CR333 DISPUTE OF FACT Waiving of policy ownership in dispute.


Waiving of policy ownership in dispute.

The facts

On 10 April 2006 the complainant, the VPT company (hereinafter referred to as the company), applied with the assistance of a broker for a policy for R7M on the life of Mr C, a farmer in the district to whom the company owed money for land it had purchased from him. Mr C was otherwise unconnected with the company. The application form, signed on behalf of the company by Mr M who was the major shareholder, showed that it was the company that was to be the policyholder and the premium payer. The insurer issued a quotation which was signed by Mr M and returned to the insurer. Above Mr M’s signature on the quotation, however, was a handwritten note saying –

“Hiermee doen ek, Mnr M, afstand van my eienaarskap op genoemde polisaansoek”

The insurer thereupon issued an amended quotation, one for R2M which was thereafter signed by Mr C and which on 9 June was returned to the insurer. In the result, and without further reference to the company, a policy for R2M was issued by the insurer on 20 June 2006 with Mr C as the life insured and policyholder and with the company as the premium payer. The policy commenced on 1 July 2006.

The company duly and promptly paid the premiums for five years. When it then took stock of its policies it came to its attention that it was not the owner of the policy and that for the period of five years it had been paying premiums towards a policy which would be of no benefit to it. As complainant it alleged that the abovesaid note had been added after Mr M signed the quotation and that it had never been its intention to waive ownership of the policy. It complained that, prior to making the changes, it had been incumbent on the insurer to confirm with the company the change of policyholder. It added that it had entrusted the matter of the policy to its broker and that the broker had never alerted it to the change in ownership.

In the circumstances the complainant company claimed a full refund of premiums.

It was thereafter established that the note had been written on the quotation by the broker consultant but she was unable to provide any information on the circumstances in which the note was introduced. That line of investigation therefore proved futile. The fact remained, however, that the signature of the complainant’s major shareholder, Mr M, appeared below the note.

Response by insurer

The insurer stated that, not having been privy to the business arrangements between the company and Mr C, it had in good faith accepted the change of ownership instruction duly signed by the company’s major shareholder, a well-known business person in the area. The insurer suggested that the parties settle the matter between themselves, but added as a gesture of goodwill an offer to refund the company with six months’ premiums. This offer was declined by the company, which insisted on a full refund.


The view of the office was that, due to a number of unexplained features, there must have been a broader business arrangement and relationship between those involved that served as a background to the application for the policy, but that such information had not been furnished to the office. In the absence thereof it was not possible for the office to adjudicate on the complaint either one way or the other. Further, it seemed improbable that the company and its auditors, without being in possession of the policy, would for five years have continued paying substantial premiums.

The office’s view was that Rule 5.5.2 applied, which stipulates that if it is of the opinion that a material and conclusive dispute of fact cannot be resolved on a balance of probabilities, it shall advise the parties that a determination in favour of the one or the other cannot be made.

In any event it seemed that to obtain a complete and acceptable version of the background would require the evidence of a number of people whose versions on aspects thereof would doubtless end in a dispute of fact. The only way that such factual disputes are capable of being resolved is by the holding of a hearing where all the relevant witnesses are in attendance and can be cross-examined. If only one such witness cannot be compelled to attend then the holding of the hearing would achieve nothing. The office does not have the power, however, to issue witness subpoenas, so that the presence of one or more of the necessary witnesses could not be compelled. For this reason the view of the office was that rule 3.3.3 also applied, which stipulates that the office will not consider a complaint if it can more appropriately be dealt with by a court of law.

The office dismissed the complaint and suggested that the complainant consider the offer extended to it by the insurer, or seek relief in court.

February 2013