CR331 Credit insurance Claim under credit life policy for retrenchment benefit

See too: CR, Retrenchement,

CR331
Credit insurance

Claim under credit life policy for retrenchment benefit – insurer invoking exclusion in case of acceptance of voluntary retrenchment – circumstances of case not constituting voluntary retrenchment

Background

1. The complainant was employed by a hair and beauty salon. On 28 February 2012 her employer gave her a letter advising that she could not keep the business going. The employer stated in the letter:
2.
“Unfortunately due to the economic climate I found I was unable to carry on with the salon as it was and the only other option that was left to me was to offer all of [my] employees a rent a Chair/Space which would have at least allowed you to work within the premises on a self employed basis.

But obviously after some deliberation you have decided not to accept my offer of rent a chair/space (self employed) you have decided to seek pastures new”.

3. The complainant was paid out her notice, and she lodged a retrenchment claim against her store account protection plan policy. The insurer repudiated the claim on the basis that the complainant had accepted voluntary retrenchment.

4. The complainant lodged a complaint with our office. She stated that

“My employer had given us options, that due to financial reasons I was unable to choose, which had left me with the only option that was retrenchment. I did not do it voluntarily, as it was the only option I was left with”.

5. In its response to our office the insurer stood by its decision, citing the paragraphs from the employer’s letter quoted above as justification, without further comment.

Discussion

6. The clause in the policy dealing with the retrenchment benefit stated as follows:

“In the event of the Insured being retrenched or made redundant by his/her employer during the period of insurance and the term of their work agreement and prior to the Insured’s 60th birthday, due to new technology, reorganisation by the employer, liquidation of the company and staff reductions, and which resulted in the Insured not earning any income for a continued unemployment period of 30 days, payment in one lump sum to [the store] on the account, subject to the sum insured”.

7. The insurer’s liability was excluded

“… if the Insured comes to the expected end of a fixed term contract, is a contract worker, finishes the job he/she was specifically employed to do, resigns, retires or accepts voluntary retrenchment”.

8. We wrote to the insurer stating our view that offering employees an option to pay rent for space in its premises thereby to become self-employed was not an offer of continued employment with the employer. Declining an offer to rent space could not therefore be seen as voluntary retrenchment.

9. It was clear from the employer’s letter that it was the economic climate that had led to her decision to close the business. As a result of this situation the employees were faced with involuntary unemployment, as a direct result of the liquidation of the company, resulting in staff reductions (in that the employment of all staff was to be terminated).

10. We did not believe it could be said that the termination of the complainant’s employment in these circumstances was voluntary; rather it appeared that the reason for the termination was retrenchment/redundancy, occasioned by the liquidation of the company. We asked the insurer to reconsider.

Result

11. The insurer accepted our approach and paid the claim.

SM
May 2013

CR331
Retrenchment

Claim under credit life policy for retrenchment benefit – insurer invoking exclusion in case of acceptance of voluntary retrenchment – circumstances of case not constituting voluntary retrenchment

Background

1. The complainant was employed by a hair and beauty salon. On 28 February 2012 her employer gave her a letter advising that she could not keep the business going. The employer stated in the letter:

“Unfortunately due to the economic climate I found I was unable to carry on with the salon as it was and the only other option that was left to me was to offer all of [my] employees a rent a Chair/Space which would have at least allowed you to work within the premises on a self employed basis.

But obviously after some deliberation you have decided not to accept my offer of rent a chair/space (self employed) you have decided to seek pastures new”.

2. The complainant was paid out her notice, and she lodged a retrenchment claim against her store account protection plan policy. The insurer repudiated the claim on the basis that the complainant had accepted voluntary retrenchment.

3. The complainant lodged a complaint with our office. She stated that

“My employer had given us options, that due to financial reasons I was unable to choose, which had left me with the only option that was retrenchment. I did not do it voluntarily, as it was the only option I was left with”.

4. In its response to our office the insurer stood by its decision, citing the paragraphs from the employer’s letter quoted above as justification, without further comment.

Discussion

5. The clause in the policy dealing with the retrenchment benefit stated as follows:

“In the event of the Insured being retrenched or made redundant by his/her employer during the period of insurance and the term of their work agreement and prior to the Insured’s 60th birthday, due to new technology, reorganisation by the employer, liquidation of the company and staff reductions, and which resulted in the Insured not earning any income for a continued unemployment period of 30 days, payment in one lump sum to [the store] on the account, subject to the sum insured”.

6. The insurer’s liability was excluded

“… if the Insured comes to the expected end of a fixed term contract, is a contract worker, finishes the job he/she was specifically employed to do, resigns, retires or accepts voluntary retrenchment”.

7. We wrote to the insurer stating our view that offering employees an option to pay rent for space in its premises thereby to become self-employed was not an offer of continued employment with the employer. Declining an offer to rent space could not therefore be seen as voluntary retrenchment.

8. It was clear from the employer’s letter that it was the economic climate that had led to her decision to close the business. As a result of this situation the employees were faced with involuntary unemployment, as a direct result of the liquidation of the company, resulting in staff reductions (in that the employment of all staff was to be terminated).

9. We did not believe it could be said that the termination of the complainant’s employment in these circumstances was voluntary; rather it appeared that the reason for the termination was retrenchment/redundancy, occasioned by the liquidation of the company. We asked the insurer to reconsider.

Result

10. The insurer accepted our approach and paid the claim.

SM
February 2013

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