CR26 Funeral Insurance – dubious claims

by with No Comment Case ReportsFuneral InsuranceTopics & Cases

CR26 Funeral Insurance – dubious claims.
The complainant, who was also the policyholder and the premium payer, insured the life of Ms A under two group scheme funeral policies with company X. Both policies were applied for telephonically through the company’s telemarketing department. When Ms A died and the insurer failed to meet the complainant’s claim, she referred her complaint to us. The company responded:

(i) that, on listening to the recording of the applications for insurance, the policyholder described herself in the one case as the life assured’s daughter and in the other as her step-sister;

(ii) that there was a significant discrepancy between the surnames of the life assured on the submitted death certificate and identity document;

(iii) that a quotation from the funeral undertaker supplied by the complainant in support of the claim had been tampered with;

(iv) that no payment had in fact been made to the undertaker who buried Ms A;

(v) that it would appear that premiums were deducted from the complainant’s banking account in respect of other policies covering various people’s lives; and,

(vi) finally, that the complainant could not furnish convincing proof of the family relationship existing between herself and the deceased.

The company chose to repudiate liability on the narrow ground that an insurable interest had not been proven, in consequence of which all premiums were refunded to the premium holder.

Confronted with this array of potential defences the policyholder chose not to respond. Our file was accordingly closed. This was yet another of several instances where a complainant, faced with an insurer’s explanation to the complaint lodged with us, chose, instead of pressing on with the complaint, to beat a prudent retreat.

PMN

CR366 Funeral benefit Claim declined on the basis that the parties were divorced prior to the conclusion of the contract.

by with No Comment Case ReportsFuneral InsuranceTopics & Cases

CR366
Funeral benefit

Claim declined on the basis that the parties were divorced prior to the conclusion of the contract.

Background

1. The complainant took out a funeral plan covering her husband, two children and two extended family members. The policy commenced in July 1999.

2. The deceased passed away on 16 March 2015 as a result of unnatural causes. When the complainant instituted a claim for the payment of the death benefit, the insurer declined to pay the benefit on the basis that the parties were divorced prior to the commencement of the policy.

3. In doing so, the insurer relied on a final order of divorce issued by the then Supreme Court of Bophuthatswana on 24 April 1997 and an affidavit deposed to by the deceased on 11 October 2006 confirming that the parties were indeed divorced. The complainant disputed that they were divorced and submitted a letter from the National Prosecuting Authority of South Africa (“NPA”) dated 14 March 2005 dealing with a fraud case that was lodged against the deceased before he died. The aforesaid letter reads as follows:

“We read your representation and the relevant police docket. The following was observed.

(a) The divorce document appears to be falsified.

(b) The accused alleges that he had instituted divorce proceedings and was given the divorce document by his attorney who has since passed away.

(c) Further investigation by the police confirmed that the accused’s divorce file at the deceased attorney was destroyed.”

4. The NPA concluded that there was proof that the decree of divorce was invalid, meaning that the marriage between the deceased and the complainant still subsisted. However, they declined to prosecute because they did not have evidence to prove that the deceased did not obtain the divorce order from his attorney. Despite this information, the insurer maintained that it was not legally obliged to accept liability to pay the claim.

5. The complainant also submitted a divorce order that was issued by the same court in the same year containing the same case number, but with different dates and different parties.

Discussion

6. On receipt of the second court order, we pointed out to the insurer that it clearly showed that something was amiss because we have never heard two separate cases from the same court, bearing the same case number, but reflecting different parties. We requested the insurer to clarify from the court whether the court order relevant in this matter was valid or not.

Result

7. The insurer came back indicating that they were prepared to pay the complainant’s claim on a without prejudice basis and the benefit was paid accordingly. Our file was closed.

NS

March 2016

CR337 Policy-holder Funeral insurance – policy-holder

by with No Comment Case ReportsFuneral InsuranceTopics & Cases

CR337
Policy-holder

Funeral insurance – policy-holder – whether an individual who was not involved in any negotiations with the insurer may be the legal owner of a policy?

Background

It was not in issue that the complainant was the only person who at all times negotiated with the insurer for the conclusion of the policy contract, the brother of the complainant being named as the life insured. The complainant paid the premiums, and assumed that he was the policyholder and that as such he was entitled to the payment of the proceeds on the death of his brother.

The position reflected in the Funeral Policy Document (“the policy”) issued by the insurer was, however, not in accordance with the negotiations. In the policy the life insured was indicated as “Member”, which was defined therein as follows:

“Member means a person who is a member of the scheme and

• Who is covered under the policy and
• Who is the legal owner of the policy according to the policy schedule.”

The policy also provided that “the Member and such members of his family who qualify for benefits in terms of the Policy Schedule shall enjoy cover in respect of death…”. The document further defined “Life Partner” and “Child” in terms of their relationship to the Member.

