Chapter 9 - Claims and title to life policies

9.1 When a contractual obligation is released and the contract (such as a life policy) brought to an end it is said to be 'discharged'. Discharge of a contract usually takes place in one of the following ways:

The obligations under a life assurance policy may be terminated in any one of such ways.

9.6 Much will depend on the type of life policy in question. Endowment life policies will be payable to the policyholder on survival of the life assured to the end of the term or to his executors or administrators (personal representatives) on proof of his death during the term of the policy. Whole of life policies will also be payable on death to the personal representatives on proof of title (by the grant of representation) or to the policyholder himself on surrender or encashment. Payment to the policyholder is more likely for investment orientated whole of life policies such as 'Investment Bonds'. Term or temporary policies will only ever be payable to the personal representatives (or the policy will expire where the life assured survives until the end of the term). In all the above cases payment will be subject to proof of title, and of age where that is required. The above examples assume that the policyholder and life assured are the same person. Of course the policyholder may be some other 'successor in title' such as assignees or trustees of a trust which the policy was subject to. So for policies subject to trust or which have been assigned, payment on death of the life assured (or on surrender) would be made to the trustees or assignees and not to the personal representatives..

By making payment to the person entitled , the life office is discharged or released from its obligations under the contract. If the life office pays to the wrong person it will not have discharged its liability under the contract. The term 'discharge' is often used loosely to refer to what is in fact a receipt which is merely evidence of payment of money. However, a formal receipt may be combined in one document with a discharge of all claims under the policy.

The policy terms are likely to contain provisions on how notice of a claim is to be given to the life office. Usually this must be given in writing^[8]. The notice is likely to have to be given to the life office at a specified address. Generally, with life assurance the time at which a claim is made is not normally as important as under, for example, general insurance or indemnity-based insurance and so a specific time limit for a claim is not common. However, it is possible to envisage situations where making a claim within a certain time period could be important, for example non-disclosure of a known medical condition where the passing of time may mean that vital evidence is no longer available. On receipt of notice, the life office will normally require the completion of a standard claim form or discharge form. This will usually provide for an acknowledgement by the claimant that he will have no further claims against the life office in respect of that benefit. It may go further and contain an indemnity in favour of the life office regarding any subsequent claims by third parties (although see 9.5 above). Clearly, the life office will not be protected where it can be shown that it was aware that it was not paying to the correct person.

The position of partial surrenders or withdrawals must also be considered as the remainder of the policy will continue in force. Some types of contracts expressly provide for the policyholder to take partial surrenders or withdrawals (usually investment bonds). There are likely to be terms relating to the method of withdrawal, level of withdrawals and the residual value of the policy and other matters so it is important to have regard to the precise contractual terms. It is also important to consider the taxation consequences of partial withdrawals (see further Chapter 13).

9.7 A life office may only safely pay policy moneys to the person or persons entitled to them . The life office should always obtain its discharge by paying the person entitled to sue at law for the policy moneys, or some person properly authorised by him to receive them. If the office accepts anything less than the discharge of the person entitled to sue at law, then it stands the risk of having to pay out twice on the policy. The person entitled to suewill either be the original policyholder (ie the person with whom the contract was made by the life office, known also as the 'grantee' or 'assured'), or his personal representatives; but may be his trustee in bankruptcy, or the trustees under a Married Women's Property Act policy^[9], or the trustees of a trust declared in respect of the life policy, or a legal assignee of whose assignment the office has received notice, or a mortgagee. An appropriate payee may also be an attorney under a general or lasting power of attorney or a deputy under a Court of Protection Order. The life office should not pay an equitable assignee without the agreement of the person entitled at law to sue. Where the office has notice of an equitable interest (other than a beneficiary's interest under a trust, will or on intestacy and other than the equity of redemption under a mortgage) the person entitled to such interest should be required to join in with the legal owner before the life office makes payment.

If the policy is expressed to be payable to a third party (ie some person other than the policyholder), such a person may not have the right to sue and the policyholder (or his successors in title) alone may have the right to enforce the contract^[10]. This is subject to the Contracts (Rights of Third Parties) Act 1999, depending on whether the provisions of the Act have been expressly excluded. Assuming it has not been excluded the policy may be worded so that payment to the third party is an essential term of the contract, in which case the company can carry out the contract by paying him, and the carrying out of the contract will discharge it by performance^[11]. Although such a payment may be a good discharge to the life office, the person to whom the payment is made may have to account to the personal representatives of the policyholder. A person will not normally be able to sue on the policy unless it is executed by deed or the Contracts (Rights of Third Parties) Act 1999 has not been excluded and the contract gives benefits to the third party or expressly provides that he may enforce it. If the payee is merely an agent of the policyholder, his mandate may be withdrawn, and is normally withdrawn automatically by the policyholder's death. Therefore, if the policy is payable to a third party and payment to him is not expressed to be an essential part of the contract, the office should only pay to, or on the express authority of, the policyholder or those deriving title through him.

9.8 Formal discharges or authorities for payment by individuals are normally given under hand, ie signed by the said individuals and they need not be in the form of a deed.

Section 43 of the Companies Act 2006 provides that a company may contract by writing either under its common seal, or by any person acting under its express or implied authority. This Section also provides that the same formalities required by law in the case of a contract made by an individual also apply, unless a contrary intention appears, to a contract made by or on behalf of a company.

Therefore, where a company wishes to deal with a life office, for example if it wishes to insure an employee's life, the proposal form can simply be signed by an authorised signatory. The life office can always rely on Section 40 of the Companies Act 2006, whereby a third party acting in good faith with a director or a person authorised to act on behalf of the company will bind the company even if the action in question is ultra vires (beyond the powers of) the company.

Since 1989^[12], if a company wishes to execute a deed, it need not affix its common seal. Indeed, it need not even have such a seal. A deed signed by two authorised signatories (directors and/or, for a private company, the company secretary) or by one director in the presence of a witness and expressed to be executed by the company will have the same effect as if it had been executed under seal.

