CR8 Conclusion of contract – telemarketing – terms of the contract


• Conclusion of contract – telemarketing – terms of the contract

The insurer’s agent approached the complainant by telephone. The complainant alleged that the parties came to an agreement in terms of which he took out whole life insurance on the life of his mother. The life insured died slightly more than a year afterwards. The insurer disputed liability on the grounds that the policy made it clear that death due to natural causes would only be covered 12 months after the insurer received an acceptable application form completed by the proposer. According to them, the policy and schedule were mailed to the complainant in the ordinary course of business. They explained that this class of policy required underwriting and that it was therefore necessary for the policyholder to complete and sign the application form which incorporated a health declaration. The complainant failed to return a signed application form despite having allegedly been reminded to do so. Consequently the insurer contended that there was no contract.

The telephonic conversation that took place was recorded. We listened to the tape. We found that the agent assured the client that there would be immediate cover for accidental death and cover for death by natural causes after a year. She informed the client that no medical examination was needed but that the life insured had to do a declaration of health indicating the status of her current health and all her pre-existing medical conditions. She made it clear that the plan did not cover pre-existing conditions. Thereupon the agent asked the client whether she might complete an application form and they proceeded to do so by noting certain particulars. They discussed and agreed on the amount of the premium and the sum insured. The agent then proceeded to provide some particulars of herself and in the course of this discussion she said that the phone call was being recorded “as we do a legal contract via the phone.” She assured the client that the cover would continue even though the insurer has not received the documents. She added that if the client did not receive these forms within 2 or 3 weeks, he should please give her a call so that they could be re-posted. She did emhasise that the documents must be signed and returned. Finally, she typified the policy in question as a whole life policy.


The policyholder was of the opinion that he had a whole life policy on his mother’s life and that full cover would be enjoyed after one year. He had been assured that the telephone contract was a legal contract. The agent filled in an application form on his instruction. It is true that he was told that the form had to be signed but he was also assured that there would be cover even though the documents had not been received by the insurer.

We came to the conclusion that a valid contract of insurance had indeed been entered into on the terms as discussed between the agent and the policyholder. There is after all no general requirement that a contract of insurance must be in writing and signed. The form in question had admittedly to be signed to confirm and record the details about the life insured, i.e. for proof rather than validity. It was not brought home that the returning of a duly signed application form was a prerequisite for the validity of the contract or for the purpose of extending the contractual benefits. It is true that the insurer needed these documents but in the light of the discussion that took place, the position simply was that the insured had a contractual duty to complete, sign and forward these documents to the insurer. It was therefore no more than an ordinary contractual obligation which the insurer could enforce as a breach of contract but it did not rob the insurance of its validity.

In the circumstances the policyholder’s contention was upheld.