CR4 Cession – effect of cession on rights of nominated beneficiary.
• Cession – effect of cession on rights of nominated beneficiary.
The policyholder, who was also the life assured and premium payer nominated his business partner as the beneficiary and, thereafter, for good measure, ceded the policy to him as well, “as sekuriteit vir finansiële hulp aan die versekerde lewe.”
The policy itself provided: “Wanneer ‘n polis gesedeer is, sal die regte van die persoon aan wie die polis gesedeer is, terwyl sodanige sessie van krag is, voorkeur geniet bo enige regte wat ‘n genomineerde Begunstigde mag verkry.”
When the debt for which the security was given was repaid the policy was receded to the policyholder but the nomination was not retracted or changed.
The policyholder died unexpectedly and the insurer paid the proceeds of the policy to his estate. The beneficiary challenged this payment.
The insurer argued, in support of its decision to pay the estate, that on the recession of the policy the policyholder became a new cessionary whose rights prevailed over those of the beneficiary.
We expressed our doubts over this position. Upon repayment of the secured debt the policyholder was, after all, entitled as a right to the reversion of the ceded rights. His position could therefore not be equated to that of a subsequent cessionary. The better view is that the policy provision meant that the rights of the beneficiary were merely suspended during the currency of the initial cession; the implication being that upon payment of the debt for which the cession was given, the rights of the beneficiary revived in full.
In the result the insurer was encouraged to explore a settlement as between the beneficiary, itself and the estate over which the office in any event had no jurisdiction.