It was therefore clear from the policy that it only provided cover in respect of a person who was both covered under the policy and who was also the legal owner of a policy.

The policy made no provision for the nomination of beneficiaries. The contract was furthermore vague as to who benefits are to be paid to, stating only that benefits would be paid to “the person(s) entitled thereto”.

The complainant, who had negotiated telephonically with the insurer for the cover, was indicated in the policy as the premium payer, and the person in respect of whom cover was applied for, his brother, was indicated as the “member”. On the death of his brother a claim by the complainant was rejected and the policy proceeds were paid to the widow of the life insured.

The complainant’s averment that he took responsibility for payment of major expenses in respect of the funeral was not contested.

Consideration

The insurer conceded that there had been no contact between the insurer and the deceased person who was indicated in the policy as the member and who it considered to be the owner of the policy.

There was also no indication that any mandate or other form of authorisation to act on behalf of his brother was at any stage required from or produced by the complainant. There was furthermore no indication, and it was not contended, that the complainant at any stage intended to transfer to the life insured any rights he acquired as a result of negotiations with the insurer.

The basic question which arose under the circumstances was how the complainant’s brother, who was not in any way involved in the negotiations relating to the policy contract and who did not authorise the complainant to act on his behalf, could become the owner of the policy and therefore party to the policy contract, whilst the actual negotiator, who had the intent to himself enter into the contract, was not the policyholder.

In the circumstances, furthermore, the complainant had been led by the insurer to justifiably believe that he was the contracting party, which in terms of the reliance theory is the accepted basis in law for holding that a contract is concluded because of the resulting “constructive consensus” or “quasi mutual assent”. The attention of the insurer was in this regard drawn to “The Law of Contract in South Africa” (5th edition) by RH Christie (at pages 318 and 319) and also to “Life Insurance in South Africa” by Judge PM Nienaber and Prof MFB Reinecke (at pages 129 to 137.

Result

The insurer accepted the office’s recommendation that the complainant be regarded as the policyholder and made payment to him of the proceeds plus interest.
EdeB
March 2013

CR337
Funeral Insurance

Funeral insurance – policy-holder – whether an individual who was not involved in any negotiations with the insurer may be the legal owner of a policy?

Background

It was not in issue that the complainant was the only person who at all times negotiated with the insurer for the conclusion of the policy contract, the brother of the complainant being named as the life insured. The complainant paid the premiums, and assumed that he was the policyholder and that as such he was entitled to the payment of the proceeds on the death of his brother.

The position reflected in the Funeral Policy Document (“the policy”) issued by the insurer was, however, not in accordance with the negotiations. In the policy the life insured was indicated as “Member”, which was defined therein as follows:

“Member means a person who is a member of the scheme and

• Who is covered under the policy and
• Who is the legal owner of the policy according to the policy schedule.”

The policy also provided that “the Member and such members of his family who qualify for benefits in terms of the Policy Schedule shall enjoy cover in respect of death…”. The document further defined “Life Partner” and “Child” in terms of their relationship to the Member.

It was therefore clear from the policy that it only provided cover in respect of a person who was both covered under the policy and who was also the legal owner of a policy.

The policy made no provision for the nomination of beneficiaries. The contract was furthermore vague as to who benefits are to be paid to, stating only that benefits would be paid to “the person(s) entitled thereto”.

The complainant, who had negotiated telephonically with the insurer for the cover, was indicated in the policy as the premium payer, and the person in respect of whom cover was applied for, his brother, was indicated as the “member”. On the death of his brother a claim by the complainant was rejected and the policy proceeds were paid to the widow of the life insured.

The complainant’s averment that he took responsibility for payment of major expenses in respect of the funeral was not contested.

Consideration

The insurer conceded that there had been no contact between the insurer and the deceased person who was indicated in the policy as the member and who it considered to be the owner of the policy.

There was also no indication that any mandate or other form of authorisation to act on behalf of his brother was at any stage required from or produced by the complainant. There was furthermore no indication, and it was not contended, that the complainant at any stage intended to transfer to the life insured any rights he acquired as a result of negotiations with the insurer.

The basic question which arose under the circumstances was how the complainant’s brother, who was not in any way involved in the negotiations relating to the policy contract and who did not authorise the complainant to act on his behalf, could become the owner of the policy and therefore party to the policy contract, whilst the actual negotiator, who had the intent to himself enter into the contract, was not the policyholder.

In the circumstances, furthermore, the complainant had been led by the insurer to justifiably believe that he was the contracting party, which in terms of the reliance theory is the accepted basis in law for holding that a contract is concluded because of the resulting “constructive consensus” or “quasi mutual assent”. The attention of the insurer was in this regard drawn to “The Law of Contract in South Africa” (5th edition) by RH Christie (at pages 318 and 319) and also to “Life Insurance in South Africa” by Judge PM Nienaber and Prof MFB Reinecke (at pages 129 to 137.

