CR167 Surrender – right of complainant to surrender a policy – ownership of policy


Surrender – right of complainant to surrender a policy – ownership of policy.


The complainant had owned a hotel, the XYZ Lodge, and had purchased a policy to cover his overdraft with the bank.

After the complainant sold the hotel he paid off the overdraft and then attempted to surrender the policy. The insurer refused to accede to his request as it alleged that the policy now belonged to the new owner of the hotel and could only be surrendered with his consent or on cession of the policy to the complainant. The complainant declined to do so and referred the complaint to our office.


On investigating the matter we found that the policy had been issued in the name of XYZ Lodge, the name under which the complainant ran his hotel. However, he, as sole proprietor, owned the hotel and there was no other legal entity involved. The policy was also in effect owned by him as it was issued in the name of the Lodge. The sale agreement in respect of the hotel made no mention of the policy as part of the sale.

We advised the insurer that it should act on the complainant’s request and pay the surrender value of the policy to the complainant’s account as the policy was in effect owned by him.


The insurer was not prepared to accept our legal argument but eventually agreed to pay out the surrender value on receipt of an indemnity from the complainant, which covered them in the event of a claim on the policy from any other party.

April 2006