Where there is any doubt about the persons authorised to sign discharges on behalf of a company or corporation, the life office may either obtain a discharge under the company's seal, duly attested, or require evidence that the person signing is authorised to do so.

The Limited Liability Partnerships Act 2000 provided for the creation of limited liability partnerships (LLPs). The Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009^[13] apply the execution provisions applicable to companies to LLPs.

9.9 Regarding payment of claims by cheque, the Cheques Act 1992 provides that a cheque crossed and marked with the words 'account payee' or 'a/c payee', either with or without the word 'only', will not be transferable. Payment of a claim, whether by one sum or by instalments, may be made by cheque although it is becoming increasingly common for the policy moneys to be paid directly into the claimant's bank account.

In many cases the sum assured will be a fixed amount and so there is no question regarding the amount to be paid out. However, in other cases, for example with investment bonds, a calculation of benefits is required. With investment bonds, the death benefit may be expressed as, for example, 101% of the value of the units allocated to the contract, with the relevant value being taken as at the first valuation after notification of the death, but in all cases the precise terms of the policy would need to be examined.

It is unusual for the policy to provide for payment to be made at any particular time. Payment of benefits should normally be made within a reasonable time of the claim. If there is a need to investigate matters concerning the death and title to the policy this would obviously tend to extend the time between claim and payment.

When payment is made, any outstanding premiums will normally be deducted from the proceeds payable. Interest is likely to be payable on the policy proceeds either as the result of any relevant policy term or, if there is not one, life offices which are members of the Association of British Insurers would still ordinarily pay interest in accordance with the 'Long-Term Insurance: Statement of Normal Practice'. Essentially, this provided that the insurer will pay interest on claims delayed more than two months from the happening of the insured event (or for unit-linked policies from the cessation of the unit linking if later) unless the amount of such interest would be trivial. Interest is calculated at a relevant market rate from the end of the two-month period until the date of actual payment. For example, where there is a delay between death and the personal representatives obtaining a grant of probate, interest will be payable on the proceeds less any overdue premiums. A statement of account will be sent to the claimant explaining how the amount paid has been calculated.

In an Issues Paper published on 23 March, 2010, the English and Scottish Law Commissions expressed the view that insurers who delay paying valid claims should be liable to policyholders for any foreseeable losses they cause. Currently, even if payment of an insurance claim is delayed for years, the insured cannot claim compensation for any additional losses caused by that delay. However, this was stated to be unfair, biased and ignores commercial reality. The tentative solution is to amend the law so that policyholders would be able to claim damages in cases where an insurer acts in bad faith and to make insurers liable if they fail to pay a valid claim within a reasonable time. Although not a life assurance case the Court of Appeal in Sprung v Royal Insurance (UK) Ltd^[14] highlighted the perceived injustices in this area of the law. In this case it was decided that there can be no claim for consequential loss by an insured for breach of a contract of insurance.

9.17 Section 5 of the Limitation Act 1980 provides that all actions founded on a simple contract must be commenced within six years from the date when the cause of action arises. Therefore, any action to recover the sum assured under a life policy which has not been issued under seal should be brought within six years of the happening of the event upon which the benefits under the policy are expressed to be payable. Normally, the sum assured under a life policy is payable only after proof, satisfactory to the life office, of the death of the life assured and title to the policy (or simply title to the policy on maturity of an endowment assurance or surrender of a life policy) has been provided. As the proof required by the life office relating to death and title are wholly within the power of the claimant the operation of the Limitation Act 1980 is not suspended in the meantime. However, where an action is based on fraud or mistake the period of limitation only begins to run when the fraud, concealment or mistake is discovered, or could with reasonable diligence have been discovered^[29].

The relevant period during which an action must be brought is 12 years in the case of policies issued under seal^[30].

9.18 If, in the opinion of the board of directors of a life office, no sufficient discharge can be obtained in any other way, the life office may pay the policy moneys into court under the Life Assurance Companies (Payment into Court) Act 1896^[31]. The procedure for doing this is set out in Part 37 of the Civil Procedure Rules 1998 (Practice Direction – Miscellaneous Provisions about Payment into Court, paras 4 and 5). An office wishing to make payment into court must file an affidavit or witness statement made by its secretary or other authorised officer^[32]. The receipt or certificate of the proper officer of the court is a sufficient discharge to the life office for the moneys paid into court. Payment may not be made into court under the Act if any other action is pending in England in relation to the policy unless the court gives leave to do so. The office is required to give immediate notice of a payment into court to every person appearing to be entitled to the moneys or to have an interest in them. The life office cannot deduct from the policy moneys any costs of or incidental to the payment into court and must bear the costs of payment in.

By proceeding under the 1896 Act the life office obtains an absolute discharge against all claims present and future and not only, as in the case of interpleader proceedings, in respect of an existing conflict between rival claimants. Payment into court therefore offers a remedy when the office faces the problem that the person legally entitled or the person who has given notice of his equitable claim cannot be ascertained or traced or where, perhaps, the title is unclear or unsatisfactory. For example, the identity of an assignee is not clear from a deed of assignment. Where the office claims a charge or other interest in the policy moneys it should deduct the amount it claims, paying only the balance into court. Payment in of the whole amount may be taken as an admission by the office that it has no claim on the moneys in court.

The life office must bear the costs of payment in, unless it has agreed with the claimants that they will bear the costs. The office will not normally have to bear the costs of a subsequent application for payment out unless the original payment into court was not reasonable. The advantage to the life office is that it will avoid the cost of deciding the issue of entitlement as between competing claimants. Although possible, it should rarely be necessary to pay into court solely on the ground of the loss of policy documents unless conflicting claims to the policy are also being made and cannot be reconciled.

9.19 Where the life office could be sued in different countries (eg England and Scotland) payment into court in one action is not an absolute bar to proceedings in the other country. However, generally, if payment into court is made in the country in which the claim is payable, the court in the other country would not allow proceedings to continue until there had been an adjudication on the claim against the moneys paid in.

