CR337
Policy-holder

Funeral insurance – policy-holder – whether an individual who was not involved in any negotiations with the insurer may be the legal owner of a policy?

Background

It was not in issue that the complainant was the only person who at all times negotiated with the insurer for the conclusion of the policy contract, the brother of the complainant being named as the life insured. The complainant paid the premiums, and assumed that he was the policyholder and that as such he was entitled to the payment of the proceeds on the death of his brother.

The position reflected in the Funeral Policy Document (“the policy”) issued by the insurer was, however, not in accordance with the negotiations. In the policy the life insured was indicated as “Member”, which was defined therein as follows:

“Member means a person who is a member of the scheme and

• Who is covered under the policy and
• Who is the legal owner of the policy according to the policy schedule.”

The policy also provided that “the Member and such members of his family who qualify for benefits in terms of the Policy Schedule shall enjoy cover in respect of death…”. The document further defined “Life Partner” and “Child” in terms of their relationship to the Member.

It was therefore clear from the policy that it only provided cover in respect of a person who was both covered under the policy and who was also the legal owner of a policy.

The policy made no provision for the nomination of beneficiaries. The contract was furthermore vague as to who benefits are to be paid to, stating only that benefits would be paid to “the person(s) entitled thereto”.

The complainant, who had negotiated telephonically with the insurer for the cover, was indicated in the policy as the premium payer, and the person in respect of whom cover was applied for, his brother, was indicated as the “member”. On the death of his brother a claim by the complainant was rejected and the policy proceeds were paid to the widow of the life insured.

The complainant’s averment that he took responsibility for payment of major expenses in respect of the funeral was not contested.

Consideration

The insurer conceded that there had been no contact between the insurer and the deceased person who was indicated in the policy as the member and who it considered to be the owner of the policy.

There was also no indication that any mandate or other form of authorisation to act on behalf of his brother was at any stage required from or produced by the complainant. There was furthermore no indication, and it was not contended, that the complainant at any stage intended to transfer to the life insured any rights he acquired as a result of negotiations with the insurer.

The basic question which arose under the circumstances was how the complainant’s brother, who was not in any way involved in the negotiations relating to the policy contract and who did not authorise the complainant to act on his behalf, could become the owner of the policy and therefore party to the policy contract, whilst the actual negotiator, who had the intent to himself enter into the contract, was not the policyholder.

In the circumstances, furthermore, the complainant had been led by the insurer to justifiably believe that he was the contracting party, which in terms of the reliance theory is the accepted basis in law for holding that a contract is concluded because of the resulting “constructive consensus” or “quasi mutual assent”. The attention of the insurer was in this regard drawn to “The Law of Contract in South Africa” (5th edition) by RH Christie (at pages 318 and 319) and also to “Life Insurance in South Africa” by Judge PM Nienaber and Prof MFB Reinecke (at pages 129 to 137.

Result

The insurer accepted the office’s recommendation that the complainant be regarded as the policyholder and made payment to him of the proceeds plus interest.
EdeB
March 2013

CR337
Funeral Insurance

Funeral insurance – policy-holder – whether an individual who was not involved in any negotiations with the insurer may be the legal owner of a policy?

Background

It was not in issue that the complainant was the only person who at all times negotiated with the insurer for the conclusion of the policy contract, the brother of the complainant being named as the life insured. The complainant paid the premiums, and assumed that he was the policyholder and that as such he was entitled to the payment of the proceeds on the death of his brother.

The position reflected in the Funeral Policy Document (“the policy”) issued by the insurer was, however, not in accordance with the negotiations. In the policy the life insured was indicated as “Member”, which was defined therein as follows:

“Member means a person who is a member of the scheme and

• Who is covered under the policy and
• Who is the legal owner of the policy according to the policy schedule.”

The policy also provided that “the Member and such members of his family who qualify for benefits in terms of the Policy Schedule shall enjoy cover in respect of death…”. The document further defined “Life Partner” and “Child” in terms of their relationship to the Member.

It was therefore clear from the policy that it only provided cover in respect of a person who was both covered under the policy and who was also the legal owner of a policy.

The policy made no provision for the nomination of beneficiaries. The contract was furthermore vague as to who benefits are to be paid to, stating only that benefits would be paid to “the person(s) entitled thereto”.

The complainant, who had negotiated telephonically with the insurer for the cover, was indicated in the policy as the premium payer, and the person in respect of whom cover was applied for, his brother, was indicated as the “member”. On the death of his brother a claim by the complainant was rejected and the policy proceeds were paid to the widow of the life insured.

The complainant’s averment that he took responsibility for payment of major expenses in respect of the funeral was not contested.

Consideration

The insurer conceded that there had been no contact between the insurer and the deceased person who was indicated in the policy as the member and who it considered to be the owner of the policy.

There was also no indication that any mandate or other form of authorisation to act on behalf of his brother was at any stage required from or produced by the complainant. There was furthermore no indication, and it was not contended, that the complainant at any stage intended to transfer to the life insured any rights he acquired as a result of negotiations with the insurer.

The basic question which arose under the circumstances was how the complainant’s brother, who was not in any way involved in the negotiations relating to the policy contract and who did not authorise the complainant to act on his behalf, could become the owner of the policy and therefore party to the policy contract, whilst the actual negotiator, who had the intent to himself enter into the contract, was not the policyholder.

In the circumstances, furthermore, the complainant had been led by the insurer to justifiably believe that he was the contracting party, which in terms of the reliance theory is the accepted basis in law for holding that a contract is concluded because of the resulting “constructive consensus” or “quasi mutual assent”. The attention of the insurer was in this regard drawn to “The Law of Contract in South Africa” (5th edition) by RH Christie (at pages 318 and 319) and also to “Life Insurance in South Africa” by Judge PM Nienaber and Prof MFB Reinecke (at pages 129 to 137.

Result

The insurer accepted the office’s recommendation that the complainant be regarded as the policyholder and made payment to him of the proceeds plus interest.

EdeB
March 2013