Result

The insurer accepted the office’s recommendation that the complainant be regarded as the policyholder and made payment to him of the proceeds plus interest.

EdeB
March 2013

CR338 Funeral Insurance Funeral Plan required notification of a child’s birth for the child to be added to the policy

by with No Comment Case ReportsFuneral InsuranceTopics & Cases

CR338
Funeral Insurance

Funeral Plan required notification of a child’s birth for the child to be added to the policy – claim for a still-born child.

The policyholder was a member of a group scheme that provided funeral cover for his family. In May 2012 he submitted a death claim for his still-born child and the insurer confirmed that the claim had been approved. He did not receive the payment, however, and requested our office to investigate the matter as the insurer did not respond to his enquiries.

He had selected a Plan D option at inception of his policy, to which for no extra premium he had added his spouse and five children, for which the policy provided R 20 000 cover. The policy schedule provided additional cover, at a claim value of R 10 000, for a further three children at an extra premium.

In the policy children were dealt with as follows:

“Clause 7.2.3 – CHILD or CHILDREN

A Child means:
• A Child by birth, including a Child still-born (following 28 weeks of pregnancy and not as a result of wilful abortion) while the policy is in force, …..

You need to inform (the Funeral Plan) in writing or telephonically of the birth of a Child whom you want covered in terms of this policy. No waiting period in respect of cover will apply provided such notification is received by (the Funeral plan) within 60 (sixty) days of the birth of the Child.

…..5 (five) Children can be covered under the Funeral Plan at no additional premium.
3 (three) Additional children may be covered by the Funeral Plan at an additional monthly premium.”

The insurer confirmed that the claim was declined because the still-born child was the sixth child on the policy.

Because the policy-holder was unable to register a child before it was born and yet still-born children were covered, we were of the opinion that the claim should be considered and that the premium for that month should be deducted from the claim proceeds.

In correspondence that followed the insurer confirmed that subsequent to the claim the main member had added three more children to the policy, which meant that the maximum of eight children were covered. The main member confirmed that all of them were his children. The insurer advised that in order for the children to be covered they had to be added prior to the claim event happening, in other words prior to death, but this was of course not possible in the case of a still-birth. We drew their attention to the definition of a child in the policy, and said we were of the view that a valid claim existed as the main member had advised the insurer of the birth/death as soon as it had occurred.

The claim was then reviewed by the insurer, who confirmed that it had been incorrectly declined and that they would be settling the claim but deducting the unpaid premium. They further confirmed that a similar case had been re-assessed as a result of this case. A few days later, however, the insurer advised that the case had been reassessed and had again been rejected as the still-born child was actually the ninth child on the policy, the main member having already added three additional children.

We requested the dates that the three additional children had been added and the insurer advised that they had been added on 15 May 2012. As the still-born child was born on 23 May 2012 and died on the 24 May 2012 we agreed that the claim could not be considered, as cover was only available for eight children on the policy.

We did however suggest that the insurer consider making the policy-holder a compensatory award for the poor service he received and the way in which the claim was handled. The insurer agreed that they would make an ex-gratia payment of R 5 000.

They further advised that in the future should a policy-holder have a still-born child the claim would be handled as follows:

• If the still-born child was one of the five children the claim would be considered and no premium would be deducted as the premium is packaged.
• For a sixth, seventh or eighth child the claim would be considered but the premium for that month would be deducted from the claim proceeds.
• If the still-born child was a ninth or further child the claim would not be considered.

Our office was satisfied with the offer made to the policy-holder.

KH
Feb 2013

CR335 Funeral Insurance Funeral policy

by with No Comment Case ReportsFuneral InsuranceTopics & Cases

CR335
Funeral Insurance

Funeral policy – Insurer declining on basis of child not being registered as a full-time student at date of death and therefore over age in terms of the policy provisions

Background

1. The policy-holder had a funeral policy which covered his son, the relevant policy rule stipulating that –

“2.6 Membership will cease:
…
(b) for dependent children, when they attain the age of 22, or 26 years if they are still registered as full-time students / scholars at a recognised educational institution…”

2. The son had been registered at the Durban University of Technology since 2007 studying mechanical engineering.

3. He passed away on 6 January 2012 as a result of a motor vehicle accident, shortly prior to registering for the 2012 academic year.

4. A death claim was lodged with the insurer. Documents submitted included a record of the deceased’s academic record dating back to 2007.

5. The Durban University of Technology confirmed that registration for the 2012 academic year opened on 18 January 2012.

6. We requested the insurer to consider the claim on the basis that the probabilities favoured the late son’s registration in that he had been a regular full-time student since 2007 and that his death had occurred prior to the opening of registration.

