Life insurers may issue a death benefit policy that maybe owned by the life insured, a joint tenant, a trust, (whether a superannuation fund or other trusts), a corporate entity or other legal entities.
Upon the death of the insured the insurer must make payment in accordance with the terms of the policy document to the policy owner. Similarly the policy owner must make payment to the ultimate beneficiary or member of the superannuation as outlined in the governing terms of the policy owner’s governing rules.
In circumstances where the death of the insured maybe deemed “suspicious” a Life Insurer may attempt to withhold or delay payment. Whether the insurer is entitled to withhold or delay payment depends upon the terms of the life insurance policy.
Similarly the policy owner may attempt to withhold or delay payment in “suspicious circumstances” Whether the policy owner is entitled to withhold or delay payment depends upon the policy owners governing rules.
There is also an overlapping implication that where a person is criminally responsible for a death of another and they stand to benefit from the victim, they are prevented from benefiting from the victim.
Forfeiture of Benefits
The forfeiture rule applies even to those who have not been convicted of killing a person, but are found in a civil proceeding to have killed someone on the balance of probabilities. Further, the rule applies to crimes ‘less than murder’, for example, where the victim’s death was unintentional or unforseen. In NSW Forfeiture Act 1995 (Act) seeks to embody the common law ‘forfeiture rule’. Similar acts appear in other Australian states.
In New South Wales the Act gives the Supreme Court the power and discretion, where justice requires it, to modify the application of the rule. Further, the Confiscation of Proceeds of Crime Amendment Act now also provides for forfeiture application orders in New South Wales. A party may apply to the Supreme Court in respect to a having an offender forfeit a benefit due to them.
Section 3 of the Act defines a benefit to which the act applies as being any interest in property and any entitlement under Chapter 3 of the Succession Act 2006. Chapter 3 of the Succession Act 2006 includes reference to property that falls outside a deceased estate, being the deceased’s notional estate, including life insurance proceeds paid outside of the estate.
Implications on Insurance Death Benefit Payments
Given the application of the Forfeiture Act, insurers may delay payment of death benefit proceeds in circumstances whereby the death of the policy holder is not straightforward (for example absence of cause of death on the death certificate) or surrounded by suspicious circumstances involving the nominated beneficiary.
The Insurer is not entitled to make no payment of a death benefit where there is not an express exception in the policy as this would necessary lead to the insurer being unjustly enriched. Under the terms of a life insurance policy an insurer must make payment of the benefit upon the death of the insured. Therefore once the insurer has been provided with sufficient evidence to prove the death of the insured, for instance a death certificate with cause of death and, in certain circumstances, a coroner’s report, and the insurer must make payment to the policy owner.
However insurers have been known to withhold payment of a benefit to a beneficiary and request further documentation such as police reports and/or hospital reports in order to satisfy queries they may have relating to potential involvement of a beneficiary. On many occasions this is may be seen as a ‘fishing expedition’ by an insurer looking for reasons not to make payment of a benefit due. Whether an insurer is entitled to withhold payment subject to the receipt of extra documentation is entirely dependent upon the structure of the policy definition.
If, under the policy document, the insurer must make payment of benefit upon the death of the policy holder, then there is little scope for the insurer to request further materials. Delays caused by the insurer withholding payment of a benefit due can cause unnecessary hardship for the intended beneficiary. In circumstances involving the death of income earner, the surviving spouse may be left with large bills and costs of caring for children with little or no income.
Nevertheless Insurers have been known to delay releasing benefits and trying to claim the delay is justified under terms of the policy. In one instance an insurer tried to claim that there action was justified citing a Total and Permanent Disablement term of the policy, when the claim was for a death benefit. It is therefore necessary to have a legal practitioner review your claim to determine whether any delays on behalf of the insurer are justified and/or permitted under the policy.
If an insurer has suspicions in respect to circumstances surrounding the death of a policy holder and a beneficiary’s involvement then they must look beyond the policy document, if there are no provisions in respect to withholding payment and seek orders from the Court.
At Pavuk Legal we are able to review your claim with an insurer and advise you as to what requirements you must meet to ensure that the insurer makes payment of any benefit due is paid expediously. We are able to ensure that the insurer does not cause any unnecessary delays to making payment so that you are not left facing unwarranted financial hardship. We are able to ensure that any claim is processed quickly and trouble free.
Pavuk Legal Insurance Claim Management
Business Lawyers Sydney at Pavuk Legal we are able to advise you on any obligations you may have to the insurer and ensure that your claim is processed as quickly as possible. We will eliminate the stress associated with making life insurance claims during what is often a difficult period after the loss of a family member or close friend.
Pavuk Legal can also assist you with a full range of legal services in respect to any other insurance claim including Total & Permanent Disability claims and Income Protection claims.
Many other essential hot topics for business owners is all found in the book Nobody Else’s Business. Nobody Else’s Business is about helping business owners live the life they want to live, now and in the future. It is the ultimate guidebook for succession planning of modern Australian businesses.
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