Background
The case concerned a funeral policy with Liberty Life (“the insurer”). The complainant was the beneficiary and premium payer. Ms R was both the policyholder and the life assured. Ms R (“the deceased”) died some 12 months after the policy was issued whereupon the complainant lodged a claim. However, the insurer declined the claim on the grounds that there was no insurable interest between the deceased and the complainant.
The insurer relied on the following clause in the contract: “Third party policies:
A policy issued in the name of the Policyholder and monthly premiums are paid from another person’s account. Third party policies are limited to a maximum Sum Assured of R10 000 per life assured, per policy. Third party policies are limited to a maximum of five policies debited from the premium payer’s transactional account. The relationship of the Life Assured to the Policyholder/Premium Payer must be proven at claims stage (to indicate insurable interest)”.
The insurer had contacted the deceased’s family members, including her mother who said she did not know the claimant (the complainant). While it appeared that the deceased and the complainant were related by blood, possibly cousins, there was a dispute of fact among the family members as to whether the deceased and the complainant were known to each other.
The insurer argued that the intention of the claimant and the purpose of taking out the policy on the life of the deceased was “purely for self-enrichment” as there was no proof of any financial dependence or financial loss (insurable interest) that would affect the claimant.
The matter was discussed at an adjudicators’ meeting, whereafter a provisional ruling against the insurer was made.
The meeting noted that from the application form it was clear that Ms R was the life assured as well as the policyholder. The above clause required proof at claims stage of the relationship between life assured and policyholder or premium payer. In this case the life assured and policyholder were the same person, thus the requisite relationship was proved. In any event, insurable interest need only be established between the policyholder and the lives he/she wished to insure. In this instance the policyholder insured her own life. Insurable interest was thus present.
As the policyholder, the life assured was entitled to nominate whoever she wished as beneficiary, as confirmed by the contractual terms. There need not be any insurable interest between the policyholder and the nominated beneficiary. Furthermore, while the complainant may have been the premium payer on the policy, there was nothing in the policy to the effect that he could not be nominated as a beneficiary. The provisional ruling held that the insurer could not decline the claim on the basis that there was no insurable interest.
The insurer responded to the provisional ruling stating: “After further investigation we established the premium payer misrepresented the facts by alleging there was an existing relationship between him and the deceased to mislead the insurer into believing a valid contract existed. The policy was therefore taken purely for financial benefit and not for the wishes of the policyholder”.
Final ruling
The matter was referred back to an adjudicators’ meeting. The meeting was of the view that there was no evidence that the complainant had misrepresented a relationship between himself and the deceased policyholder. The application form noted the relationship between policyholder and beneficiary as “other” and that between policyholder and premium payer as “aunt”. Despite this the insurer accepted these relationships and issued the policy.
In any event, as stated in the provisional ruling, the relationship between policyholder and beneficiary, and that between policyholder and premium payer, was irrelevant.
The meeting was of the view that the insurer’s notion that the funeral policy was taken for financial benefit, and not pursuant to the wishes of the policyholder, was disingenuous. The application form did not actually request the signature of the policyholder, only that of the premium payer. Despite this the policyholder signed the application form, indicating her consent to the policy being taken out with her as life assured and policyholder. The policyholder’s signature on the application form as well as the premium payer’s signature on the authority to debit, both of the same date, constitute prima facie evidence that all three parties (policyholder, premium payer and insurer) knew about the policy application and consented thereto.
The final ruling held that the insurer could not rely on misrepresentation, lack of consensus or lack of insurable interest to decline the claim. The insurer was directed to pay the sum assured to the complainant.