The Life Assurance Companies (Payment into Court) Act 1896 applies to Northern Ireland but does not apply to Scotland. The office faced there with competing claims on the policy may be able to raise an action of multiplepoinding in the Court of Session. This process is similar to interpleader proceedings in England. It is only available when the policy money has become payable and the office admits liability to pay to the person or persons entitled. The only interest of the life office must be that of obtaining a discharge and there must be conflicting claims to the proceeds (the 'fund in medio'). The procedure of multiplepoinding is not available where the inability to obtain a discharge arises from the inability to find a claimant or from some doubt as to the validity of the title produced by a sole claimant.

9.20 Policy proceeds arising on death are usually made payable when proof satisfactory to the life office has been submitted of the death of the life assured and of the title of the claimant. Death must be proved by such evidence as the life office requires but its demands for proof must not be unreasonable – which will be a question of fact in the circumstances of the particular case^[33]. It should be borne in mind that the life office is often being asked to pay out considerable sums of money hence it not being unreasonable to require a commensurate level of proof.

Death must be proved by:

In practice proof is usually provided in accordance with (2) above.

Generally, where a death claim arises under a life policy, an official certificate of death (ie a certified copy of the entry of death in an official register) should be produced to the life office. A certified copy of an entry, made in the General Register Office and bearing the seal or stamp of that office is, under Section 34(6) of the Births and Deaths Registration Act 1953, sufficient evidence of death without any other proof of entry. In Scotland the relevant provisions are contained in the Registration of Births, Deaths and Marriages (Scotland) Act 1965. In Northern Ireland the provisions of the Births and Deaths Registration (Northern Ireland) Order 1976 are the governing provisions.

9.21 In practice an official copy death certificate issued by a local Registrar is normally accepted. Because of the ease with which it is possible to produce falsified reproductions of death certificates by photographic or similar means, copy death certificates should not be accepted. Furthermore, from January 2001 the position with regard to copy certificates (whether for death, marriage or birth) was clarified so that the Crown now assert copyright over such documents so that only originals can be used unless a licence is obtained. Where the age of the life assured has not been admitted and the age in the death certificate does not correspond with the life office's records, proof of age should be called for. This may be established by:

For certain policies, such as investment bonds with very little additional life cover, the age of the life assured is not important in terms of, for example, setting premium levels and so verifying age is likewise not so important.

In the case of jurisdictions outside of the United Kingdom, evidence may be provided by a certified entry in a foreign public register, the use of which is provided for by the Evidence (Foreign, Dominion and Colonial Documents) Act 1933 and the Oaths and Evidence (Overseas Authorities and Countries) Act 1963.

9.22 Where the life assured has disappeared and there is no direct evidence as to whether he is alive or dead then his death may be proved by either:

Where the life assured was also the policyholder, in order to obtain a Grant of Representation, it will be necessary for someone to apply to the district judge or registrar for leave (permission) to swear the death.

Leave to swear the death does not find as a matter of fact that the individual has died but is required in order to obtain a grant of representation where there is no direct evidence of death. The application to the High Court for leave to swear the death in these circumstances must be made only after the best possible enquiries and searches have been made amongst those who would be likely to hear of or from him if he were alive^[34]. The application must be accompanied by an affidavit which should include particulars of all policies on his life. Notice should be given to the life office. No order will be made until the life offices in question have been notified of the application. If the life office opposes the application and is successful it will get its costs, but the life office may find it difficult to argue against the declaration if it does not take part in the proceedings. In a court action it may well be sufficient if the party who alleges death simply calls the missing person's nearest relatives in the United Kingdom to give evidence that he was living here and disappeared more than seven years ago and that they have not heard from him or of him since he disappeared. The party alleging death must, however, show that reasonable enquiry has been made abroad if it was known that the missing person went or intended to go to a foreign country.

Where enquiries are made in respect of a missing person, rumours and reports may be heard from people who think they have seen him and due enquiries appropriate to the circumstances should be made. If, however, such rumours and reports are in fact without foundation, the fact that they have been received within the seven years does not prevent the presumption of death arising. Sometimes, a person disappears in circumstances which suggest that even if he were alive it would be unlikely that his relatives or friends would hear of or from him. There may be good reason why he would wish to disappear from the circles in which he moved previously. In such circumstances the presumption of death does not arise from the mere fact of seven years' absence without being heard of. The court will want further evidence^[35].

9.23 Although death may be presumed after seven years' absence, there is no presumption of law as to the exact time of death within the seven-year period^[36]. So if there is a need to establish death at or before any particular time during the seven years (eg where a temporary assurance expired during that period) this must be proved as a fact by suitable evidence, eg by evidence of ill-health when he was last heard of. The position where the individual is in a 'persistent vegetative state' and would die but for a life support system can raise extremely difficult issues where, for example, such a state may persist persists beyond the termination date of a temporary insurance.

As mentioned in (1) above, if the life assured has disappeared, it is not always necessary to wait for seven years before his death can be proved. The circumstances surrounding his disappearance (eg if he was a passenger on a ship that went missing) may be such that a court may reasonably find as a matter of fact that the life assured is dead, and so an application for leave to swear the death may be made within the seven years^[37]. For example, in National Trust v Sterling^[38] a person was lost at sea who had been on the SS Titanic. In this case it was enough for an affidavit to be produced that the insured had been lost on board at the time of sinking and had not been seen among the survivors. In Bayes-Walker and another v Bayes-Walker and others^[39] the High Court declared that a missing person was to be presumed dead for the purposes of rights to a life insurance policy amongst other assets. The court applied the rebuttable presumption that a person is dead if those who would be likely to have heard news of him had not heard anything of him for at least seven years.

A case in this area which caught the public imagination was that of John Darwin who faked his own death in a supposed canoe accident in 2002. A death certificate was issued following leave to swear his death had been granted. This enabled his wife to claim under his life assurance policies.

No action can be brought against the life office where the life assured has disappeared until the personal representatives have completed their title by obtaining probate or letters of administration. The personal representatives are unable to do this until they have obtained leave to swear the death.