7. The insurer maintained that he had not registered prior to the date of death and therefore did not qualify for cover in terms of the policy.

8. Further enquiries were made with the Durban University of Technology, where it was confirmed that the deceased would have been excluded from registration as he did not meet the academic criteria required to continue his studies.

9. On the available information, the complaint could not be upheld. The insurer had grounds to reject the claim.

GB
March 2013

CR336 Equity Funeral benefit claim rejected on grounds of late submission

by with No Comment Case ReportsEquityFuneral InsuranceTopics & Cases

CR336
Equity

Funeral benefit claim rejected on grounds of late submission – equity – over much of this period at issue policyholder hospitalised and receiving medical attention.

Background

Mrs G had a funeral benefit policy containing a provision that any claim must be made within 12 months of the date of death of the deceased insured person. Her daughter, who was a life insured under the policy, died in a motor vehicle accident in January 2010 and during November 2011 Mrs G submitted a claim for her death.

The insurer declined to pay the benefit, firstly because the claim was not submitted within the stipulated 12 months, and secondly because the benefit covering Miss G had expired a year prior to the submission of the claim so that the insurer therefore no longer carried a liability in respect of Miss G. At no stage did the insurer suggest, however, that it would suffer prejudice by paying the claim.

Discussion

We asked the complainant what the reason was for the late submission of the claim and she explained that it was because she had been admitted to hospital with depression and major psychiatric illness that she suffered from the moment she heard of her daughter’s gruesome death, and she furnished medical reports in support of this. Copies of the medical reports were sent to the insurer, but they were not prepared to meet the claim, stating –

“We acknowledge the latest submission from Mrs G but advise that this does not alter the decision.

The medical records state that Mrs G was first admitted for depression in January 2010. The report does not indicate how long her admission was. She was again admitted in September 2010, but again, the report does not indicate a date of discharge. The reports do show that Mrs G had depressed mood, depressed energy, poor appetite, insomnia, poor concentration and forgetfulness. These feelings are understandable in view of the tragic losses suffered by Mrs G.

However, despite the loss of her daughter in January, when her husband passed away in August 2010, she still had the presence of mind to submit a claim for his funeral costs. This claim was paid. She also did not react to the notification of the expiry of cover with respect to her daughter which was sent in October 2010.

Her claim in respect of her daughter was only submitted in October 2011, a full year after the expiry of the cover, and almost two years after the death of her daughter. The policy is very clear on the notification period.

Unfortunately our decision to decline remains.”

More medical records were received and provided to the insurer, but they were still not prepared to change their decision, stating –

“We refer to previous correspondence and the latest submission form Mrs G and advise that our decision remains the same. The latest submission from Mrs G is not new information albeit slightly more detailed.

We acknowledge that Mrs G was ill during 2010 and in fact was indisposed for almost 3 months in that year. We do not deny and have never disputed her illness. However, Mrs G’s illness is not the issue.

The particular policy is a funeral policy. One of the conditions of the policy is that claims are submitted within 12 months of the death of the insured. This was not done and almost two years after the death of the insured a claim was submitted. At this stage, not only was the death claim outside the prescribed submission period, but the benefit had expired 12 months prior to the submission of the claim.

In addition to the abovementioned contractual provisions which support our decline of the claim, in our opinion there were two instances apart from the actual claim event which should have triggered submission of a claim. The first instance was when she submitted a claim in respect of her spouse, and the second instance was on receipt of the benefit expiry date notification.”

Assessment

This case was referred to an adjudicators’ meeting for consideration.

On the available evidence it appeared that Mrs G had been treated in a hospital for depression and major psychiatric illness, consequences which were quite understandable in light of the loss that she suffered. In our view this was a reasonable explanation for the delay.

The meeting noted the insurer’s contentions regarding the two instances which might have triggered submission of a claim, being when she submitted a claim in respect of her spouse, and on alleged receipt of the benefit expiry date notification. The meeting was of the view, however, that given the circumstances at the time the submission of a claim in respect of her late spouse would not necessarily have served as a trigger to submit a claim in respect of her late daughter. As to the expiry date notification, Mrs G explained that at the time that it was mailed to her, she was still in fact in hospital with her depression and major psychiatric illness and that she therefore never received it.

As to the insurer’s second ground the meeting took the view that it may have been that the benefit covering Miss G was not in force at the time that the claim was submitted. It had certainly been in force at the time of her death, however, and it was only this that was relevant.

The office is enjoined in terms of Rule 1.2.4 to ensure that due weight is accorded to considerations of equity. In the light of the above considerations the unanimous view of the meeting was that the circumstances of the case warranted the exercise by the office of its equity jurisdiction in favour of the complainant.

A provisional determination was made that the claim should be paid.

