CR136 Insured life wrongly described as spouse of principal insured

Funeral insurance – insured life wrongly described as spouse of principal insured – agency – vicarious liability of insurer for agent’s misrepresentation


The complainant was the nominated beneficiary and premium payer in terms of a funeral policy. His wife was the policyholder and principal insured but he was actually the driving force during the pre-contractual negotiations. The policy also covered the life of another woman as a second life insured. This woman had been incorrectly described in the application form as the “spouse” of the principal insured whereas she actually was the cousin of the beneficiary. The type of policy under discussion covered spouses for a certain sum at no additional premium. In the circumstances no premium was charged in respect of the second life insured.

The complainant alleged that the incorrect description of the second life insured was done on the advice of an official at the bank who marketed the insurance. The complainant and his wife simply followed the advice of the bank official as they had relied on her experience and knowledge of insurance matters. The good faith of the complainant and his wife was not challenged.

On the death of the second life insured, the insurer rejected the complainant’s claim on the grounds of the mis-description. The insurer admitted that there was an arrangement between itself and the bank for the marketing of its policies but it denied any responsibility for the bad advice given by the bank official.


The mis-description of the proposer’s relationship to the second life insured amounted to misrepresentation. It affected the terms of the policy and was clearly material. In principle, the ordinary remedies for misrepresentation would accordingly have been available to the insurer.

We suggested to the insurer that the contract regulating the relationship between the insurer and the bank could be interpreted as a joint venture of some sort. It could probably not be described as a partnership since a partnership would run contrary to insurance legislation but it was not necessary to find a precise niche for it. The insurer’s role was to underwrite the scheme whereas the bank’s task was to inform and advise clients. It had to explain the funeral cover plan to customers and it also had to assist customers with the completion of the application form. An important aspect of the bank’s duties was that it had to negotiate and conclude individual transactions with customers on behalf of the insurer. Furthermore, it had to adhere to the sales and servicing procedures prescribed by the insurer.

Against this background there was little doubt that the bank had been mandated and authorised by the insurer to inform and guide customers who applied for insurance with the insurer. The bank was not in the position of an independent broker. We further suggested to the insurer that at the time that the bad advice was given by the bank official he was acting within the scope of the bank’s mandate.

It is trite law that a principal is liable for misrepresentation by his mandatory or agent acting within the scope of his or her authority (see Ravenne Plantations v Estate Abrey 1928 AD 143). Hence, we advised the insurer that it must take responsibility for the incorrect information that was given by the bank’s official.

The complainant took part in the negotiations as premium payer and beneficiary. As a result of the official’s incorrect information, the contract was structured in such a way that it cost the complainant the loss of the benefit he would have had had his cousin been properly covered as an extended family member. For this loss the complainant had to be compensated.


Taking into consideration that the premium rate for an extended family member required a premium of R3.85 and since the minimum amount of cover that an insured life may carry in the circumstances was R1 000 the insurer undertook to pay that amount less 12 premiums of R3.85 each. A total amount of R953.80 was paid by the insurer to the beneficiary.

April 2006