9.24 In cases of common disaster where it is likely that more than one application for leave to swear the death will emerge the Principal Registry will keep a record of all evidence accepted when the first application is granted for guidance in respect of subsequent applications, so that in such a case, enquiry should first be made to the Principal Registry. If passenger lists and evidence of death have been supplied to the Principal Registry by, for example, the shipping company or airline concerned then a circular may be issued listing the names of those who have died and no further evidence of death will be necessary and there will be no need for leave to swear the death. However, for disasters such as the World Trade Centre in New York destruction on 11 September 2001 and the tsunami in South East Asia on 26 December 2004, leave to swear the death in each case (in the absence of a death certificate) would be required in view of the difficulties in ascertaining the victims with complete accuracy.

If the courts of a foreign country where the presumed deceased was domiciled have made orders presuming his death and vesting his estate in the persons entitled, his death may (depending on the circumstances) be presumed without further evidence, but if there is only an order by the foreign court presuming the death but not vesting the estate, further evidence will certainly be required to show that the presumed deceased is in fact dead^[40].

A life office will not necessarily be bound by an order for presumption of death made for some purpose other than that of obtaining a grant of representation, or even by an order of the Family Division giving leave to swear the death. It is still open to the office to defend proceedings against it either on the ground that there is no evidence of death or that there is no evidence of death before the date when the policy expired. But once the will has been proved or an administrator appointed, the office will then become liable to an action to enforce payment and may have to pay the costs of all subsequent proceedings. The life office may decide to pay the claim and if it emerges that the life assured is still alive it can seek to reclaim the money paid out on the basis of a mistake of fact although once payment has been made retrieving the funds may prove difficult.

In Scotland the Presumption of Death (Scotland) Act 1977, which repealed the Presumption of Life Limitation (Scotland) Act 1891, governs the position for presuming the death of a person who is thought to have died or has not been heard of for seven years in Scotland. The earlier statute did not apply to claims under life policies and the claimant had to prove the death as best he could. Under the 1977 Act, where a person, domiciled in Scotland (or resident there for a year prior to the action), is missing and is thought to have died or has not been known to be alive for a period of at least seven years then any person having an interest may raise an 'action of declarator' of the death of the missing person.

9.25 If two persons die in circumstances where it is uncertain which of them died first, the deaths are, for all purposes affecting the title to property, presumed to have occurred in order of seniority, and so the younger is deemed by Section 184 of the Law of Property Act 1925 to have survived the elder. Therefore, if the elder has by will left his property to the younger, the bequest will not lapse. Conversely, a bequest in a will from younger to elder will lapse. These provisions are subject to the Law Reform (Succession) Act 1995^[41], under which the intestate's spouse must survive the intestate by 28 days in order to be entitled. This statutory presumption in Section 184 can be excluded by an express contrary provision in a will. This was the case in Re Guggenheim^[42] where the deceased had made a declaration to the effect that in the event of he and his wife dying simultaneously, or in circumstances where there was no evidence as to who died first, his wife should be deemed to have predeceased him.

The statutory presumption does not apply for the purpose of incidence of inheritance tax. In this case the persons are treated as having died at the same instant and their property as having devolved accordingly^[43].

9.26 The seniority rule applies even though the circumstances suggest that the victims probably died at the same time.

Section 31 of the Succession (Scotland) Act 1964 provides that where two persons have died in circumstances indicating that they died simultaneously, or rendering it uncertain which survived the other (known in Scotland as 'common calamity'), then for all purposes affecting the title to property or claims to legal rights or the prior rights of a surviving spouse^[45], (a) where the persons are husband and wife it shall be presumed that neither survived the other, and (b) in any other case it shall be presumed that the younger survived the elder, unless the elder has left a testamentary disposition containing a provision in favour of the younger if he survives the elder and failing the younger in favour of a third person, and the younger person has died intestate, in which case it shall be presumed for the purposes of that provision that the elder survived the younger. In Lamb v Lord Advocate etc^[46] it was held that no presumption arises for consideration if there is proof that one person survived the other and such proof is on a balance of probabilities.

9.27 With a life annuity, payment by a life office depends on survival. Evidence of continued existence may be requested to be certified by of a responsible independent person, or the annuitant himself.

Normally life annuity payments are made directly to the bank account of the annuitant. Evidence of survival may then be waived, on the understanding that the bank will inform the life office when it receives notice of the death of the customer. This obviously relies on the bank informing the life office appropriately and the bank would ordinarily exclude or seek to refuse liability for failure to do so. Although not ideal, it may be the most practical way to proceed given the administrative inconvenience to the life office in verifying the annuitant's continued existence.

This practice involves certain risks (eg that both husband and wife might be entitled to draw on the same account), but in practice the risk may be thought worth taking in the circumstances. Also, the life office should be able to recover amounts paid out in the mistaken belief that the annuitant is still alive^[47].

9.28 A life office may need to examine title to a policy in many different circumstances, but most cases will fall under one of the following heads:

9.31 Life offices frequently have to decide what course of action to take where a claim is made (or other dealings are proposed) where the policy is stated to be lost or destroyed. In some cases, where the amount of money involved is modest the life office may take a pragmatic approach and simply make payment on request especially if payment is to be made to the account from which premiums were paid (although care needs to be exercised for joint accounts, trust policies, etc). Assuming the life office is not prepared to do this the following sets out the general position.

There are no statutory provisions relevant to the loss of life policies. The inability of the claimant to produce it or to account for it may amount to constructive notice to the life office of an equitable assignment or other dealings.

The loss of a life policy is not in itself normally a sufficient ground for payment into court under the Life Assurance Companies (Payment into Court) Act 1896, although the particular facts may sometimes justify this course^[48]. The life office can require proof of the loss and of the searches that have been made in order to rebut constructive notice of any other interest. The claimant may be asked to make a statutory declaration (under the Statutory Declarations Act 1835) before a commissioner of oaths as to the facts surrounding the loss. This should include a statement that there have been no dealings with the policy, if appropriate, or if not, the statement should give particulars of all such dealings. If the loss is reported after the death of the policyholder, his executors are unlikely to be aware of the circumstances of the loss and can usually do little more than assert that they cannot find the policy.

