Law and Courts III

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Client's repudiation of original Policy in migration to another Insurance

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On 23 August 2018, and unbeknown to the Appellant, the client instructed her banker to stop the payment of the debit order in respect of the premium due under the policy for September 2018. On 10 September 2018, the Appellant advised the client in writing that her policy had been cancelled with effect from 1 September 2018 and she was further advised as to procedural steps should she wish to reinstate her policy. On the same date, the Appellant also sent the client a text message on her cellular phone advising her that her policy had been cancelled. Briefly, the respondents attempted to re-instate the policy but a letter was sent from the Appellant, the gist of it read, the Appellant required a fully completed and signed declaration on a ‘health by all lives assured’ form. On 25 July 2019, the respondents launched an application in the High Court for payment of the proceeds of the policy with interest. The High Court found in favour of the claimants and the then Respondent but Appellant in this case, appealed to the Supreme Court of Appeal. The facts were as follows - On 6 August 2018, the Appellant's client had made it clear that she wanted to move her policy; to ensure that the policy would be cancelled, she instructed her bank on 23 August 2018 not to pay the premium that was due on 3 September 2018. When the Appellant wrote to the client on 28 August 2018, advising her that the policy would come to an end on 1 October 2018 it was oblivious to the fact that the client had had instructed her bank not to pay the premium and she had no intention of honouring the terms of the policy which required her to give a month’s notice. Thus, one can accept that she had deliberately repudiated her policy. . . . .The test is whether such a notional reasonable person would conclude that proper performance (in accordance with a true interpretation of the agreement) will not be forthcoming and the insuperable hurdle confronting the Respondents was that the Appellant's client had been informed by the Appellant at least twice, that she was contractually bound to give 30 days' notice if she wished to cancel her policy. Did the Appellant have an obligation to advise the client of the unpaid debit order prior to cancelling the policy and afford her 30 days within which to pay the arrear premium.. The honourable Court held the thirty-day grace period for an unpaid premium in the policy does not apply in cases where the cancellation resulted from repudiation by the insured herself of the policy. The client's policy was cancelled not for the non-payment of premium per se but because the Appellant elected to accept the client's repudiation of the contract.
Vide Discovery Life Limited v Hogan and Another (389/2020) [2021] ZASCA 79 (11 June 2021); see paras 16-17 for citations and precedence. Company Law Today - This facts of this case serve as a warning that care ought to be taken to ensure the cover of the policy being cancelled survives to at least the day on which the cover under the replacement policy commences.
On 4 December 2015 the client took out a life plan insurance policy contract (the policy) with the Appellant. The policy insured her life for R3 million and was due to escalate until the date of the occurrence of the insured event, being her death. The policy commenced from 1 January 2016. In a telephone conversation on 6 August 2018 with an employee of the Appellant, the client advised that she would cancel the policy as she was moving over to another Insurance company. Unfortunately, while on holiday at the Sani Pass Lodge she was overcome by carbon monoxide fumes from a faulty geyser in the showers, collapsed and died. The proceedings were brought by her parents, the respondents as the nominated beneficiaries under the insurance policy. On 15 August 2018 previously, the client had written to the Appellant and said that she was cancelling the policy with immediate effect and a day later, the Appellant had advised her broker by letter that the policy would be cancelled as per her request, with effect from 1 October 2018, the last day of cover being 30 September 2018, with the final premium payable on 3 September 2018 and the cancellation was subject to 30 calendar days’ notice period.
Brief Summary