Insurers must investigate revocations in the case of third part policy holders

Insurers must investigate revocations in the case of third part policy holders

By Insurance24

HARARE, Insurers must investigate revocations in the case of third part policy holders to avoid paying claims twice, insurance 24 has learnt.

This was revealed by Gill, Godlonton and Gerrans Partner, Hebert Mutasa last week while he was presenting a paper on the Insurers Obligations in Relationship to Stipulations Made in Respect of Third Parties-Life and Motor Vehicle Insurance.

“Insurers must investigate revocations before the purported revocation and before making payment otherwise you will be caught in a situation where you will have to pay payment twice,” he said.

Mutasa said at an Insurance Institute of Zimbabwe (IIZ) of Zimbabwe conference in Nyanga that it was critical for the insurer to understand that as a basic principle, the right to revoke the nomination of a beneficiary is not only restricted to the policy holder.

“…but, may extend to his successors title except the executor of his estate can also revoke nomination,” he said.

Mutasa said if an insurer pays to beneficiary who is not a true beneficiary he would not have discharged his obligation in terms of that policy.

It is imperative, he said for an insurer to understand principles related to the invocation of nomination and those principles should be examined

“Nomination can be revoked whether expressly or by conduct. If its express revocation there is no problem because in that instance the policy holder would have given notification to the insure to say I’m revoking the nomination .Proceed to pay so and so the problem come when its tacit revocation,’ he said.

Mutasa added that before venturing to pay in terms of a life policy with a nominated third party, Insurers should ensure that the nomination is valid and the sense that it has not been revoked at the time of acceptance by the nominee and whether there is a willingness to revoke.

“If you are an insurer you may be presented with a situation where it is clear that the policy is saying one thing and the conduct of the policy holder is showing some sort of revocation.

In a case where the policy holder is showing some sort of revocation it within the insurers prerogative to say although the policy is saying policy revocation should be communicated I’m satisfied this scenario in the absence of a revocation of a formal revocation I’m inclined to accept that the nomination has been revoked. It is not an easy decision to make. The safest route would be for an insurer to withhold payment and invoke some procedural irregularities from the court,’ he said.

In respect of claims arising from damages to the insured property including insured motor vehicle ,Mutasa said the standard extension clause has been construed as not providing indemnity to the authorized driver in respect of damage to such property arising
from the drivers wrongful action while driving the insured motor vehicle.

“This position is premised on the basis that the standard extension clause expressly excludes such property. An insurer exercising its subrogation rights will therefore entitled to recover
damages against the driver in respect of the damaged insurer’s
property,” he said.

But it has to be emphasized that the construction to be accorded to such clause will depend on the precise wording of the clause concerned,”

He therefore said the plain question that is associated with the scope of the extension clauses is whether or not the authorized driver is indemnified against claims arising from bodily injury or damage to the insured property arising from his negligence.
Scope of extension clauses
Mutasa said this is the area which has posed some considerable difficulty particularly to the extent that it affect the insurers subrogation rights the authorized driver where such driver has
wrongfully caused bodily injury to or the death of the insurer or damage to his property, including the insured motor vehicle.

“The standard extension clause will contain a declaration to the effect that the insurer will not only indemnify the insured against liability to third parties but also any person who drives or uses the insured motor vehicle with the consent of the insured,” he said..