Result

The insurer accepted our provisional determination and settled the claim.

HE
February 2013

CR336

Late Submission of Claims

Funeral benefit claim rejected on grounds of late submission – equity – over much of this period at issue policyholder hospitalised and receiving medical attention.

Background

Mrs G had a funeral benefit policy containing a provision that any claim must be made within 12 months of the date of death of the deceased insured person. Her daughter, who was a life insured under the policy, died in a motor vehicle accident in January 2010 and during November 2011 Mrs G submitted a claim for her death.

The insurer declined to pay the benefit, firstly because the claim was not submitted within the stipulated 12 months, and secondly because the benefit covering Miss G had expired a year prior to the submission of the claim so that the insurer therefore no longer carried a liability in respect of Miss G. At no stage did the insurer suggest, however, that it would suffer prejudice by paying the claim.

Discussion

We asked the complainant what the reason was for the late submission of the claim and she explained that it was because she had been admitted to hospital with depression and major psychiatric illness that she suffered from the moment she heard of her daughter’s gruesome death, and she furnished medical reports in support of this. Copies of the medical reports were sent to the insurer, but they were not prepared to meet the claim, stating –

“We acknowledge the latest submission from Mrs G but advise that this does not alter the decision.

The medical records state that Mrs G was first admitted for depression in January 2010. The report does not indicate how long her admission was. She was again admitted in September 2010, but again, the report does not indicate a date of discharge. The reports do show that Mrs G had depressed mood, depressed energy, poor appetite, insomnia, poor concentration and forgetfulness. These feelings are understandable in view of the tragic losses suffered by Mrs G.

However, despite the loss of her daughter in January, when her husband passed away in August 2010, she still had the presence of mind to submit a claim for his funeral costs. This claim was paid. She also did not react to the notification of the expiry of cover with respect to her daughter which was sent in October 2010.

Her claim in respect of her daughter was only submitted in October 2011, a full year after the expiry of the cover, and almost two years after the death of her daughter. The policy is very clear on the notification period.

Unfortunately our decision to decline remains.”

More medical records were received and provided to the insurer, but they were still not prepared to change their decision, stating –

“We refer to previous correspondence and the latest submission form Mrs G and advise that our decision remains the same. The latest submission from Mrs G is not new information albeit slightly more detailed.

We acknowledge that Mrs G was ill during 2010 and in fact was indisposed for almost 3 months in that year. We do not deny and have never disputed her illness. However, Mrs G’s illness is not the issue.

The particular policy is a funeral policy. One of the conditions of the policy is that claims are submitted within 12 months of the death of the insured. This was not done and almost two years after the death of the insured a claim was submitted. At this stage, not only was the death claim outside the prescribed submission period, but the benefit had expired 12 months prior to the submission of the claim.

In addition to the abovementioned contractual provisions which support our decline of the claim, in our opinion there were two instances apart from the actual claim event which should have triggered submission of a claim. The first instance was when she submitted a claim in respect of her spouse, and the second instance was on receipt of the benefit expiry date notification.”

Assessment

This case was referred to an adjudicators’ meeting for consideration.

On the available evidence it appeared that Mrs G had been treated in a hospital for depression and major psychiatric illness, consequences which were quite understandable in light of the loss that she suffered. In our view this was a reasonable explanation for the delay.

The meeting noted the insurer’s contentions regarding the two instances which might have triggered submission of a claim, being when she submitted a claim in respect of her spouse, and on alleged receipt of the benefit expiry date notification. The meeting was of the view, however, that given the circumstances at the time the submission of a claim in respect of her late spouse would not necessarily have served as a trigger to submit a claim in respect of her late daughter. As to the expiry date notification, Mrs G explained that at the time that it was mailed to her, she was still in fact in hospital with her depression and major psychiatric illness and that she therefore never received it.

As to the insurer’s second ground the meeting took the view that it may have been that the benefit covering Miss G was not in force at the time that the claim was submitted. It had certainly been in force at the time of her death, however, and it was only this that was relevant.

The office is enjoined in terms of Rule 1.2.4 to ensure that due weight is accorded to considerations of equity. In the light of the above considerations the unanimous view of the meeting was that the circumstances of the case warranted the exercise by the office of its equity jurisdiction in favour of the complainant.

A provisional determination was made that the claim should be paid.

Result

The insurer accepted our provisional determination and settled the claim.
HE
February 2013

CR336
Funeral Insurance

Funeral benefit claim rejected on grounds of late submission – equity – over much of this period at issue policyholder hospitalised and receiving medical attention.

Background

Mrs G had a funeral benefit policy containing a provision that any claim must be made within 12 months of the date of death of the deceased insured person. Her daughter, who was a life insured under the policy, died in a motor vehicle accident in January 2010 and during November 2011 Mrs G submitted a claim for her death.

