varicose veins.

D.M. emphasised that she did not suffer from chronic varicose veins, that she had never had an incident and neither did she take any medication to mitigate any such condition.

On 12 April 2024, the Arbiter ruled that the claim should not have been refused by the Insurer on the grounds of 'any pre-existing medical condition that exist or have existed within the 12 months from the date of application for cover.' The Arbiter ruled that if the concept of a pre-existing medical condition is extended to cover a condition that a policyholder is not aware of, and that the policyholder in question did not undergo any consultation, this would be too much of a wide interpretation of the term 'pre-existing medical condition'. The Arbiter ruled that especially with these types of insurance policies, where the tour operator is also the tied insurance intermediary (TII) in question (and therefore there is the possibility of a conflict of interest whereby the tour operator may choose not to properly explain the terms of the policy so as not deter the policyholder from booking their trip with the tour operator in question) it is necessary for there to be more clear communication with policyholders as to what is excluded under travel policies of this nature, also in the Maltese language.

The Insurer's Appeal

The Insurer appealed the Arbiter's decision on 2 May 2024. The Insurer emphasised that the policy clearly stated that 'any pre-existing medical conditions that exist or have existed within the 12 months from the date of application for cover' would fall within the list entitled 'What is not insured?' and that the 12-month time-frame was not intended to cover medical consultations but pre-existing medical conditions. The Insurer claimed that D.M. had been suffering from varicose veins long before the Insurer issued the policy, and that accordingly this should be considered as a pre-existing medical condition. The Insurer claimed that had D.M. not had a history of varicose veins, the doctor would not have suggested that D.M. cancel her trip following the accident that took place the day before her trip. The Insurer quoted Emmet J. Vaughan and Therese M. Vaughan's 'Fundamentals of Risk and Insurance' and explained the concept of insurance is to cover unexpected risks, and that therefore where a risk is more probable due to the existence of a pre-existing medical condition, such risk should be excluded from the insurance policy in question.

The Insurer furthermore submitted to the Court of Appeal that D.M. had indeed received a copy of the policy wording (as well as the exclusions under the policy) and that the despite not understanding all the terms of the policy, she did not seek clarification in this regard. The Insurer also explained that it had following its regulatory obligations and it had also issued the so-called Insurance Product Information Document (IPID).

The Court of Appeal upheld the Arbiter's decision, ruling that while the underlying condition of varicose veins did indeed contribute to D.M.'s loss of blood and the need for her to be rushed to hospital where she was given advice not to travel, the fact remains that it was the accident itself that directly led to D.M. cancelling her trip, and not the underlying varicose veins condition. The Court of Appeal ruled that had D.M. cancelled her trip solely due to the underlying condition of varicose veins, the Insurer would have been correct in disqualifying the claim, but that in this case, the Insurer's interpretation of the 'pre-existing medical condition' clause was too wide.

Conclusion

The Court of Appeal's ruling underlines the importance of clear communication at insurance policy sales stage, to ensure that policyholders have understood and are in agreement with the terms of the policy in question.

Nico Fauser is an Associate within the insurance team at Ganado Advocates. He assists (re)insurance clients, protected cell companies and insurance intermediaries with legal, corporate and transactional matters.