Ownership of NZ insurance claims could be in doubt

by Maryvonne Gray 11 Feb 2014

Ownership of NZ insurance claims could be in doubt

Family fall-outs and badly worded wills could prevent the benefits of Christchurch earthquake insurance claims going to the right person, a top New Zealand law firm has warned.

As the gap between claims being filed and claims being settled grows, the chances of a policyholder dying in that time is increasing, David Dingwall, of Wynn Williams Lawyers, told Insurance Business.

“The consequences could be devastating to the widow whose late husband has already arranged and paid for repairs out of joint savings, in reliance of later receiving a cash settlement from EQC and/or their private insurer, only for half of those insurance proceeds to fall to one or more unyielding successors after his death,” he said.

“Still worse is the situation in which it is discovered that the late husband was the only one named on the insurance policy.”
Dingwall said the key thing was never to assume and Cantabrians would be wise to verify how their property is owned, and ensure that is consistent with their insurance policies and wills.

“An insurance policy in two names will not necessarily mean the policy is held jointly,” he said. “So if the insured is named as Mr X and Mrs X, without more, the policy is deemed under written severally. The relevant policy is the one on foot when the events happen.

“The combination of these facts means that should Mr X pass away, his rights under a pre-existing claim continue, and Mrs X might not receive the benefit of them, despite their intentions.”

Unless a will provides otherwise, which is unlikely, rights under an insurance claim will pass to the residue of the deceased insured’s estate, Dingwall said.

“This scenario is problematic where the residuary beneficiary of the estate is not the person who takes ownership of the property, either by survivorship or by will.

“For example, it may be that the deceased’s spouse takes ownership of the property, but the benefit of the insurance claim relating to that property falls to their children, or grandchildren, or even a third party.

“While the potential for this scenario may seem relatively low,” he added, “as Cantabrians grow older waiting for settlement of their claims the conditions are ripe for that potential to increase.”