CR203 Payment – debit order not activated due to capturing error on part of insurer – policy lapsed
Payment – debit order not activated due to capturing error on part of insurer – policy lapsed
During 2004 the complainant applied telephonically for a policy which provided, inter alia, cover for himself and his wife for death as a result of an accident. The policyholder’s wife died on 7 July 2005 due to unnatural causes. When the policyholder instituted a claim the insurer repudiated the claim because, so it contended, the policy had lapsed on 1 September 2004 due to the non-payment of premiums.
Upon making enquiries from the insurer, the complainant ascertained that the insurer lodged the debit order but that it was returned by the bank marked as “no authority”, the reason being that the insurer incorrectly captured the account details as a transmission account despite the fact that the complainant informed the insurer that it was a cheque account. Debit orders could apparently not be lodged against a transmission account. (Subsequent to the sale of the first policy, two further policies were sold to the complainant and in both instances the complainant did not provide the insurer with new banking details. Apparently the insurer informed him that his banking details were on record and could be used to lodge the debit order. Premiums were deducted successfully for these two policies.)
The complainant demanded that the insurer pay the death claim because the lapse of the policy was due to an error on its part. He explained that he was the holder of more than one policy from the insurer and did not realise that this specific policy’s premiums were not being deducted from his bank account at the time. He maintained that the insurer should have contacted him telephonically when premiums were in arrears and that he never received a letter sent by the insurer in which it informed him that the policy had lapsed.
The matter was discussed at an adjudicators’ meeting. The meeting’s view was that:
o the insurer was in the first instance to blame for the fact that the payments were not initially transmitted from the complainant’s cheque account;
o there was, however, no contractual duty on the insurer to have contacted the complainant when the debit order was returned, marked “no authority”;
o on the probabilities the insurer did send a letter to the complainant in which it informed him that the policy had lapsed;
o a policyholder, as the debtor in respect of the obligation to make payment of premiums, is under a duty, when payment of premiums is to be deducted from his bank account, to ensure that such payments are indeed transmitted from his account;
o because no premiums were thus transmitted the policy had lapsed and accordingly could no longer support a claim;
o any claim for damages by the complainant for breach of contract (mora creditoris) would largely be neutralised by the mitigation rule;
o because of the insurer’s initial poor administration a compensatory award in terms of our Rule 3.2.5 was justified which, in the circumstances, should not be less than R10 000.
The complaint was accordingly not upheld but a provisional ruling was made that the insurer should pay compensation in the amount of R10 000. The insurer abided by our decision.