Advances made to third parties against an insurance policy without the knowledge or consent of insured – insured’s demand to insurer to reinstate value of policy as if advances not made
In 1988 an endowment policy contract was entered into on the life of the complainant. The complainant was also the owner of the policy. At that time he was 14 years old. The policy had been contracted to cover a debt between the complainant’s father and a friend and in terms of the agreement the friend was to pay all premiums. During 1996 and 1997 two advances were made to the father of the insured and during 1998 a further advance was made to a trust in which the friend who was paying the premiums was involved. In total the advances were R69 000. On the date of the first advance being made the insured was already a major and had full contractual capacity.
During 2000 he made enquiries to the insurer concerning the policy and was advised of the advances that had been made against the policy. On requesting copies of the applications for the advances he was advised by the insurer that the documentation had disappeared. He requested the insurer to recalculate the value of the policy as if the advances had not been made as the advances, in the opinion of the complainant, had been made without his consent and knowledge. The insurer refused.
The complainant approached our office for relief and following further investigation the insurer averred that if the policy was to be reinstated as if the advances had not been made, the insurer would have to sue whoever had benefited from the advances on the basis of unjustified enrichment. In this particular case they considered the complainant to have been the ultimate beneficiary of the unjustifiable enrichment and so advised him and our office.
On the facts as presented we were of the opinion that since the insurer could not provide any evidence as to who had applied for the advances, the insurer was unable to prove that the complainant as the policyowner had consented to the payment of the advances to third parties. We therefore concluded that the insurer had made advances on a policy belonging to the complainant, who at that time had full contractual capacity, to third parties, which had been to the detriment of the complainant. In the circumstances we suggested that the insurer should reinstate the policy as if the three advances had not taken place. Since we had no jurisdiction concerning the question of whether anyone was liable on the basis of unjustifiable enrichment, we made no recommendation.
The insurer accepted our recommendation and the endowment policy of the complainant was reinstated as if the three advances had not taken place.