CR130 Conclusion of contract

Conclusion of contract – Insurer acting on the unauthorised instructions of an adviser to alter the inception date of a policy


On 9 March 2005 the complainant applied for a policy with death, functional impairment, disability and core dread disease benefits. In the application form an inception date of 1 April 2005 was requested. The insurer asked for additional medical information which was only received during the week of 21 March 2005. Accordingly there was not enough time left for the insurer to lodge the debit order for 1 April 2005. The insurer asked the adviser (an agent of the insurer) to obtain instructions from the complainant about the payment of the first premium and a fresh inception date. According to the adviser the complainant’s wife gave them the instruction to move the inception date to 1 May 2005 and to deduct the premium on that date. (The adviser’s office provided the insurer with a letter that purported to originate from the complainant confirming this instruction. It later transpired that the adviser’s office generated this letter and that the complainant never sent it.)

On the instruction from the complainant’s adviser the insurer thereupon moved the inception date to 1 May 2005 with the first premium to be deducted on the same date. As misfortune would have it the complainant was seriously injured in a car accident on 9 April 2005

When a claim was instituted the insurer denied liability on the ground that the policy was only to commence on 1 May 2005. The complainant denied ever having given instruction or authority to his adviser to defer the inception date to 1 May 2005. According to him there was an instruction, via his wife, to the advisor to retain the inception date and to deduct a double premium on 1 May 2005.


We were thus confronted with a dispute of fact. What was not in dispute was that the complainant did not pay a premium on 1 April 2005 nor was a double premium deducted on 1 May 2005. Consequently there was no room for a claim on the policy itself. It was common cause that the policy could have been issued and the debit order could have been put into operation for 1 April 2005 after all the requirements were received, but due to production load it could not be issued in time. The insurer was willing to consider the claim if the complainant could provide proof that there was sufficient funds in his bank account to pay the premium of 1 April 2005. According to the complainant there was not sufficient funds in his account because the advisor informed them in late March 2005 that the premium for 1 April 2005 would not be deducted and therefore they did not make provision for it.


On the available evidence we could not make a decision on a balance of probabilities as to what the complainant’s instruction to the adviser’s office was. What concerned us was that the insurer failed to confirm the instruction it received from the adviser to defer the inception date with the complainant himself. We informed the insurer that it should not have acted on the adviser’s mere instructions. Had it referred the instruction to the complainant matters could conceivably have taken a different turn. We suggested to the insurer that they should consider settling the claim on a 50% ex gratia basis to which both parties eventually agreed.

April 2006