CR312 Jurisdiction- Mistaken payment by insurer to policyholder of portion of benefit
Mistaken payment by insurer to policyholder of portion of benefit – insurer in fact not liable because of an exclusion clause – complainant claiming balance of benefit – office’s jurisdiction to deal at the same time with insurer’s condictio indebiti as a counterclaim.
The following is a provisional determination issued by the Ombudsman.
“1. The issue in this case is whether our office has jurisdiction to deal with an insurer’s condictio indebiti (a claim for repayment of money paid in error).
2. The facts relevant to the instant case are:
2.1 In August 2005 the insurer concerned had granted a life policy to the complainant covering one of its employees, Mr V. The policy also covered the event inter alia of his future functional impairment. In November 2006 the cover amount was increased to some R6M, but because in applying for the increase it was disclosed that Mr V had in the meanwhile had cervical fusion surgery in July 2006, an exclusion clause was introduced excusing the insurer from liability for the cervical spine.
2.2 Mr V thereafter suffered a disc herniation of C5/6 with spinal cord compression and myelomalacia (morbid softening of the spinal cord) and in June 2009 the complainant submitted a claim for the functional impairment benefit. The insurer paid the complainant
R1 644 194, being half of the total amount of the benefit of
R3 288 387.
2.3 In its complaint lodged with the office the complainant claims payment of the other half. The insurer’s defence is that an application of the exclusion clause excused it from liability, and that because it had owed nothing in the first place, it was in error that the payment of R1 644 194 was made. It states that it intends to sue the complainant in court for repayment.
2.4 In response the complainant contends that the insurer waived its right to rely on the exclusion clause. In this regard it is not in dispute that in the claim which was submitted to the insurer the exclusion clause had expressly been drawn to the insurer’s attention, and the complainant’s contention is that a payment made with that knowledge could only mean that the insurer thereby waived its right to rely on the exclusion clause.
3. That the exclusion clause would otherwise have excused the insurer from liability is not in issue, the only dispute being the complainant’s allegation that the insurer had waived its right to rely on the clause.
4. The office must of course deal with the complainant’s claim for payment of the other half of the benefit, which will be done in due course. The preliminary issue that must first be resolved, however, is whether our office has jurisdiction to deal at the same time, as a counterclaim, with the insurer’s condictio indebiti.
4.1 The insurer contends that our office does not have jurisdiction, and states that it wishes to institute action in court for repayment of the amount paid to the complainant.
4.2 On behalf of the complainant, on the other hand, it is contended that the office does have jurisdiction.
5. In this regard the complainant’s representative draws attention to our office’s decision in CR268 where in a similar situation we had held in 2008 that we do have jurisdiction. In that case the following were the office’s reasons (see the office’s website at www.ombud.co.za in Topics and Cases under “Jurisdiction”):
“As a complaint such as the complainant’s concerned the administration or implementation of a long-term insurance contract, and because as the beneficiary the complainant had been the one to lodge the complaint against the insurer’s demand for repayment, it was concluded that the office does have jurisdiction. In arriving at it we were alive to the fact, our rulings not being binding on complainants, that should the office rule against the complainant and should the complainant refuse to make repayment of any amount, the office could not enforce its ruling or impose any other sanction on her. We were satisfied that this did not stand in the way of the office exercising jurisdiction, and that in such a case the insurer would then have to sue the complainant in court.”
6. In that case the insurer had not raised any objection to our office exercising jurisdiction, so that we had not had the benefit of an argument that an insurer might otherwise have relied on. For this reason it is necessary to reconsider the question.
7. In the nature of the present dispute it is our Rule 2.1 that deals with when our office will have jurisdiction. It provides that the office will have jurisdiction over complaints (the emphasis being my own) –
“…arising from the marketing, conclusion, interpretation, administration, implementation or termination of any long-term insurance contract …”
and the only question that arises is whether in making the payment concerned the insurer was busy with the implementation or administration of the policy contract.
8. In this connection the insurer contends, first, that when making a payment in error it can never be for the purposes of the “implementation” or “administration” of a policy. In making this submission it seeks to compare the situation to one where the mistaken payment had been made to a third party to whom no policy had ever been issued.
While it might have been otherwise had the payment been made to someone to whom no policy had been issued, in the instant case it was in terms of the complainant’s policy, however, that the complainant’s claim was lodged with the insurer, and it was in response to that claim that the insurer then made the allegedly mistaken payment. The fact that it may have made a mistake by making the payment does not and cannot mean, however, that it was not thereby about the business of implementing or administering the policy contract.
9. The insurer’s second contention is based on the fact that in law all that need be proved in order for the condictio indebiti to succeed is, first, that it was in the mistaken belief that the monies were owing that the payment concerned was made, and secondly, that its mistake was excusable. Because of this the insurer submits, as I understand it, that the two issues in its condictio indebiti are entirely divorced from the issues that arise in the complainant’s claim. This is, however, incorrect. The issue in the complainant’s claim, because of the defence to it that the insurer raises, will be whether the insurer had waived its right to rely on the exclusion clause, and that very issue is inextricably bound up with the first requirement for the success of a condictio indebiti i.e. whether or not it was in error that the payment concerned was made.
10. The insurer submits lastly that, unlike the case in CR268, the complainant’s original complaint had not been that the insurer was demanding repayment. That much is of course true, but the fact remains that, although it has happened by a different route, in both CR268 and the instant case the complainant’s complaint and the insurer’s contentions are inextricably bound up with each other.
11. For all of the above reasons I am of the view that, on the facts of the instant case at any rate, the office does have jurisdiction to deal by way of a counterclaim with the insurer’s condictio indebiti. “
The insurer accepted the provisional determination and the office proceeded to deal with the complainant’s claim and the insurer’s counter claim.