CASE 16: late submission of claim under individual funeral plan

On the death of an insured the insurer must be notified within a period of six months of the date of death. The relevant clause in the policy is clause 8.1 which reads as follows:

The principal insured ("the deceased”), who was insured under an individual Funeral Plan, issued by Safrican, passed away on 26 January 2011. The claim was submitted by his father, the beneficiary, on 15 November 2012. The primary reason provided for the late notification was that the beneficiary was unaware of the existence of the policy and only discovered it when he sorted out some files that belonged to both himself and the deceased. He also stated that his son had lived with them up to a year prior to his death, and used his parents’ postal address. As far as he knew no mail was ever received from the insurer, including at the time after death when the premiums had ceased due to the premium payer passing away. The beneficiary stated that the death of both his son and his brother within a relatively short period of time had prevented him from dealing with his affairs such as the sorting out of documents.

The claim was submitted within three days of the discovery of the policy but still 16 months after the expiry of the six months waiting period. Safrican submitted a letter from its administrator, in which the administrator declines the claim on the basis that the claim was lodged outside the prescribed period.

At an adjudicators' meeting it was decided, after considering the submissions by both parties, that the insurer be requested to consider the claim. The meeting reiterated its views that the exercise of this office’s equity jurisdiction in this matter was reasonable. The insurer had not raised that it would suffer prejudice by admitting a late claim. Further, the policy, an individual plan, was 10 years old and up to date with its premiums at the time of death.

The meeting was of the view that if this office was precluded from exercising its equity jurisdiction on the basis that the insurer’s repudiation of a claim was in accordance with the provisions of the policy, the office would be precluded from exercising equity in just about every case. The purpose of the equity jurisdiction is to enable the office to depart from the express terms of the contract when strict adherence thereto will result in hardship or unreasonableness, given the circumstances of the case. In consideration of the insurer’s response and the reasons for the late submission, this office exercised its equity jurisdiction in favour of the complainant and issued a provisional determination.

The insurer objected to the provisional determination and a final determination was subsequently issued.

I submitted the case to the adjudicators’ meeting, the Deputy Ombudsman, Ms Jennifer Preiss, presiding, on 16 January 2014, to re-consider the complaint and your further submissions, which are set out below.

1. Your response to the provisional determination is that:

(a) The insurer will be significantly prejudiced if it is asked to make the payment of the claim, as it will be difficult for the insurer to:

i. Assess the validity of the claim

ii. Investigate the circumstances that led to the death

iii. Verify the documents and vet credentials.

(b) The policy was in arrears and had been inactive.

(c) The complainant knew of the existence of the policy and even if he could not find the policy documents he should have notified the administrators of the death.

(d) The insurer is well within the terms and conditions of the policy to reject the claim.

2. In the provisional determination, we pointed out that there are a number of relevant factors and competing interests to consider. The meeting of 16 January 2014 reiterated its views expressed in the provisional determination and that the exercise of this office’s equity jurisdiction in this matter is justified. With regard to the points which you raise, the meeting was of the view that Safrican had not demonstrated that there would be any specific prejudice to it if this specific claim, which emanates from an individual Bonitas Funeral policy, was paid.

3. In the provisional determination I raised a number of points on the exercise of this office’s equity jurisdiction and I refer to them without repeating them. As stated experience has shown that, contractual terms which are not in principle unfair or unreasonable or contrary to public policy can in given circumstances also result in an unjust result.

4. As stated in the Practice Note on Late Submissions, our office agrees that a clause in a policy requiring a claim to be lodged within a stipulated period is not per se unreasonable or unfair and reliance by an insurer on such a clause will, in principle, be enforced by this office. The enquiry is whether taking into account all relevant factors, fairness dictates that we should exercise our equity jurisdiction by departing from the express terms of the contract in order to prevent an unjust hardship.

5. You state that late submission makes it difficult for the insurer to assess the claim. In this case the Late Mr M died of natural causes (asthma, per Mr M Senior). The policy’s only exclusions are a crime-related cause of death and suicide. No details were given by you as to the further investigations you would have undertaken in this case. In our view it is not likely if the death certificate indicates a natural cause of death, confirmed by the Notification of Death official form, that any further investigation on the cause of death would be deemed necessary. If such investigation is deemed necessary it is unclear why it could not be done now. Even if the submission is made within the prescribed period, the insurer is required to verify documents and the same process could be followed if the documents are submitted outside the prescribed period within a reasonable period of time. In this case the claim was submitted 13 months late and the insurer should be able to verify the validity of the claim, without too much difficulty. Assessing the validity of a death claim where it is a natural death under this policy should in general not be as onerous as death from unnatural causes given the exclusion clauses in this policy.

6. The policy went into arrears after the deceased passed away as he was the premium payer. According to Mr M Senior his late son used his address as he (the deceased) had moved to an informal settlement. If the administrator had sent letters to the deceased warning him that the premiums were not being received, Mr M Senior would have received the letters at his home, and he would probably have noted that they came from the insurer or administrator, prompting him into action. You advised me that the administrator does not have copies of correspondence sent to the deceased.

7. As to the reasons of the delay, it is our view that if Mr M Senior had known of the policy when his son passed away, he would have submitted the claim so that the benefit could be paid, as he has stated that the funeral expenses were a burden to him. In addition to the above, the meeting’s view was that the fact that the complainant had lost his son and his brother in the same period contributed to the complainant’s late submission of the claim.

8. In view of the above, the meeting concluded that Safrican had failed to show cause why the exercise of our equity jurisdiction in favour of the complainant on the basis set out in the provisional determination is not warranted or justified in the circumstances of this case. More particularly, the meeting took into account that Safrican had not demonstrated particular prejudice in this case. The meeting was of the view that it could in any event not be said that Safrican had shown that any prejudice in this case outweighed the distress which the complainant would bear if the terms of the contract were applied strictly.

9. The examples provided in the Practice Note on Late Submission are intended to be no more than general guidelines and one should rather ask what is reasonable in the circumstances.

10. The provisional determination that the insurer should assess the claim and not rely on the late submission clause is hereby made final. Please advise me once the assessment has been done. I wish to thank you for your assistance in this matter.

Payment was thereafter made by Safrican to the complainant.