Insurance Law
| Date | 01 December 2006 |
| Published date | 01 December 2006 |
| Author | LEE Kiat Seng LLB (Hons) (National University of Singapore); LLM (Maritime Law) (London); Advocate and Solicitor (Singapore); Adjunct Associate Professor, Faculty of Law, National University of Singapore. |
| Citation | (2006) 7 SAL Ann Rev 309 |
16.1 One question which has never been the subject of judicial deliberation is that of the exact ambit of s 61(1) of the Insurance Act (Cap 142, 2002 Rev Ed). Section 61(1) reads:
In any case where the policy owner of any life policy or accident and health policy of an insurer dies, and the policy moneys are payable thereunder on his death, the insurer may make payment to any proper claimant a prescribed amount of the policy moneys of all such policies issued by the insurer on the deceased”s life without the production of any probate or letters of administration; and the insurers shall be discharged from all liability in respect of the amount paid.
16.2 A ‘proper claimant’ as used above is defined in s 61(6)(b) to mean ‘a person who claims to be entitled to the sums in question as executor of the deceased, or who claims to be entitled to that sum (whether for his own benefit or not) and is the widower, widow, parent, child, brother, sister, nephew or niece of the deceased’.
16.3 The question which arises of s 61(1) is: What is the ambit of the provision? Whatever else may be the aim of this provision, is it one which can only be invoked by the insurers, or may any ‘proper claimant’ compel the insurer to pay out the policy moneys?
16.4 The case of Vaswani Roshni Anilkumar v Vaswani Lalchand Challaram[2006] 2 SLR 257 brought up the uneasy relationship between s 61(1) and the practice of insurance companies allowing policyholders of life and accident policies to nominate their beneficiaries.
16.5 The contest was between the nominated beneficiaries under the policies and the beneficiary of the deceased”s estate.
16.6 The facts are simple. The deceased had, prior to his marriage, purchased three policies. His father had been nominated as beneficiary under the first policy. Both his parents were named as beneficiaries under the second and third policies. Upon the death of the deceased, the insurer was prepared to pay out under the above policies to the parents of the deceased as named beneficiaries. A complication, however, arose: the deceased”s widow staked a claim on these moneys on the basis that since the deceased had died intestate, she was entitled to half the deceased”s estate under the Intestate Succession Act (Cap 146, 1985 Rev Ed) and this would include any moneys payable under any of the deceased”s policies.
16.7 This contest between the named beneficiaries under the policies and the widow of the deceased, took the parties from the District Court all the way up to the Court of Appeal.
16.8 The nominated beneficiaries commenced proceedings against the widow in the District Court. The court held in favour of the nominated beneficiaries. The widow appealed to the High Court, where again the court ruled against her. The decision of the High Court was that these moneys did not form part of the estate of the deceased and the insurer would obtain a valid discharge if it paid the moneys out to the nominated beneficiaries. Further, the administrator of the estate would also have been entitled to demand payment of the policy moneys and would then have to distribute such moneys to the persons entitled to them. The widow then appealed to the Court of Appeal.
16.9 The Court of Appeal was very clear in its pronouncement — that there was no legislation which addressed this issue of competing claims to insurance moneys where the deceased had nominated beneficiaries under the policy. Section 73 of the Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) did not apply in this situation as the situation would attract the application of the provision only if the named beneficiaries were the insured”s wife or children.
16.10 The court laid down its view of s 61(1) of the Insurance Act: this provision was not meant to deal with competing claims. The aim of the provision was to facilitate and expedite payment by an insurer to a ‘proper claimant’ without the need for the claimant to first obtain letters of
administration. Furthermore, s 61(1) only applied where there were no named beneficiaries or where the deceased had stated that the moneys should go to his estate. In either event, the proper recipient would have been the estate.
16.11 The Court of Appeal addressed the issue of what the effect of an insured person nominating a beneficiary in his policy was. The court held that the insured by so doing could be taken to have expressly authorised the insurer to make payment to such named beneficiary.
16.12 The argument of the widow that the estate was entitled to receive the moneys was premised upon the fact that the executors of an estate normally had the locus standi to sue on the deceased”s rights. However, the court ruled that this reasoning was flawed as it only answered the question of who was entitled to sue under the policy, ie, the privity of contract issue. It, however, left open the question of who was entitled to the moneys.
16.13 The unusual conclusion that the Court of Appeal came to was thus:
(a) the named beneficiaries were not entitled to bring an action against the insurer as they were not privy to the contracts of insurance;
(b) the estate was not entitled to the moneys because the terms of the contracts of insurance stipulated that the insurer had to pay to the named beneficiaries;
(c) however, the insurer was entitled to make payment to the named beneficiaries since this would accord with the terms of the contracts of insurance; by such act, the insurer would have discharged its contractual obligations.
16.14 The Court of Appeal made one more important observation. Although each policy under consideration had a recital which stated that ‘the company will pay to the Assured, his Personal Representative or Assigns or persons otherwise entitled thereto the sum assured’, the court was of the view that this would only apply if there had been no named beneficiaries and, consequently, payment was to be made to the estate. This is akin to the situation contemplated by s 61(1) of the Insurance Act.
16.15 The first thing which is clear from the case is that s 61(1) of the Insurance Act only applies where there is no named beneficiary under the contract of insurance.
16.16 The second thing which would go some way in mitigating the unfortunate consequence of this decision is the advent of the Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed).
16.17 The court had ruled that even though the insurer would have discharged its contractual duties if it had paid out the moneys according to the directions of the insured, by way of his nominating the beneficiaries under the policy, such named beneficiaries would, nonetheless, have been powerless to do anything about those directions. This is simply due to their lack of privity. Even though it may have been intended for them to benefit under the contracts and both the insurer and the beneficiaries are aware of that intention, the beneficiaries have no right to enforce the contractual terms since they are not party to the contracts.
16.18 This, however...
To continue reading
Request your trial