All potential searches for the lost policy should be made and it is sometimes possible for the life office from its records to indicate suitable directions for enquiries. For example, it can give the names of any firm of solicitors who have served a notice of assignment.

If all searches and enquiries fail, payment under a statutory declaration and/or an indemnity by the claimant may be appropriate. Executors and trustees may hesitate to give an indemnity, and in such cases the indemnity of one or more of the principal beneficiaries may be thought sufficient. Even more problematical is the situation where the claimants allege that it is the life office (or an adviser) which has lost the policy document or that the document has never been received. A claimant may legitimately question why he is being required to indemnify the life office in such cases.

With regard to indemnities the undertaking given by Abbey Life Assurance Company Ltd to the Financial Services Authority should be borne in mind (see9.5above)

9.32 Life offices tend to have standard forms for the purpose of statutory declarations and indemnities and they may require a full history of the policy, details of any dealings and the circumstances surrounding the disappearance and details of the searches for the policy.

It is unlikely that a life office can insist on an indemnity^[49]. If the matter went to court it is likely that the life office would be ordered to pay out, and the court order would be sufficient indemnity, but in view of the costs involved this must be viewed as an extreme measure for a life office to take in order to obtain a discharge.

If the policy was assigned as security for the repayment of a loan, there should be a reassignment on the loan being repaid in which case production of the reassignment will be sufficient evidence for the life office to be able to pay to the policyholder in the absence of any other indication that the policy has been assigned or otherwise dealt with. Failing this, a letter of disclaimer by the mortgagee or his personal representatives may be required.

9.33 In order to avoid claims under policies effected with a view to suicide, some life offices exclude death by suicide occurring within a specified period (usually 12 or 13 months). A few exclude suicide whilst sane at any time.

Suicide was (until 3 August 1961) a crime if committed voluntarily by a person of sound mind. It is contrary to public policy that a man should derive an advantage from his own criminal act and it followed that, until the law was altered, no benefit could have been taken by the personal representatives of a person who committed the crime of suicide.

The Suicide Act 1961 abolished the rule that suicide was a crime. The position now is that the policy moneys will often become payable on the life assured's death by suicide. However, payment may still be excluded expressly or impliedly by the terms of the policy or under general insurance law principles as described below.

If there is no express reference to suicide in the policy then two results follow:

Therefore, if the policy expressly deals with suicide (as in Beresford) one must look to the words of the policy to ascertain whether the sum assured is payable in that event. It may provide that suicide, sane or insane, is not covered at any time, or that it is not covered if it takes place within a limited period. If the life assured commits suicide after that period has expired, the life office would, on the construction of the policy, be liable even if he was then of sound mind because the express protection is limited to that period and the implication is therefore that the life office has accepted the risk after that time^[53]. The Court will, of course, normally give effect to a term wholly excluding suicide even if the life assured is insane at the time^[54].

9.34 Where the life assured commits suicide and the sum assured is not payable either because of an exception in the policy or on general principles, the premium is not returnable, because there has not been a total failure of consideration. The life office has been on risk throughout to pay the sum assured on death from other causes.

The claimant is not normally required to disprove suicide^[55]. Unless there is evidence suggesting otherwise (the death certificate may or may not indicate that suicide was the cause), there is a presumption that death was accidental or natural. In seeking to resist a claim the burden of proof is on the insurer to prove suicide on the balance of probabilities.

Exclusion from payment on suicide potentially affects the value of a policy. This is of particular concern to an assignee or mortgagee. It is usual, therefore, to provide that in the event of suicide, whilst sane or insane, within the specified period (if any) the policy shall be valid to the extent of any interest acquired by a third party for consideration in money or money's worth. Such a clause has been upheld on the basis that it did not tend towards encouraging suicide and meant that the life policy was a safe security in the hands of the assignee. (See Moore v Woolsey^[56] and White v British Empire Mutual Life Assurance Co^[57].) The life office itself will not usually be considered a third party although the precise wording of the clause must be considered. White v British Empire Mutual Life Assurance Co was distinguished in:

It would appear that a trustee in bankruptcy of the life assured would not be viewed as someone who had acquired an interest for value. Such interest arises solely through operation of law^[59].

9.35 A person who has insured the life of another cannot benefit under the life policy if he murders the person whose life he has insured^[60]. Nor can he benefit in any other manner (ie other than as the assured under the policy). This is an application of the principle of 'ex turpi causa non oritur actio' (a right of action will not arise from a base cause) which was reaffirmed in the following case in the context of the Social Security Act 1975.

This rule (known as the 'forfeiture rule') does not, however, apply where the murderer is insane^[62]. The public policy which prevents a sane murderer recovering was held by the Industrial Assurance Commissioner to have no application when the perpetrator was insane^[63].

The rule generally applies to manslaughter but its effect has been softened by case law and by statute. In Gray v Barr^[64] the rule which appeared to emerge was that if the person responsible for the death was guilty of deliberate, intentional and unlawful violence, or threats of violence then the rule of public policy applied. However, if the case in question fell outside of this ambit then the public policy provisions will not apply. But the precise extent of Gray v Barr is not entirely clear. An application of this principle can be seen in Re H (deceased)^[65] where it was found that the plaintiff could benefit under his wife's will where he had killed his wife but was found guilty of manslaughter on the ground of diminished responsibility.

Where the forfeiture rule applies it also bars all persons claiming through or under him such as his children. This was criticised by the Law Commission in Consultation Paper 172, 'The Forfeiture Rule and the Law of Succession', published on 16 September 2003. This resulted in a Law Commission report in 2005, 'The Forfeiture Rule and the Law of Succession' (Law Com No 295) which concluded that 'under our proposed reforms, the property will devolve in exactly the same way as if the killer had predeceased the victim'. In March 2011 a Bill was published ('Estates of Deceased Persons (Forfeiture Rule and Law of Succession) Bill') which would largely implement the Law Commission Report.

