CR234 Rectification – justus error
Rectification – justus error.
The complainant was the owner of an accident annuity plan policy which commenced on 1 April 1984. During July 2005 he noticed that the insurer had stopped deducting premiums from his bank account. When he enquired the insurer informed him that the policy had a term of 21 years and that the policy had expired on 1 April 2005. The complainant denied that that there was an agreement to that effect. The policy did not refer to a term.
The insurer purported to rely on a schedule dated 15 June 2004 which mentioned a term of 21 years, and also on a letter from the insurer dated 21 March 2005 to the complainant which stated that the policy would expire on 1 April 2005. According to the insurer the expiry date of the policy was omitted from the initial policy in error.
The matter was discussed on an adjudicators’ meeting. The meeting’s view was as follows:
• The insurer cannot ask for rectification of the policy because it is, inter alia, a requirement for rectification that both parties had to have the same intention which, for some reason or another, was not properly captured in the written document. That was clearly no the present case.
• The policy was issued without a specific term. The policy is prima facie proof of the agreement between the parties and if the insurer wishes to contend that it did not reflect its true intention and that the policy should have been issued with a term of 21 years, it is in effect relying on its own unilateral mistake.
• Before the insurer would be entitled to relief on that basis it would have to show that its error was reasonable, ie a iustus error.
• In the absence of any misrepresentation on the part of the complainant the insurer could not rely on its own mistake.
• The insurer was therefore bound by the terms of the policy as originally issued.
The complaint was upheld and the insurer was instructed to re-instate the policy. The complainant was required to pay all arrear premiums from 1 April 2005 until date of re-instatement. Both parties abided by our decision.