Life insurance on lines of credit denied

Mrs. A's husband passed away in 2008 leaving her the sole beneficiary of his estate. After his passing, Mrs. A submitted life insurance claims for $88,000 covering the two lines of credit (LOC) that her late husband had taken out in 2000 at their bank.

The bank declined Mrs. A's claim. It based its decision on two documents called “waivers" that had apparently been signed by Mrs. A's husband back in 2000 through which he declined life insurance coverage on the LOCs. Despite these waivers, however, the bank had withdrawn monthly premiums from the husband's account since 2000, totalling $8,000. The bank advised there was no insurance in place and the payments were taken in error. They agreed to refund all payments to Mrs. A, but not honour the insurance claim. However, based on the regular premium payments being taken over the past eight years, Mrs. A firmly believed that life insurance had been in place on the lines of credit. Mrs. A escalated her complaint to OBSI.

Complaint upheld

During our investigation, we were able to determine that the signatures appearing on the waivers were most likely genuine and had been obtained on the same date as the LOCs were set up. Mrs. A did not challenge this.

However, the existence of signed waivers did not preclude the possibility that subsequent life insurance coverage was obtained on the LOCs. We raised this question as our review showed that it was typical for Mr. A to have life insurance coverage on all his other credit products. In addition, his account statements showed that the bank had started to take out life insurance premiums from his account right after the LOCs were set up. We also reviewed evidence that Mr. A conscientiously monitored his life insurance premium payments every month. Documentation retrieved by his estate also showed that Mr. A was considered insured within the bank's system as certain correspondence addressed to him referred to his LOCs as being insured.

Under these circumstances we concluded that, despite the existence of the waivers, the bank's actions through premium withdrawals and affirmative correspondence over an extensive period of eight years led Mr. and Mrs. A to believe that the two LOCs were life insured. In all fairness, we felt Mrs. A's claim should be granted. After further consideration, the bank agreed and fully paid the claim of $88,000.

(2010)