9.36 Statutory relief from the severity of the forfeiture rule was introduced in the Forfeiture Act 1982. In appropriate circumstances, this Act relieves persons guilty of unlawful killing from forfeiture of various rights such as inheritance, pensions and social security benefits. The Act does not apply to murder or suicide but could still apply to someone who assisted the deceased to commit suicide or to someone guilty of manslaughter. The Act gives the court a wide discretion to modify the effect and application of the forfeiture rule, but the court must take into account:

In the light of these the justice of the case must require the effect of the rule to be modified (Section 2(2)). Proceedings under the Act must be commenced within three months of the conviction.

In S (deceased)^[66], the plaintiff and his wife effected a joint lives first death endowment policy. He subsequently killed her but although charged with murder was ultimately convicted of manslaughter on the grounds of diminished responsibility. In the application under the Forfeiture Act the plaintiff sought an order that the policy proceeds should be paid into a trust for the sole benefit of the son. In agreeing to the application the following factors were emphasised:

The case of Dunbar v Plant^[67] involved a suicide pact in which only one of the participants died. The Court of Appeal held that the survivor was guilty of aiding and abetting the suicide and the forfeiture rule applied. In applying the test set out in Section 2(2) of the Forfeiture Act 1982 the court decided that, whilst there would be exceptions, the normal approach would be to grant full relief against forfeiture in the case of suicide pacts.

In Dalton v Latham^[68] the claimant was convicted of the manslaughter of the deceased and his sentence was six years' imprisonment. He applied to modify the forfeiture rule to enable him to benefit under the will on the basis that he had cared for the deceased. His application was refused as the court decided he had taken advantage of the deceased and the conviction for manslaughter rather than murder merely reduced his responsibility for the crime.

9.37 Where the life office may repudiate a claim on the grounds that the policyholder caused the loss by his own wrongdoing, then his personal representatives and all who claim a share of his estate as a beneficiary under his will or on intestacy, as a creditor, as a trustee in bankruptcy, or as an assignee^[69], are equally barred from claiming. This extends also to the trustees of a trust declared by the policyholder of a policy effected on his life^[70]. However, the position is different where the rights in question are 'alternative or independent'. So, for example, enforcement of the policy by a mortgagee of the policy would be possible. In Davitt v Titcumb^[71] the right of a building society as mortgagee was in issue. A joint life policy was assigned to the building society and it was held that where one of the lives assured murdered the other the building society could still recover. However, the defendant was not to benefit, even indirectly.

To repudiate a claim on the basis of suicide or other wrongdoing, the life office must prove that the death was indeed caused by suicide or such other wrongdoing as appropriate^[72].

9.38 The broad rule is that on death immovable property (ie all interests in land or 'real property') will pass to the person or persons who become entitled under the law of the country where the property lies (the 'lex situs'). Where property is abroad, consideration should be given to drawing up a separate will dealing solely with this property with the help of a local lawyer.

Conversely, for moveable property (ie 'personal property' (including life policies)) the general rule is that property will pass to the person or persons who become entitled under the law of the country in which the deceased died domiciled (the 'lex domicilii').

The question whether or not property is moveable or immoveable is decided by the lex situs^[73].

Where the deceased dies domiciled in England, his real property in England and his personal property wherever situated therefore vest in the first instance in his personal representatives:

An interest in a life policy which the deceased held jointly with another person as joint tenant who survives him will pass not to the personal representatives of the deceased but by survivorship to the other person. It will pass to the survivor who will hold it either as absolute beneficial owner or as trustee for himself and the deceased's personal representatives. This will depend on whether the legal joint tenants beneficially owned the interest in question as joint tenants or tenants in common.

The above analysis regarding joint tenancies of life policies now needs to be considered in the light of the decision in Murphy v Murphy^[74] which surprised the authors and is not universally accepted. In particular, the judge at first instance and one of the judges in the Court of Appeal (Chadwick LJ) did not agree with the majority decision of the Court of Appeal. The position which appears to emerge from this case is that the death benefit under a jointly held temporary assurance policy constituted two separate interests rather than a joint tenancy capable of severance (which would have meant that half of the joint interest was potentially available for redistribution under the Inheritance (Provisions for Family and Dependants) Act 1975). It does seem clear that the decision was not intended to apply to non-temporary policies especially as the policy in question also contained an additional terminal illness benefit which was specifically stated not to be subject to separate interests.

9.42 A grant of representation will be issued by the Principal Registry of the Family Division, or by a District Probate Registry or a sub-registry, to evidence the title of the personal representatives to administer the estate of a deceased person where that person is domiciled in England and Wales at the time of his death.

Such grants are essentially of two kinds (although either may be limited in some way):

If the claimant does not wish to employ a solicitor, he can apply personally for a grant at any registry or sub-registry. He will have to produce a death certificate or such other evidence of the death of the deceased as the registrar may approve^[91], and supply all information necessary to enable the papers leading to the grant to be prepared in the registry^[92].

Every application must be supported by an oath made by the applicant (and such other person as the registrar may require) which must state certain information, for example, that the document of which probate is to be granted is the true and original last will of the deceased and must prove the marking of the will (ie the signatures of the applicant and the person before whom the oath is sworn)^[93], the name and last address of the deceased and the date of death.

In addition the personal representatives must deliver to the Commissioners for Her Majesty's Revenue and Customs an account specifying to the best of their knowledge and belief all appropriate property for inheritance tax purposes and the value of the said property^[94]. A grant of representation will not be made until such an account has been produced and any inheritance tax payable has been paid. There are exceptions from having to provide a return for 'excepted' estates which, in this context, essentially means estates below the inheritance tax threshold (or 'nil-rate band').

9.66 (Northern Ireland) 1955 and in various orders made under that Act, the latest being the Administration of Estates (Rights of Surviving Spouse or Civil Partner) Order (Northern Ireland) 2007^[120].

