CR282
Interest on late payments
Insurer in mora – endowment policy- insurer’s duty to take reasonable steps to find policyholder to make payment on maturity.
Background
The policyholder’s endowment policy matured in June 2004. The insurer averred that it had sent a maturity letter by unregistered mail to the policyholder’s last known address, but the policyholder, who was not aware that his policy had matured, denied having received any such letter. The policyholder had earlier changed his address, and according to him he had repeatedly informed the insurer thereof both by fax and by telephone, but the office was not able to resolve these factual disputes. The policy was eventually paid in 2008 and the policyholder claimed interest on the late payment. He pointed out that the insurer had at all times been in possession of his e-mail address, his fax and cellular numbers, none of which had ever changed.
Discussion
In the case of this endowment policy a specific date was set for performance. The office pointed out to the insurer that in such a case the duty rests on it to tender due payment by informing the policyholder in good time that it is ready to make payment on the due date and that it requires the latter’s co-operation in order to do so. Depending on the policy provisions such co-operation could be that the policyholder is required to complete and submit a maturity form. In such a case the policyholder’s failure to comply would mean that he, and not the insurer (as the debtor), will be in mora. But if the policyholder does comply and the insurer fails without lawful excuse to tender performance on the date specified in the policy, it will be a case of mora ex re on the part of the insurer (delay arising from the date named in the contract), and mora interest will be payable from the named date.
On the assumption that the insurer had not been informed of the change of address and did mail the maturity letter, the issue remained whether the insurer had made a proper tender of performance. In the circumstances of the present case, where the insurer had reliable other means of communication, the office suggested that the insurer should have secured the co-operation of the policyholder by making use of one of those other means. It was suggested that the insurer had therefore been in mora because it had not taken reasonable steps to tender payment to the policyholder. The insurer accepted the suggestion and calculated interest at the legal rate.
Result
The parties eventually settled for the amount tendered by the insurer.
MFBR
October 2009
