Life benefits must be paid according to policy
Life assurance companies cannot decide to whom they will pay benefits. The benefits have to be paid in terms of the policy contract, says life assurance ombudsman, Judge Brian Galgut.
Galgut made the ruling against Safrican Life Insurance company, which had paid out a funeral benefit of R26 000 to an ex-spouse on the death in 2011 of a trade union member, who was insured through his trade union retirement fund.
No beneficiary was nominated in terms of the policy, but the policy provided that when “no nominated beneficiary has been nominated or can be found, and no clear proof of marriage can be provided by the spouse, Safrican shall pay the benefits to his/her relative, subject to same providing clear proof of relationship”.
The deceased’s ex-spouse claimed the benefit from Safrican and stated her relationship to the deceased to be “wife”, but included a copy of her divorce order with the claim documentation.
Neither she nor the deceased’s children contributed to the cost of the funeral. The policyholder’s mother had paid the funeral costs.
Safrican Life initially said that the claim had been paid to the ex-spouse on the basis of “good faith”, and that it had no reason to assume that she was not the deceased’s wife. The company claimed that there was no principle that prevented a divorced spouse claiming, as it was often the divorced spouse who was responsible for the funeral costs.
Even after the ombudsman’s office referred Safrican Life to the policy provisions, the company “stood by its decision to pay the ex-spouse on the basis that she was the first to claim”.
Galgut determined that in terms of the policy, the benefit was payable to a relative where there was neither a spouse nor a beneficiary. The ex-spouse could not be considered a relative.
Safrican Life was also in possession of a copy of the divorce order and could not reasonably have been under the impression that the claimant was the spouse. Payment to the ex-spouse “was incorrect”.
Galgut ordered that payment must, in terms of the policy, be made to a relative of the deceased, namely his mother, as she claimed the benefit.
Safrican Life has since paid the claim to the mother.
* Contact the Ombudsman for Long-term Insurance, Judge Brian Galgut, on 0860 103 236, email firstname.lastname@example.org or visit www.ombud.co.za