The following table sets out the position in Northern Ireland:

Northern Ireland

Where the intestate leaves no husband or wife and no issue, the distribution is:

If the intestate leaves no husband or wife, issue, parent, brother, sister or issue of a deceased brother or sister, his estate is distributed to grandparents or if none are living then to uncles and aunts (the surviving issue of deceased uncles and aunts taking their parents' share per stirpes). If no person takes under the foregoing provisions, the estate passes to the Crown as bona vacantia.

Unlike the position in England, brothers and sisters and other relatives of the half blood are treated in the same way as and inherit equally with relatives of the whole blood in the same degree.

The references to 'spouse' in the above intestacy provisions now includes references to registered civil partners under the Civil Partnership Act 2004.

9.70 The Inheritance (Provision for Family and Dependants) Act 1975 implemented the recommendation of the Law Commission in their second report on family property^[128]. It gives the courts wide powers to order financial provision out of the estate of the deceased for his family and dependants if the court believes that under the will (or intestacy), the deceased failed to make reasonable financial provision for them.

The persons who may apply to the court are set out in Section 1(1) of the 1975 Act, and are as follows:

References to wife, husband and former wife or husband include references to same-sex civil partners and former civil partners^[129].

The 1975 Act lists the types of order in Section 2(1) which the court may make when it decides that reasonable financial provision has not been made for the applicant and in particular specifies methods by which periodical payments may be provided out of the estate, which is explained in Section 2(2). The Act also sets out (in Section 3) the matters which the court must have regard to when deciding whether reasonable financial provision has been made for an applicant.

The property which is available for financial provision is extended by the 1975 Act to include in the estate any property or money comprised in a nomination or donatio mortis causa and, if the court so decides, the deceased's severable share of property jointly owned with others. In Powell v Osborne^[130] the court ordered that half the proceeds of a life policy that the deceased held as a joint tenant should be paid to his wife. The deceased had left his wife to live with another woman with whom he had purchased a property on mortgage supported by the policy on their joint lives. The case effectively turned on the value of the policy immediately before the husband's death^[131]. The policy had no surrender value immediately before death. However, it was held that as the value of the policy depended on death, its value was for these purposes the same immediately before death as on death.

9.71 The courts also have the power to review certain transactions effected by the deceased within six years before his death other than for full valuable consideration, which were made with the intention of defeating claims for family provision. The courts may require that the property comprised in those transactions be made available for financial provision^[132]. Therefore inter vivos gifts or part-gifts may be vulnerable in the hands of any person for the prescribed length of time.

By Section 146 of the Inheritance Tax Act 1984, any inheritance tax paid on property, which is required to be made available for family provision, may be reclaimed from Her Majesty's Revenue and Customs if the revised provisions would result in less (or no) Inheritance Tax being payable. Effectively, the property is added back into the deceased's estate, the order by the court is treated as a disposition by the deceased on his death, and a new calculation of the inheritance tax, if any, is made. For example, the court order may provide for property to be redistributed to the deceased's spouse in which case the new calculation will provide that no inheritance tax will be payable in respect of that property due to the spouse exemption.

'Maintenance' for which an applicant might receive financial provision under Section 1 of the Inheritance (Provision for Family and Dependants) Act 1975 cannot include provision for liability for inheritance tax^[133].

Failure by the deceased to discharge his responsibilities to the applicant, during his minority, did not in itself entitle the applicant to receive financial provision from the deceased's estate under the Act^[134]. In Ilott v Mitson and others^[135] the Court of Appeal overturned the High Court's decision that a mother could reasonably make no financial provision for her estranged adult daughter, instead leaving her entire estate to charity.

An application to the court cannot normally be made, without the permission of the court, after six months from the date on which representation to the estate is first taken out. Personal representatives are protected from liability for distributing any part of the deceased's estate after this six-month period notwithstanding the fact that the court might make further orders or vary an existing order.

The 1975 Act does not apply in Scotland where provision for dependants is secured by the legal rights and statutory prior rights mentioned in the previous section^[136]. It was, however, effectively extended to Northern Ireland by the Inheritance (Provision for Family and Dependants) (Northern Ireland) Order 1979^[137].

9.72 Section 134(1) of the Social Security Contributions and Benefits Act 1992 and associated regulations provide that a person is not entitled to income support if his capital exceeds £16,000^[138]. This limit has come in for criticism on the basis that it does not encourage persons to save or to take measures to put in place funds for periods when they are unemployed etc. Also, a claimant is treated as possessing income and capital of which he has deprived himself for the purpose of securing entitlement to income support or increasing the amount of that benefit^[139]. This question may arise in relation to the holding of single premium or other life assurance policies where the policyholder requires nursing home care and fees are payable.

The surrender value of a policy is treated as capital, however, the Income Support (General) Regulations 1987^[140] provide that the surrender value can be disregarded in assessing the claimant's eligibility for income support^[141]. Interesting questions arise when a claimant invests (deliberately or not) in a single premium life policy which would appear to have the effect of reducing his capital. It is not obviously a disposal of capital as the claimant would still retain ownership of the asset (ie the policy). In a case before the Social Security and Child Support Commissioners^[142] the claimant had invested £10,000 into a single premium insurance based investment bond. The Commissioner decided that the surrender value was to be disregarded. However, he also decided that where a significant amount was invested then this operated as a 'deprivation' and an adjudication officer should always consider whether the investment was made for the purpose of securing income support. However, the general position seems to be that such insurance bonds will not be taken into account. See further the Charging for Residential Accommodation Guide (2003) 22, October 2003 (known as 'CRAG') for further details.

9.73 Where a policy on the life of the testator is, by his will, made the subject of a specific legacy, the policy (or the sum assured if the testator was the sole or last surviving life assured) will pass in the first instance to his executors. If, however, the policy is on the life of another person or the policy money is payable by instalments it will have a continuing existence and where the executors do not need it for purposes of administration they may vest it in the legatee.

