CR237
Beneficiary Nomination
Insured’s nomination of beneficiary refused by insurer—remedies of disappointed beneficiary
Background
Mr M took out a life policy on his own life, revocably nominating his daughter as beneficiary. The maturity date of the policy was 1 September 2005. An endorsement was subsequently issued in terms of which the insured’s friend, Ms K, was added as the second life insured though not as co-party to the contract. The endorsement also provided that the death benefit “…will now become available on the death of the last surviving insured life…”
Some time after the issue of the endorsement Mr M instructed the insurer to appoint Ms K as his beneficiary in place of his daughter. The insurer’s response was that:
“Ms K is already the co-life assured which means that when the original life insured passes away, the policy will continue in the name of Ms K, and therefore we cannot note the beneficiary.”
The insured did not apparently challenge the insurer’s refusal to record Ms K’s nomination nor did he take any other remedial measures to benefit his friend e.g. by ceding the policy to her.
Mr M died on 12 May 2005, and on his death the policy was treated as part of his estate. When it eventually matured some months later, the insurer paid the proceeds of the policy to the estate of the late Mr M, and the executor dealt with the proceeds in terms of his will.
Ms K lodged a complaint. She submitted that the insurer should have implemented Mr M’s proposed nomination of her as a beneficiary. She contended that had her nomination been implemented she would have received the policy’s proceeds upon maturity. The office considered her claim as a delictual claim for compensation of pure economic loss.
Discussion
The insurer pointed out that the policy drew a distinction between death benefits, payable on the death of the life insured, and endowment benefits payable on maturity of the policy. The policy provision creating the rights of the beneficiary read as follows:
“Beneficiary
If the insured life should die, we will pay the death benefits of this policy to the beneficiary you have nominated. We will cancel the beneficiary nomination if: • you cede the policy to any third party; or you use your policy as security for a loan. We will also cancel or change the beneficiary nomination if you give us notice in writing. If a beneficiary is not nominated on the policy, we will pay the death benefits to the estate.”
Based thereon the insurer contended that the policy merely conferred on the beneficiary a right to receive the death benefit and not the endowment benefit. Ms K would therefore not have been entitled to claim even if the insurer had implemented Mr M’s nomination of her. On the death of Mr M nothing became payable because Ms K, the second life insured, was still alive and a nomination in her favour would therefore have been to no avail. The endowment benefit would have become payable when the policy matured soon after the death of Mr M but by virtue of the policy provisions Ms K would not have had any right to that benefit. In the result, so the insurer contended, its conduct in refusing to give effect to Mr M’s instruction to nominate Ms K as a beneficiary had caused the complainant no real loss.
Conclusion
The office agreed with the insurer’s contentions and dismissed the complainant’s claim. The office was nevertheless of the opinion that at the time of Mr M’s request the insurer could easily have given effect to his avowed wish to benefit Ms K. This it could have done by suggesting an amendment of the policy provisions so as to cause Ms K to be entitled to the endowment benefit, which would not have prejudiced Mr M’s position in any way. By not advising Mr M to this effect the insurer failed to render proper service to its client. The office persuaded the insurer to pay to Ms K R10 000 as compensation for the inconvenience caused by its lack of service.