The insurer declined to pay the benefit, firstly because the claim was not submitted within the stipulated 12 months, and secondly because the benefit covering Miss G had expired a year prior to the submission of the claim so that the insurer therefore no longer carried a liability in respect of Miss G. At no stage did the insurer suggest, however, that it would suffer prejudice by paying the claim.

Discussion

We asked the complainant what the reason was for the late submission of the claim and she explained that it was because she had been admitted to hospital with depression and major psychiatric illness that she suffered from the moment she heard of her daughter’s gruesome death, and she furnished medical reports in support of this. Copies of the medical reports were sent to the insurer, but they were not prepared to meet the claim, stating –

“We acknowledge the latest submission from Mrs G but advise that this does not alter the decision.

The medical records state that Mrs G was first admitted for depression in January 2010. The report does not indicate how long her admission was. She was again admitted in September 2010, but again, the report does not indicate a date of discharge. The reports do show that Mrs G had depressed mood, depressed energy, poor appetite, insomnia, poor concentration and forgetfulness. These feelings are understandable in view of the tragic losses suffered by Mrs G.

However, despite the loss of her daughter in January, when her husband passed away in August 2010, she still had the presence of mind to submit a claim for his funeral costs. This claim was paid. She also did not react to the notification of the expiry of cover with respect to her daughter which was sent in October 2010.

Her claim in respect of her daughter was only submitted in October 2011, a full year after the expiry of the cover, and almost two years after the death of her daughter. The policy is very clear on the notification period.

Unfortunately our decision to decline remains.”

More medical records were received and provided to the insurer, but they were still not prepared to change their decision, stating –

“We refer to previous correspondence and the latest submission form Mrs G and advise that our decision remains the same. The latest submission from Mrs G is not new information albeit slightly more detailed.

We acknowledge that Mrs G was ill during 2010 and in fact was indisposed for almost 3 months in that year. We do not deny and have never disputed her illness. However, Mrs G’s illness is not the issue.

The particular policy is a funeral policy. One of the conditions of the policy is that claims are submitted within 12 months of the death of the insured. This was not done and almost two years after the death of the insured a claim was submitted. At this stage, not only was the death claim outside the prescribed submission period, but the benefit had expired 12 months prior to the submission of the claim.

In addition to the abovementioned contractual provisions which support our decline of the claim, in our opinion there were two instances apart from the actual claim event which should have triggered submission of a claim. The first instance was when she submitted a claim in respect of her spouse, and the second instance was on receipt of the benefit expiry date notification.”

Assessment

This case was referred to an adjudicators’ meeting for consideration.

On the available evidence it appeared that Mrs G had been treated in a hospital for depression and major psychiatric illness, consequences which were quite understandable in light of the loss that she suffered. In our view this was a reasonable explanation for the delay.

The meeting noted the insurer’s contentions regarding the two instances which might have triggered submission of a claim, being when she submitted a claim in respect of her spouse, and on alleged receipt of the benefit expiry date notification. The meeting was of the view, however, that given the circumstances at the time the submission of a claim in respect of her late spouse would not necessarily have served as a trigger to submit a claim in respect of her late daughter. As to the expiry date notification, Mrs G explained that at the time that it was mailed to her, she was still in fact in hospital with her depression and major psychiatric illness and that she therefore never received it.

As to the insurer’s second ground the meeting took the view that it may have been that the benefit covering Miss G was not in force at the time that the claim was submitted. It had certainly been in force at the time of her death, however, and it was only this that was relevant.

The office is enjoined in terms of Rule 1.2.4 to ensure that due weight is accorded to considerations of equity. In the light of the above considerations the unanimous view of the meeting was that the circumstances of the case warranted the exercise by the office of its equity jurisdiction in favour of the complainant.

A provisional determination was made that the claim should be paid.

Result

The insurer accepted our provisional determination and settled the claim.

HE
February 2013

CR309 Funeral Insurance – Insurer “deeming” lives insured to be the policyholders

by with No Comment Case ReportsFuneral InsuranceTopics & Cases

Funeral Insurance CR309

Insurer “deeming” lives insured to be the policyholders, and not the person who applied in her own name for the policy – this practice not justified.

Background

A “policyholder” is defined in section 1 of the Long term Insurance Act (no. 52 of 1998) as “…the person entitled to be provided with the policy benefits under a long term policy”. A policyholder in this sense is occasionally referred to as the “policy owner”. A “policyholder” and “policy owner” basically indicates a person who is in a contractual relationship with an insurer and who acquires rights and obligations under the contract of insurance. Confusion sometimes arises when a person enters into a contract with an insurer for cover on the life of another person, and such contracts are subject to requirements including that of “insurable interest”. The basic contractual position, however, remains that the person who has entered into the contract remains the policyholder whilst the person whose life is insured is not, on that ground alone, a party to the contract but is the object of the insurance.

