CR140

Funeral policy – principal life assured dies – policy-owner dies before he can submit a claim – insurer pays proceeds to new policy-owner – should the insurer have paid the estate of the policy-owner or the new policy-owner?

Background

The complainant’s husband was the policy-owner of a funeral policy in terms of which his mother, his brother and his sister were the lives assured.

His mother passed away on the 14th of May 2005 due to an accident. On the 19th of May 2005 he passed away due to a terminal illness.

The policy provided:

“If there is no beneficiary for ownership at the time of the policy-owner’s death, the first surviving assured mentioned in the list of assureds in the Statement of Benefits, in the order in which their names are printed from top to bottom, will become the new policy-owner.

At the death of the policy-owner who is an assured too, a nominee, and not the new policy-owner, is entitled to the benefit payable. It is deemed that the new policy-owner retains the nominees on the policy until he revokes it in writing. If there is no nominee, the new policy-owner is entitled to the benefit payable”.

Point In Dispute

At issue was whether the benefit of the funeral policy should be paid to the estate of the complainant’s deceased husband, as the complainant contended, or to the “beneficiary for ownership” as the insurer asserted.

Discussion

The complainant argued that had her husband not been severely ill at the time of his mother’s death he would have promptly made a claim against the funeral policy. He died five days after his mother and before he was in a condition to lodge the claim. Therefore, so she concluded, the funeral policy benefit that was already due to her husband at the time of his death should accrue to his estate.

The insurer argued that the complainant’s husband was the policy-owner and not a life assured in respect of the relevant policy. In the light thereof the complainant could not be viewed as a spouse according to the contractual stipulations. Furthermore, the complainant was not mentioned in the proposal form and accordingly was not an assured on the policy. Hence the brother of the complainant’s husband was the next person in precedence as set out in the “statement of benefits” to receive the benefit.

In considering the matter this office found the argument of the insurer to be unconvincing. The complainant had not asked that the benefit be paid to her but that it be paid to the estate of her deceased husband.

Conclusion

Since the complainant’s husband was alive when the benefit of the policy was due to him, the proceeds thereof were payable to him. Upon his death such proceeds became payable to his estate.

The insurer was persuaded by this rationale and accordingly paid all benefits to the estate of the complainant’s late husband.

AR
April 2006