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CR384 Delay in payment; interest; in duplum rule

CR384

Delay in payment; interest; in duplum rule

Background:

1. The policy commenced on 1 July 1995. It covered life, capital disability and a double accident (as defined) benefit each at R48 176.

2. The life insured Mr. V, a Police Officer, passed away as a result of a gunshot wound to the head on 27 January 2000.

3. The beneficiary, the deceased’s brother, also, Mr. V submitted a claim and was paid the life cover benefit of R56 892.32 on 12 April 2000.

4. The information at the disposal of the insurer indicated that the death was as a result of suicide and they declined the double accident benefit. However, new information was submitted later on 6 September 2018 and on 11 September 2018 the insurer paid the beneficiary the double accident benefit of R48 211.32, which included interest of R35.32.

5. One of the issues that had to be determined was the consideration of interest on the delayed payment of the accident benefit. The insurer was alerted in this regard to paragraph 23 of the revised practice note on the payment of interest as follows:

“The foundation of Rule 3.2.6 is equity. When the issue of interest arises as a result of late payment, considerations similar to unjustified enrichment could be indicative of where the equities lie. Where the insured/beneficiary has a claim that became due on a particular date, but payment of the claim is deferred, the effect is that the insurer enjoys the benefit of the use of the money due to the insured/beneficiary at the expense of the latter.”

6. The complainant was aggrieved about the interest of R35.32 citing that his brother had passed away in 2000 and the accident benefit was only paid in 2018, while the insurer’s argument was that they only became aware that the cause of death was an accident and thus that a double benefit was due, as opposed to suicide, in September 2018 after which they made payment within a week.

7. Our office did a provisional ruling dated 26 August 2019 finding that the insurer should pay interest on the accident benefit, with effect from 1 April 2000, when the claim for the life cover benefit was finalized, as the insurer had the use of the funds. The interest amounted to R104 297.06 according to a calculation submitted to our office by the insurer on 23 July 2019 but later retracted as not applicable in this matter. 

8. The insurer made further submissions in terms of the provisional determination, offering 50% of R104 000 and citing the in duplum rule, that, in their opinion applied, whereby the interest component should be capped to the (outstanding) capital amount. The offer was a settlement amount of R52 000to be paid on an ex-gratia basis.

9. The complainant declined the settlement offer.

10. The office decided to obtain an independent legal opinion on the application of the in duplum rule on interest on benefits, as opposed to interest on loans.

11. The legal opinion concluded that interest should be capped at the capital amount of the benefit.

12. The matter was submitted to an adjudicators’ meeting where it was decided as follows:

  • The ex-gratia offer of R52 000 made by the insurer was reasonable.
  • Our office agrees with the legal opinion provided to our office by an independent legal consultant that, with application of the in duplum rule, the offer exceeds the capital benefit, and that the interest due, whether in mora or not, had stopped accruing when it reached the capital amount.
  • As the amount offered is in excess of the capital amount, the dates from when the interest should run is deemed irrelevant.

13. The complainant expressed that he remained aggrieved that the interest did not run from date of death but accepted the office’s decision. He was paid R52 000 in interest and the file was closed.

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