Insurers sometimes seek to depart from these basic contractual principles, particularly in respect of assistance/funeral cover “sold” by means of telephone marketing and marketing at retail sales outlets.

An example was a complaint in which the complainant stated that she took out funeral cover for herself and dependents through the call centre of an insurer. When the contracts were issued she noticed that she did not feature anywhere on them but that her “dependents” each got a contract in which they were indicated as policyholders.

The insurer contended that only one policy was for the complainant but that the rest were for the dependents. It said that “when you as the payer take a funeral policy for someone else, you are only the payer and the payer’s details do not reflect on the membership certificate of the persons the payer took the funeral policies for”. Apart from the legal position, these contentions were not in accordance with the policy provisions provided to us. Therein the “policy owner” was defined as “the person who is the legal owner of the policy”. It was furthermore clear and significant that the policy made provision only for cover on the lives of the policyholder, the policyholder’s spouse, the policyholder’s financially dependent children as well as parents of the policyholder and extended family members of the policyholder.

The insurer nevertheless insisted that any person can contact the sales call centre and apply for funeral cover for a family member, domestic worker etc, and that the applicant will then be the premium payer and the life insured will become the owner/main member of the policy. They added that after such sales call a confirmation call is made to the life insured to obtain his/her permission, and that only if the life insured agrees would the application be accepted.

Discussion
It appeared that the permission requested from the life insured is permission for cover on that person’s life. Whilst that may under certain circumstances amount to a mandate to the person who applied for the contract to act on behalf of the life insured it does not follow as a matter of course. The intention of the applicant is clearly also relevant. In this matter it was confirmed from the complainant that she had not intended to contract on behalf of other parties, but instead to obtain cover under a policy in respect of which she was the policyholder on the lives of her “dependents”.

Conclusion
The insurer was informed that unless the person who applies for insurance acts on a power of attorney or other mandate or authorisation on behalf of another party, the construction that an applicant is nothing more than a premium payer, and that a party who had no dealings whatsoever with the insurer becomes the policyholder or contracting party, cannot be upheld.

The insurer conceded to a request by the complainant for cancellation of all of the contracts and a refund of premiums plus interest.

EdeB
March 2011

CR263 Funeral insurance policy – definition of a “common law spouse”

by with No Comment Case ReportsFuneral InsuranceTopics & Cases

CR263
Funeral insurance policy – definition of a “common law spouse” – meaning of.

BACKGROUND

This was a case where, as sometimes happens, the insurer failed to take proper account of the terms of its own policy.

In 1997 the complainant had become a policyholder in a scheme that provided inter alia funeral benefits in the event of the death of himself or certain members of his family including his spouse. He had maintained the policy ever since.

In 2001 he and his wife were divorced, but by then she had been suffering for a couple of years from brain cancer and was unable to look after herself. He therefore never left home but continued at all times to live with her as his common law wife.

In 2007 she died of her brain cancer and when the complainant lodged a claim for the R10 000 funeral benefit the insurer repudiated liability on the ground that he and she had been divorced in 2001, and that a divorced spouse was not covered by the policy.

DISCUSSION

After a considerable delay the insurer eventually furnished the office with a copy of the policy. One of its terms did indeed stipulate that “Divorced spouses are not covered”, but the insurer’s contention nevertheless lost sight of two other relevant provisions in the policy that dealt with the provision of common law spouses and that recognised that such spouses were covered.

In the first place the policy provided cover, not only for spouses in ordinary civil marriages, but also for common law spouses, and it defined a “spouse” to include a “common law spouse”. A common law spouse was in turn defined as “a person recognised by (the insurer) at its sole discretion as a spouse, after a cohabitation period of 6 (six) months

Secondly, and in any event, the words “Divorced spouses are not covered” did not stand alone, but were contained in a definition of “divorced spouse” which was stated to include “a spouse who is no longer party to a common law relationship”.

The real question was therefore whether or not, at the time of her death, the complainant’s wife was a common law spouse as defined in the policy.

The aforesaid provisions showed that, when applied to the facts of the case, the complainant’s wife had remained his common-law spouse after the divorce. When this was put to the insurer, it then adopted the attitude that it had not been proved that since the divorce the complainant and his wife had been living together either for six months or at all. The office pointed out that, when submitting his complaint, the complainant had furnished an affidavit made by him in which he had explained they had never parted company. At the offices’ request, and in any event, the complainant thereafter filed a further affidavit, one by the priest who had served him and his wife for the last nine years, in which the priest confirmed that they had been living together as man and wife for all of that time.

The insurer then relied on a provision in a document it issues called “Claims Procedure” in which it was stipulated that affidavits do not as such constitute sufficient proof. The office pointed out, however, that this document had not been part of the policy and was therefore not binding.

