CR350 Credit insurance / Retrenchment Credit insurance

Credit insurance / Retrenchment

Credit insurance – claim under credit life policy for retrenchment benefit – insurer repudiating on grounds of exclusion for voluntary retrenchment – dispute of fact as to whether retrenchment was voluntary – insurer eventually accepting complainant’s version


1. The complainant claimed against his credit protection policy when his employment was terminated. The insurer repudiated the claim, citing a policy exclusion of liability if “the life assured…accepts voluntary redundancy”.

2. The insurer stated that it had telephoned the employer’s Human Resources manager and director, who confirmed that the complainant had opted for voluntary retrenchment. There was also a settlement agreement signed by the parties, stating that “the Employee and the Company have mutually agreed to terminate the employment relationship” on the basis of certain terms of separation. One of the terms of the agreement was that the employee undertook “not to institute any claim, in whatever forum, against the employer regarding the voluntary termination of services”.

3. However, the manager had given the complainant a letter when he left his employment, setting out the dates of his employment and position, and then stating: “This further serves to confirm that Mr X’s service has been terminated due to the Operational Requirements of the Business”.


4. We asked the insurer to provide a recording of the telephone conversation between it and the employer. We pointed out that the settlement agreement did not, in our view, constitute proof of the life assured having accepted voluntary redundancy. One would need to know whether he had volunteered to be made redundant, as part of a voluntary severance programme offered by the employer. There was no evidence of this in the employer’s letter indicating that his employment had been terminated “due to Operational Requirements of the Business”. We suggested that it might be that the employer had required employees to sign a settlement agreement to forestall any allegation of alleged unfair dismissal or unfair labour practice.

5. The insurer sent us the recording. On it, the employer explains that the key reason for the retrenchment process it had engaged in was operational reasons, but that as a strategy “to mitigate the risks of retrenchment” it had offered its employees “the option to go for a voluntary retrenchment, which was more attractive than the forced one”. He stated: “The criteria we were going to use was LIFO [Last In First Out], and they exactly knew who they were, so it made sense for them to say give it to me voluntarily… it saves a whole lot of time and you have to move on”.

6. We sent the recording to the complainant for his comment. His response is worth quoting in full:

“After listening to the tape …I find [the employer] economical with the truth. What I know happened is that we had a consultation at the end of October last year with [the employer], he then told me and my other former colleague that the company has decided to do away with sales consultants in Gauteng. He told us that to make it easier for us they will give us a week extra pay more than what the law allows.

I did ask him if I can be placed in other position inside the company, his response was that it’s impossible as the company is restructuring itself. We can either agree on this offer or if we don’t agree the company will get rid of us anyway. He told me that he needs a response by the following day so that he can report back to the directors.

On the set day he said I need not worry because he will write me a retrenchment letter and we will still get our UIF so as to help us financially. I did mention to him that I cannot take that decision as I have young family to look after and have a home loan and other financial commitments to fulfil. His response was that the company is trying to meet me halfway that is why they offering an extra week. He also said once I sign the letter he will speak to his bosses to allow us to be in their books until end of November 2011 so that we can have that extra month pay, which is what happened. I tried to delay the process of signing that letter, but was told that I’m not allowed to see company customers anymore the company will help me with its resources to look for another employment.

I’m really disappointed that he can say what he is saying on the tape and contradict what he told me and wrote on the letter. I’m also amazed by [the insurer] that they can take what he is saying verbally being a truth than what he wrote on the letter with company stamp and letterhead.”


7. We asked the insurer to reconsider the case in the light of the complainant’s submission. The insurer did so, and advised us that it had decided to admit the claim. It appears that it was prepared to give the complainant the benefit of the doubt with regard to the dispute of facts and the contradictory documentation.

September 2014