Those bloody insurance policies!
01 March 2014
The old Roman-Dutch law maxim de bloedige hand neemt geen erf has been adhered to in South African law for many years. It has found application in various spheres, such as the law of succession, criminal law and insurance law. In its most basic form, this maxim essentially means that no person may benefit from their own unlawful act. When this principle is applied to the realm of insurance law, it means that when a beneficiary under a life insurance policy has caused the death of the life insured, that beneficiary may not receive the proceeds of the policy.
One of the bases for this prohibition is founded in public policy, as illustrated by the case of Danielz NO v De Wet & Another, 2008 JDR 0726 (C). Mrs De Wet, the beneficiary under her husband’s life insurance policies hired a number of unsavoury characters to “teach him (Mr De Wet) a lesson”. Unfortunately and unforeseen by Mrs De Wet, Mr De Wet was killed instead of being "taught a lesson”. Mrs De Wet was eventually convicted of conspiracy to assault with the intention to do grievous bodily harm, due to her lack of intention to kill her husband. When assessing Mrs De Wet’s claim that she was entitled to benefit from Mr De Wet’s life insurance policies (as her intention was never to kill him), the court held that public policy would strongly militate against her claim. The court held specifically that:
"In no civilised society should a person who deliberately and in a premeditated manner planned and participated in a vicious assault, which ultimately caused the death of the deceased, benefit from the consequences of his/her actions - even if those consequences were unforeseen."
This case neatly illustrates the application of the bloedige hand principle in the context of the life insurance sector.
However, what happens when the life insured commits suicide? Are the beneficiaries entitled to the proceeds of the policies on the insured’s life even though he/she intentionally brought about the risk insured against? In this instance, regard must be had to the terms of the insurance contract, and the interpretation of those terms with reference to the intentions of both parties. Should the insurance contract specifically exclude the insurer’s liability upon the suicide of the insured, obviously no payment will be made to the beneficiaries. However, it has become common practice in the life insurance industry to include a so-called exclusion clause in insurance contracts (see for example Nicolaisen v Permanente Lewenversekeringsmaatskappy Bpk,  4 All SA 76).
Such an exclusion clause usually provides that if the insured commits suicide within two years of the conclusion of the insurance contract, the insurer is exempt from payment of the policy. On the other hand, if the suicide occurs after the two year period has elapsed, the insurer would be liable for payment of the policy.
What would happen if the above two scenarios coincide? In other words, if an insured commits suicide and the beneficiaries under the policy are suspected to be involved in that suicide, is the insurer liable to pay in terms of the life insurance contract? Obviously, if the suicide occurred within the two year exclusion period, the insurer would be exempt from paying the policy benefits. But if the suicide occurs after the two year exclusion period, the insurer cannot repudiate the claim. Should the beneficiary be involved in the suicide of the insured, that beneficiary would be precluded from receiving any proceeds of the insured’s life policy. This would go back to the bloedige hand principle discussed earlier. However, what remedies are available to the insurer if it suspects that the beneficiary is involved in the insured’s suicide, and thus precluded from benefiting in terms of the policy?
In Du Toit v Standard General Insurance Company Limited (1994 (1) SA 682 (W), Mr Du Toit was the beneficiary in terms of two policies over the life of his wife. The policies were taken out in April and May of 1992. In June 1992, his wife was murdered under suspicious circumstances. Each policy required that the “[insurance] company requires satisfactory proof of the following: the circumstances giving rise to the benefits . . .” before the policy would respond. Eventually, an application was brought to compel payment by the insurers in terms of the policies. The court held, inter alia, that:
“that the respondent (the insurer) had to be afforded an objectively reasonable period in order to inform itself of all relevant facts which could influence the question whether the applicant (the beneficiary) had supplied satisfactory proof of the circumstances giving rise to his claim”.
The court then went further and confirmed this principle by stating:
“In requiring proofs, however, or in deciding whether the proofs given are sufficient, the insurers cannot act capriciously, unreasonably, or unjustly, by requiring evidence which is not necessary to satisfy them on any reasonable view of the case. It is sufficient if the assured lays before them evidence with which reasonable men would be satisfied, and it is unnecessary to show that the insurers have been, in fact, satisfied.”
It therefore becomes clear that when an insurer suspects that a beneficiary may be involved in the death (be it suicide or not) of the insured, it must be afforded an objectively reasonable time to investigate the circumstances surrounding the insured’s death. The time it takes the insurer to investigate the circumstances surrounding the insured’s death is thus an objective question, determined with reference to the factual circumstances. It is clear from the Du Toit case that the insurer must be afforded an objectively reasonable time to investigate, but that it cannot unreasonably delay payment of the proceeds of the policy while doing the investigation. Each case would depend on its own merits. It is clear, however, that the insurer is not forced to pay out without doing further investigations where it suspects foul play on the part of the beneficiary. The insurer does, however, need to ensure that these investigations do not unduly and unreasonably delay the payment of the policy benefit.