CONCLUSION

Although the insurer then informed the office that it was going to arrange for its forensic investigator to look into the complainant’s home circumstances over the years concerned, it did not apparently do so but instead notified the office that the claim would be paid.

SM
January 2009

CR280 Funeral insurance Funeral benefit – no beneficiary nominated by the policyholder

by with No Comment Case ReportsFuneral InsuranceTopics & Cases

CR280
Funeral insurance

Funeral benefit – no beneficiary nominated by the policyholder – benefit paid to someone other than the executor of the deceased’s estate.

Background

In 1994 Mr M took out a funeral policy covering the lives of himself, his spouse and their children. He did not nominate a beneficiary. Mr M and his wife were divorced by decree dated 25 April 2000, and he passed away on 8 January 2003. Not being aware of the decree of divorce, and the ex-spouse not having disclosed it, the insurer paid the death benefit to the ex-spouse on 16 January 2003.

In February 2004 a competing claim was lodged with insurer by the deceased’s common law wife, Mrs N (“the complainant”) in her capacity as the executor of the deceased’s estate. The insurer refused to pay the estate, its stance being that it had paid the ex-spouse in good faith. It contended that the complainant should claim the benefit from the ex-spouse, stating that:
“We won’t pay out this claim twice because of the dishonesty of the ex-spouse.”

The complainant lodged a complaint with the office, submitting that the benefit should be paid to her as the executor of the estate.

Discussion

There was no provision in the policy document which authorised or justified payment of the benefit to the ex-spouse where she had not been a nominated beneficiary. We pointed out to the insurer that in the absence of such a provision the benefit would have been payable to the estate. The insurer was therefore liable to pay the benefit to the executor of the deceased’s estate. The insurer responded that its standard practice in cases of this nature had been to pay the benefit to a legal spouse or undertaker, and that if there was no legal spouse then the benefit was payable to the deceased’s estate. We pointed out that even if this practice was correct, which it did not appear to be, it was clear that the payment of the benefit to the deceased’s ex-spouse was made contrary to the practice because the deceased’s ex-spouse was neither a legal spouse nor a representative of the estate.

We took the view that the payment of the benefit to the deceased’s spouse clearly did not amount to a discharge by the insurer of its obligations in terms of the insurance contract.

The fact that the insurer was misled by the deceased’s ex-spouse into believing that she was still married to the deceased at the time of his death was no defence to a claim by the rightful claimant, the deceased’s estate.

We disagreed with the insurer’s assertion that the complainant should claim the benefit from deceased’s ex-spouse because it was the insurer that had been defrauded, and not the deceased’s estate.

Conclusion

We made a provisional ruling that the claim should be paid together with interest thereon, and that a compensatory award should also be paid for material inconvenience and distress suffered by the complainant as a result of the insurer’s reliance on a defence which was incorrect in law. The insurer complied with our provisional ruling.

NS
October 2009

CR281 Funeral Insurance Funeral policy

by with No Comment Case ReportsFuneral InsuranceTopics & Cases

CR281
Funeral Insurance

Funeral policy – fund rule stipulating that a child over 22 years would only remain covered if he or she was a registered full-time student.

Background

The policyholder, a member of a fund, had a funeral policy covering her spouse’s life and that of their children. As to the children the relevant fund rule stipulated:

“Membership will cease:
(a)….;
(b) for dependent children, when they attain the age of 22, or 26 years if they are still registered as full-time students/scholars at a recognised educational institution…”

The insured’s daughter died in a motor collision on 28 September 2008 when she was 25 years old. A death claim was lodged with the insurer, one of the documents submitted being a certificate of symbols issued by the Department of Education in which it was stated that the child was doing Grade 12 on a “part-time basis”. The claim was declined because, so the insurer contended, the certificate proved that the child had only been studying part-time, whereas the fund rule required that a child over the age of 22 years would only remain covered if he or she was still a “full-time student”.

Discussion

There were no legal grounds on which to uphold the complaint, because there was insufficient information upon which to hold that the child had been a “full-time student” as defined in the rule. The office nevertheless recommended to the insurer that it consider an ex gratia payment of 50% of the claim in view of the following:

1. The certificate of symbols issued by the Department of Education was not sufficient proof, despite its wording, that the deceased was registered as a part-time student. We pointed out to the insurer that confirmation for this should have been obtained from the school concerned.

2. It appeared from the complaint that the deceased had been improving her symbols with the intention of pursuing her studies at a tertiary institution. As a result we took the view that if she had not died and had managed to improve her symbols she would probably have been registered as a full time student in the following year and would have been covered in terms of the rule concerned.

Result

The insurer accepted the recommendation, and the complainant was pleased with the settlement whereby 50% of the claim was paid.

NS
October 2009
G E Matimba
2008/BG/7127