CR288
Minors

Payment to minor as policyholder – policy contract rectified to reflect minor’s guardian as the policyholder.

Background

An endowment policy with a 10 year term had been issued to a minor as the policyholder who at inception was 6 years old. When it matured the natural father of the minor contended that as the minor’s legal guardian he was entitled to payment of the proceeds on behalf of the minor.

The insurer insisted on “official proof of guardianship”, examples of which were stated in a communication from the insurer to be: “Affidavit stating who is currently taking care of the child together with a birth/baptismal certificate if he is indeed one of the biological parents. The medical aid membership card or clinic card will also then suffice”. It was further stated that payment would only be made to the minor as legal owner and that if no banking details of the minor were supplied a cheque would be issued in his name, failing which payment would be made into the Guardians Fund of the Master of High Court.

Assessment

Although the insurer’s requirements seemed open to question on various aspects, including matters related to guardianship and payment to the Guardian Fund, these were not specifically considered because the facts surrounding the conclusion of the contract, which came to light during the office’s consideration and investigation of the complaint, confirmed the correct basis for resolution of the matter.

What transpired was that the person who had negotiated with the insurer and signed the application documents, and who also paid the premiums, was not a parent or guardian of the minor but the minor’s godmother who did not have authority to act on behalf of the minor. This had apparently been overlooked by the insurer when it issued the policy to the minor. It was not entirely clear from the application documents whether the godmother had intended to act in a representative capacity on behalf of the minor, or whether it had been her intention to take out the policy on the life of the minor. The latter was a probability as it was clear on the facts supplied that she had an insurable interest.

The insurer was requested to confirm with the godmother exactly what her intentions had been. It was thereupon confirmed that the godmother had intended that she herself would be the policyholder, that the life insured was to be the minor, and that the proceeds would be utilised for the education of the minor.

Resolution

The insurer and the godmother agreed that the policy contract as issued had not been in accordance with the common intention of the insurer and the godmother. The insurer was willing to allow rectification of the policy contract by substituting the godmother as policyholder and by paying the proceeds to her in response to the claim.

EG de Beer
October 2009