Whether insurer’s conduct in having accepted late premiums in an earlier period, and in accepting arrangements to pay arrears, indicated a waiver of its right to regard the policy as having automatically lapsed according to its terms – onus on complainant to prove conduct showing unequivocal intention to waive, and consistent with no other hypothesis.
1. The complainant was the premium payer on her father’s whole life policy. She failed to pay the premiums on time in February, March and April 2009, and in terms of the relevant policy provisions it lapsed automatically. In a complaint to our office she maintained that payment had been accepted late on two previous occasions in 2008 without the insurer relying on an automatic lapsing, and that, in respect of the February, March and April 2009 premiums she had telephoned the insurer’s call centre and made arrangements to pay arrear amounts off by increasing her payments from July 2009 onwards. She argued that in this way the insurer had “negotiated” the contract, and she had been led to believe that it would not insist on implementing the lapsing provisions in the policy.
2. The relevant terms stated that –
“All premiums are payable in advance and due on the first day of the month. A period of grace of one month is allowed for the payment of each premium.
If a premium is not paid within the period of grace, the policy will lapse.
If the policy lapses, [the insurer] will consider reinstatement subject to [the insurer’s] requirements at the time”.
3. The complainant’s argument was effectively that the insurer had waived or abandoned its right to the automatic lapsing of the policy according to its abovesaid terms.
4. The insurer denied that it had had any intention to release the complainant from her obligation to pay premiums timeously (with the exception of one premium – see paragraph 10 below), or to waive its right to regard the policy as having lapsed if the premiums were not paid within the grace period of one month.
5. We pointed out to the complainant that the onus is on the party alleging a waiver to establish it by clear proof of an intention to release or waive. A waiver may be effected not only expressly, but also tacitly, for example by conduct such as the complainant contended in this case. In respect of a waiver by conduct the circumstances relied on must be unequivocal, however, and consistent with no other hypothesis. There must be nothing indicating that the insurer did not have the intention to waive its right to regard the policy as having lapsed.
6. Section 52 (1) of the Long-term Insurance Act requires that if a premium is not paid on its due date “the long-term insurer shall notify the policyholder of the non-payment”. The insurer maintained that such notices had been sent to the policyholder on 27 March 2009, 26 June 2009 and 26 August 2009, pointing out the arrears and warning of the pending lapse of the policy (if the arrear premiums were not paid).
7. The insurer contended that these letters were an indication of its intention in 2009 to enforce the policy provisions. It would indeed be difficult to argue, in the face of the notices, that the insurer intended by its conduct in allowing late payment in 2008 to waive timeous payment in 2009 or that the insurer intended to be similarly lenient in 2009.
8. The complainant and her father maintained that neither of them had ever received any such notices. The insurer sent us a screen dump indicating that notices were sent on the mentioned dates to the correct address, but it could not prove that the letters had been received by them. On the probabilities it appeared unlikely to us that all three letters would have gone missing in the mail, and therefore likely that at least one of the letters would have been received, and if received but ignored this would afford no defence.
9. Even if one were to accept that the notices were not received, what remained to be considered was whether there was any other evidence which indicated that there was an intention by the insurer to waive the lapsing provision.
10. Concerning the two respective versions of the calls and arrangements allegedly made between the complainant and the call centre operator, there was a dispute of fact. The calls were not recorded. The complainant stated that the call centre operator told her in April 2009 that all the arrears would be written off and that she must just pay timeously in future. The call centre operator’s version was that he told her only one premium would be written off, and that the rest still had to be paid. Apparently she thereafter made some short payments, and no payment at all in August 2009. The operator stated that he had telephoned her on three further occasions, in July, August and September 2009, reminding her to pay the arrears and to provide new bank account details (to allow future debit order deductions), and each time she stated that she would do so. No arrear payments were made until October 2009, however, by which time the insurer had regarded the policy as having lapsed with effect from 1 July 2009.
11. As it was the complainant who was asserting that the arrangements were part of the insurer’s conduct showing an intention to waive timeous payment, the onus was on her to prove her version.
12. In our view she had not discharged this onus. On a balance of probabilities it was more likely that the insurer had been prepared to write off one month’s arrears, and not two or more months. When the premiums were overdue in 2008 the insurer did not write off any premiums, which made it unlikely that it would have been prepared to write off more than one premium in 2009. The premium history showed that only one premium was in fact written off in April 2009. The complainant had herself stated that the call centre operator told her in the beginning of his April 2009 conversations with her that even if the arrears were written off she must start paying premiums timeously thereafter. This would indicate that the insurer was prepared to make one concession, but no more. It was also consistent with an intention not to waive the lapsing provision in the policy if she did not comply with the further chance afforded her.
13. We asked the insurer to comment on why, if it was not the insurer’s intention to be lenient regarding premium payment, the call centre operator had made so many calls to the complainant about the arrears. The insurer responded that, because she had continued to make some payments, and made promises to honour the financial arrangements, she was given the benefit of the doubt. However, after the third failed promise to provide the required bank details, the policy was regarded as having lapsed (retrospective to the month before the last payment default ie July 2009).
14. We advised the complainant that in our view the insurer could not be faulted for this. The conduct of the insurer did not indicate an unequivocal intention to waive its right to regard the policy as having lapsed. While the insurer was prepared to negotiate with the complainant regarding arrear premiums, this was done on the basis that she would comply with the arrangements; when she did not the insurer was entitled to insist that the policy had lapsed. We made a provisional ruling to this effect, and the complainant apparently accepted it as we did not hear from her again.