Family to sue Momentum for R100 million
- Posted by Roger Hendricks
- On 03/09/2016
- 0 Comments
In what could be one of the biggest battles over a repudiated assurance claim in South African history, the family of the founder of Cozens Recruitment Services, Ladragh Cozens, is planning to sue Momentum Life for more than R100 million. Cozens died last year after suffering a heart attack.
Momentum has repaid all the premiums, less costs, of four policies on the life of Cozens, but it has told the family and Cozens Recruitment that it will not pay the benefits of any of the policies.
Michel Gunko, Cozens’s husband of 15 years and the managing director of Cozens Recruitment for the past 19 years, has accused Momentum of acting in bad faith, because it agreed to provide Cozens with life assurance and accepted premiums but then conducted an investigation after her death that resulted in the repudiation of the policies.
Momentum has apparently repudiated the policies on the basis that Cozens did not disclose important medical information that would have affected the company’s decision to insure her. This is disputed by her husband.
Gunko says: “When Ladragh took out the policies, she did disclose the fact that she consumed alcohol. I stand to be corrected, but I am quite certain she noted the amount of tots of whiskey she drank per day on the insurance form, as well as disclosing her use of sleeping pills.
“This was further disclosed during updates on the policy, when a doctor working for Momentum did Ladragh’s physical, and Ladragh disclosed this information then, too.
“I am of the opinion that Momentum should have done their homework when she applied for the policies and not upon her demise.
“What we have since discovered is that Momentum only ran a thorough investigation into Ladragh’s health and medical background at the claim stage and not at inception, signing-on stage. This was also confirmed by our then Momentum consultant.”
Gunko says the adviser who sold the life policies has left the employment of Momentum because of how the claims has been handled.
Four Momentum Myriad policies were taken out on the life of Cozens between 2008 and 2011:
* A buy-and-sell agreement valued at R55 million, which covered the death of either Gunko or Cozens, to allow for the purchase of the shares in the business by either Gunko or Cozens on the death of the other party. Gunko says the two policies involved were updated every year without Momentum requesting further information.
* Keyman cover. This policy was owned by Cozens Recruitment Services and insured Cozens for R10 million. Gunko says the value of the benefit was based on a business needs analysis and the proceeds from the policy would ensure the smooth running of the business from a cash flow perspective.
He says that, as is the case with most businesses, the recruitment agency has an overdraft facility and the policy benefit would cover the overdraft.
“When we took out the policy, we were promised that we would receive the funds within 48 hours of Ladragh’s demise. We received another long story from Momentum. It stated it cannot pay out on the keyman policy, as this would mean that they would be admitting liability on the other policies,” Gunko says.
* A life assurance policy valued at R38 million, with the benefit split equally between Gunko and Cozens’s three children.
Gunko says the benefit was “based on the comprehensive needs analysis done on personal estate requirements. Ladragh wanted to ensure that the children and myself were well looked after upon her demise. She wanted to ensure that her children and I continued to live comfortably in the way she was able to provide for while she was still alive.”
* Mortgage bond assurance that would pay the outstanding bond of about R3 million on a property that was owned by Cape Saffron Trust – the entity that owns the Cozens head office in Glenhove Road, Johannesburg.
Ashendran Padayachee, of Momentum Retail, says the mortality benefits on the policies were repudiated earlier this year on the legal and statutory grounds of material non-disclosure.
The premiums on the contracts, less costs, were refunded to the various parties who had paid them.
Padayachee says he cannot say why the claims were repudiated, because Momentum is limited by client confidentiality, which includes “sensitive medical and underwriting information in our possession”. The information cannot be provided to a third party.
“Momentum, in conjunction with its re-insurance partners, and in accordance with its underwriting and claims protocols, is satisfied with the decision to repudiate the respective claims for the mortality benefits on the life of the late Mrs LA Cozens,” Padayachee says.
A court date has not been set.
LIFE ASSURANCE HEALTH WARNING
When you take out a life assurance policy, it is imperative that you disclose any conditions that currently affect, or have previously affected, your health. A life assurance company sets the premium you pay by taking into account the risks it believes it will face in paying out a claim.
For example, if you suffer from a heart condition, the assurer may charge you a higher-than-average premium and/or exclude death and disability cover for a heart attack, or simply refuse to provide you with cover. If you do not disclose your heart condition to avoid paying a higher premium or having an exclusion added to your policy, the life assurance company is entitled to refuse to pay a benefit in the event of a claim.
The result is that the very people whom you sought to protect in the event of your premature death or disability are left financially exposed.
The disclosure requirements include stating if you have a dangerous hobby, such as sky-diving, or a high-risk occupation, such as deep-sea diving for diamonds.
You must read your policy document carefully and ensure you understand all the grounds on which the life company could reject a claim. For example, the policy could contain a clause that requires you to notify the life assurer if you change your occupation or start smoking. Your policy may also entitle you to a reduced premium if you stop smoking.
All disclosures must be made in writing.
Life assurance companies often check only at claims stage whether or not all the required disclosures were made.
By: Bruce Cameron