CR188
Interest on late payment – delay of payment to nominated beneficiary caused by persons involved in the administration of the estate of the policyholder – whether steps taken by the insurer to locate the nominated beneficiary were reasonable?

Background
The complainant, Mrs B, was nominated as the beneficiary on a policy of her former husband in terms of which his own life was insured. The insurer was notified of the death of the insured by a firm of attorneys who indicated that they were attending to the administration of the estate of the deceased insured. The insurer confirmed that the proceeds of the policy were payable to the complainant and informed the attorneys of certain requirements to establish the claim. These requirements were in conformity with the provisions of the policy in terms of which the insurer would not admit any claim under the policy until it received, inter alia, a properly completed application form and proof to their satisfaction of the title of the claimant, Mrs B. The insurer received no response from that firm of attorneys but was subsequently informed by the estate and trust division of a firm of chartered accountants that they were now attending to the administration of the estate. This firm provided copies of the death certificate, letter of executorship and a power of attorney but did not complete the death claim form or the confirmation of the title of the claimant, Mrs B. The executrix in the interim also wrote to the insurer requesting that payment be held over. Yet another trust company informed the insurer that they were now dealing with the administration of the estate. The insurer wrote at least sixteen letters to the persons claiming to be attending to the administration of the estate requesting them to provide the outstanding documentation. The insurer was only provided with the completed application form when the complainant’s attorney, who submitted the complaint to our office on her behalf, eventually produced it.

The complainant demanded interest from the insurer for the period of delay from the date of the submission of the death claim to the date of payment. It was contended on her behalf that she only became aware that she was nominated as beneficiary when she received a letter from the attorneys of the executrix of the policyholder’s estate requesting her to renounce her right to the benefits of the policy. The insurer was then approached and the outstanding requirements were met. The proceeds were thereupon paid without further delay.

The complainant contended that the insurer was under an obligation to locate the beneficiary and offer payment to her; and that the insurer’s failure to do so caused her a loss of interest for the entire period of the delay from the date of death to the date of payment.

Discussion

In the light of the submissions that there was a failure on the part of the insurer to comply with a duty to take reasonable steps to locate the beneficiary and make payment to her, the primary issue in this matter was whether the insurer was delictually liable due to such alleged failure. The two primary considerations in this respect were whether there was a duty on the insurer to locate and make payment to the beneficiary and secondly, whether it failed in its duty.

There is a wealth of authority on the criteria applicable in the determination of wrongfulness, fault and causation. The element of reasonableness is a common denominator to all these elements and there is also some convergence in their application.

We were of the opinion that we were not able to support a contention that there is an absolute duty on an insurer, giving rise to delictual liability, to firstly, locate a nominated beneficiary and secondly, to make payment to such beneficiary forthwith. At most the insurer was obliged to take reasonable steps to advise any parties claiming payment of the prerequisites for doing so.

The main consideration was, therefore, whether the steps taken by the insurer were reasonable or contributed to the delay in payment.

At the time when the claim was instituted the only particulars regarding the beneficiary known to the insurer were those furnished in the application form for the insurance in which the full names and a relationship of Mrs B as the wife of the proposer were stated. The insurer was not aware of the divorce nor whether the beneficiary was alive at the time of the submission of the claim. The insurer admittedly did not conduct specific investigations to locate the beneficiary but advised every person who submitted a claim and each party thereafter who indicated that they were handling the affairs of the estate that a benefit was payable to a nominated beneficiary and requested the completion of the claim application form by the beneficiary. In all, at least sixteen such notifications were provided to the various parties who were involved in the administration of the estate from time to time.

Our conclusion was that the steps taken by the insurer were reasonable and that the insurer could reasonably have assumed that such notifications would be communicated to the beneficiary concerned. The fact that it subsequently appeared that the various parties involved, and in particular the executrix of the estate for reasons of her own, were not keen to inform the beneficiary of her rights and requirements, could not alter this position.

Result

The complainant was accordingly informed that we were unable to uphold her claim for the payment of interest.

EdB
November 2006