An assent is some action which activates the gift of the property to the beneficiary concerned (even if further formalities are required to transfer the subject matter to the person entitled) and show that the executors do not require the property for administration. The beneficiary derives his title from the will; the assent merely makes the gift operative. Once the personal representatives have effectively assented, they hold the property on trust to carry out the further requirements. Some form of documentation is often needed in order to vest the legal title to the property in the beneficiary. An assent, by itself, is often of little practical use except in relation to tangible moveable property such as jewellery, furnishings, etc. For a life policy an assignment would be required.

Assents to the vesting of personal estate such as a life policy need not be in writing or in any particular form. This is different to the vesting of a legal estate in land which is required to be in writing. Stamp duty is no longer payable on a written assent relating to non-land transactions (except for some documents relating to stocks, shares and marketable securities)^[143].

9.74 Appropriation is the transfer by the personal representatives of a particular asset in satisfaction of a legacy or a share of the estate.

An appropriation of a policy may be made under Section 41 of the Administration of Estates Act 1925 or under an express power in the will. For a life policy continuing beyond the death of the testator, for example, a policy he had purchased on the life of another person, this would therefore require an assignment (see further Chapter 10)

9.75 Property subject to a charge passes under the will subject to the charge. If, for example, a testator makes a specific bequest of a policy on which there is a policy loan, the legatee will, unless a contrary intention appears from the will, take the policy subject to the loan. He cannot require the executor to pay off the loan out of other property of the testator^[144]. It should be noted that the ambit of 'charge' is wide and includes, for example, an equitable charge.

9.76 When a document which represents, or is evidence of, a chose in action (such as a life policy) is delivered by a person in contemplation of death on condition that it shall be the property of the donee only in the event of the death of the donor in the circumstances threatening him, there is a donatio mortis causa of the chose in action. The court will uphold this against the personal representatives. It is a question of fact whether the delivery of a document was made as a gift inter vivos or mortis causa, and to establish the latter there must be evidence that the donor made the gift in contemplation of death.

A life policy can be the subject of a donatio mortis causa^[145]. If it is delivered by a person in contemplation of death in circumstances which indicate an intention to give, the court will presume that it was given to be retained only in the event of death and to be returned if the donor should recover. An essential part of the validity of a donatio mortis causa is that the donor should part with dominion over the property so as to prevent it being dealt with by him in the interval between the gift and his death or recovery. It is possible to pass most types of property by donatio mortis causa, such as chattels, but with land the position was not clear until the case of Sen v Headley^[146] which decided that the personal representative held the land on trust for the beneficiary of the gift.

9.77 The affairs of mentally disordered persons in England are administered by the Court of Protection mainly in accordance with the Mental Health Acts of 1983 and 2007, the Mental Capacity Act 2005 and various Court of Protection Rules. The Court of Protection may make orders affecting the property of a person who lacks capacity and may appoint a deputy who must act in accordance with the Code of Practice under the Mental Capacity Act, 2005 and the court's directions. The Office of the Public Guardian will supervise the deputy and has an administrative and complaint handling role. A person who lacks capacity cannot deal with his own property whilst the appointment is in force. Before making a payment to the deputy, the life office must be satisfied that the court has made an order authorising the deputy to give a discharge. If the person lacking mental capacity recovers and becomes capable of dealing with his own affairs, the deputy is discharged by a further order of the Court of Protection; the deputy's powers cease automatically on the death of the person lacking capacity.

It should be noted that a person lacking capacity cannot grant a valid power of attorney (see 9.79 below), and any ordinary power he may have given before his incapacity arose will cease to be effective. However, if he gave an enduring or lasting power of attorney before his incapacity, and provided the said power is registered, it will not cease to be effective ^[147]. It is not possible to effect new Enduring Powers of Attorney but existing Powers signed before 1 October, 2007, may remain in force.

The Court of Protection may execute a will or codicil or effect a settlement for a person lacking capacity. This is known as a 'statutory will'. A patient may make a valid will for himself in a lucid interval even if there is a deputyship order is in force but the person propounding the validity of the will would have to show that it was made during such an interval^[148].

9.78 Where a policyholder domiciled abroad becomes mentally disordered, the person able to deal with his affairs is the officer appointed by the proper court of the country of domicile. Therefore, a a person properly appointed by a foreign court to look after the affairs of a mentally disordered person domiciled and resident abroad may sue for that person's personal estate in England.

9.79 The Mental Capacity Act 2005 received a lot of media attention for its 'living wills' provisions but it also replaced Enduring Powers of Attorney with 'Lasting Powers of Attorney' ('LPAs') on 1 October, 2007. These are wider than EPAs in that there are two types of LPA. One type relates to property and affairs and the other to personal welfare issues.

9.80 Unlike EPAs, LPAs only take effect upon registration with the public guardian. Therefore, donors who wish their attorneys to act on their behalf, even though they retain capacity, will either have to register the LPA or complete a separate ordinary power of attorney. This seems a backward step in that some donors found it helpful to rely on their unregistered EPAs. For example, a donor may be in hospital or nursing home, unable for practical reasons (as opposed to mental incapacity) to attend to their affairs or simply disinclined to get involved with certain issues. EPAs could be used to ease the burden in these circumstances. However, EPAs were open to abuse and the new system requiring registration of LPAs has the advantage of requiring a greater degree of supervision by the Public Guardianship Office. Another safeguard is that a 'prescribed person' must certify that the donor understands the effect of the LPA and that no undue pressure has been placed upon him to sign it. This would appear to be quite an onerous obligation upon the doctor or other prescribed person. Another safeguard is that attorneys and deputies are legally required to have regard to the Mental Capacity Act, 2005, Code of Practice.

9.81 For life offices dealing with attorneys they will obviously need to ensure that the LPA is registered and still in force. The Public Guardian maintains a register of LPAs which can be checked. A life office can also rely on the office copy of the LPA with regard to the content of the LPA which it should check in particular to ensure there are no restrictions or conditions.