Assurer owes interest on delayed claim

An assurance company’s attempt to avoid paying interest on a benefit that was delayed for over three years because of an investigation into the circumstances surrounding the claim has been dashed by the Ombudsman for Long-term Insurance.

In August 2015, Liberty Life paid out R1 million on a life policy claim instituted in February 2012. Initially, it said it would pay only one month’s interest, but the ombudsman, Judge Ron McClaren, instructed Liberty to pay interest for the period from April 2012 to August 2015, which amounted to R347 459.

The case involved a policy on the life of Ms A, taken out in September 2010. Ms A died in January 2012, at the age of 46. There was a possibility that she had committed suicide. Like most life policies, the Liberty policy contained a suicide clause stating that if the assured committed suicide during the first two years of the policy, it would not pay out the benefit.

The circumstances surrounding Ms A’s death were as follows:

◆ She was alone at the time of her death, and there was no forced entry into the house;

◆ Her body was found in the bathroom by her fiancé;

◆ She was being treated for depression; and

◆ The police docket contained photographs of a number of medicines that appeared to have been found near Ms A’s body.

Liberty deferred paying out the claim, because it needed to establish the cause of death. Toxicology tests had to be carried out, and Liberty was advised that it could take up to seven years to obtain the results.

It was subsequently established that the medicines had not been found near Ms A’s body, but had been placed by the police on a kitchen counter for photographing.

In the meantime, the ombudsman received a complaint from the attorney representing Ms A’s estate (the complainant) about the delay in the payout.

TESTS INCONCLUSIVE

Following discussions between the ombudsman, a Liberty representative and the complainant, Liberty agreed to expedite the toxicology tests with the assistance of a professor of pathology.

The tests were completed in June 2015, and Liberty received the reports a month later, the findings of which were inconclusive. The claim was paid in August 2015.

Liberty advised that it would pay out only a month’s interest on the claim. However, following an inquiry from the complainant, the date from which interest would be paid was amended to January 23, 2013, the day on which Liberty received the police statement, which, it said, was in fulfilment of the last requirement in terms of the claim form. This date was still unacceptable to the complainant.

The ombudsman made a provisional determination that interest was payable from April 2012 in terms of the assurance industry’s 60-day protocol.

The decision was based, among other things, on the fact that the complainant had proved the death of Ms A by submitting the death certificate; the police statement was not a requirement in terms of the policy; and Ms A’s estate was deprived of the money for the time that it was in Liberty’s possession.

Liberty disputed the provisional determination, saying it had to receive all the requested information and evidence, which it considered necessary to determine the admissibility of the claim.

On January 29, 2016, the provisional determination was upheld by the ombudsman’s office.

The office accepted that Liberty was entitled to receive evidence necessary to assess the claim. This, however, dealt with the question of the admissibility of the claim and not with when the claim payment was due, which was when the event giving rise to the claim, the death of Ms A, occurred.

Liberty paid the full amount of interest as instructed.