CR268

Jurisdiction – overpayment to the insured of her monthly pension–insurer demanding repayment – complainant lodging a complaint with the office – held: that the office has jurisdiction over the insurer’s claim, a condictio indebiti –portion of the overpaid money ordered to be repaid.

BACKGROUND

The complainant’s husband had been in receipt of a pension purchased by his pension fund from an insurer and upon his death monthly payments were made to the complainant in terms thereof.

As a result of an administrative error, however, the annual growth percentage applicable to her pension had been recorded on the insurer’s computer system as being 100% instead of a fixed 8% per annum, and from December 2003 the complainant began receiving 100% annual increases. The annually increased payments continued to be paid for three years until the error was discovered just before the December 2006 increase, and from that date onwards she received the correct pension.

In the first year of overpayment, December 2003 to November 2004, the monthly pension payments had increased from R3 655 to R7 311, when she should only have received R3 948. In the second year, December 2004 to November 2005, they went up to R14 622, whereas they should have been R4 264. And in the third year, December 2005 to November 2006, they went up to R29 244, whereas they should have been R4 605. In total she received R614 124 over the three years whereas she had only been entitled to
R153 799, making a total overpayment in the sum of R460 325.

When the insurer demanded repayment from the complainant she then lodged a complaint with the office.

The insurer’s demand for repayment was based on the actio condictio indebiti which can only succeed if the error whereby the undue payment is made is excusable, and which is in any event limited to the amount by which the recipient is in fact enriched. Relevant in the latter regard is how the overpaid money was used by the recipient – the liability would be reduced or extinguished only if the diminution or loss of the overpaid money was not due to the recipient’s fault.

The insurer explained that although the complainant’s pension had not been one with-profits, it had mistakenly been placed on the computer system as if it were. As the computer would not operate without any growth percentage entered, with-profits pensions were routinely placed on the computer with a 100% growth percentage, which was then replaced each year by the actual declared percentage when it became known. The error with the complainant’s pension was only picked up when a spot check was done almost three years later. The insurer submitted that this was not “inexcusably slack” conduct. It maintained furthermore that the complainant knew, or ought in any event to have realised, that the annual increases she received could simply not be correct, and that there was a duty on her not only to have informed the insurer of the mistake, but also to have retained the amounts of the overpayments.

The complainant’s attorney contended on her behalf that she was unable to pay the money back as she had spent it, and thereby “lived within her means”. He submitted that the insurer’s explanation indicated negligence on its part; the error was repeated every year for four years, and should not therefore be seen as excusable. He maintained that the complainant, aged 75 and a housewife all her life, had not realised until the increase in the third year to R29 244 per month that the amounts were not due to her, and that she had then telephoned her financial adviser and subsequently also the insurer about it.

The insurer replied that there was a single error, only discovered four years later, so that the error had not been repeated as alleged. It argued that at no stage could the complainant reasonably have believed that she was entitled to 100% increases. It denied in any event that she had ever contacted it, even though by her own admission she had in fact realised from at least November 2005, when the monthly amount increased to R29 244, that the increases were a mistake. The insurer submitted that her use of the money amounted in fact to theft.

DISCUSSION

Although neither party had taken the point, the first question that had to be
answered was whether the office had jurisdiction to adjudicate on the insurer’s
claim. As a complaint such as the complainant’s concerned the
administration or implementation of a long-term insurance contract, and
because as the beneficiary the complainant had been the one to lodge the
complaint against the insurer’s demand for repayment, it was concluded that
the office does have jurisdiction. In arriving at it we were alive to the fact, our
rulings not being binding on complainants, that should the office rule
against the complainant and should the complainant refuse to make
repayment of any amount, the office could not enforce its ruling or impose any
other sanction on her. We were satisfied that this did not stand in the way of
the office exercising jurisdiction, and that in such a case the insurer would
then have to sue the complainant in court.

Our jurisdiction having been confirmed, a meeting of the adjudication staff accordingly considered the merits of the case.

The meeting accepted that in her circumstances the complainant may not have been aware that the monthly increase in the first year from R3 655 to R7 311 was excessive, and that she might reasonably have assumed that for that period the increase had been due to favourable returns obtained by the insurer’s investments. The unanimous view of the meeting was, however, that from the start of the second annual increase in December 2004, when her monthly pension increased further to R14 622, the complainant ought to have been aware that she was being enriched sine causa. And by her own admission she in fact realised when the pension increased to R29 244 in December 2005, that the increase could simply not be correct. The amounts overpaid to her in error in the second and third years amounted to R419 968-08 should therefore have been retained by her. Despite the office’s request the complainant had persistently failed to explain what had happened to this money, save for her assertion that she had spent it on day to day living and that in so doing she had lived within her means. She therefore failed to show that she had not been enriched, or that the diminution or loss of the overpaid money was not due to her fault.

It was the view of the meeting that, in the circumstances as explained by the insurer, its error was an excusable lapse. It occurred once rather than having been repeated three times, the effects of the original error simply being carried through to each succeeding year.

CONCLUSION

The office therefore made a final determination that the complainant was liable to repay to the insurer the amount of R419 968.08, being the amount by which she had unjustly been enriched between December 2004 and November 2006. Through her legal advisor the office was informed that he would make contact with the insurer in order to settle the matter, and the office heard nothing further.

SM
January 2009