No passing the buck


The Complainant’s monthly instalment in respect of her insurance policy was deducted from her bank account by way of debit order. Her debit order was returned unpaid for two consecutive months which resulted in the policy lapsing.  


The Bank advised that the debit orders were returned unpaid as there were insufficient funds in the Complainant’s account and referred to the terms and conditions of the account which stipulated that there should always be a minimum balance in the Complainant’s account. The Bank also confirmed that it had sent the complaint SMS notifications on each occasion that the debit order was returned unpaid and that it met with the Complainant to educate her on the functioning of her account.


A month after the two returned debit orders, the Complainant was in a car accident. She lodged a claim with the insurance company which was repudiated. The Complainant lodged a complaint with this office and alleged that her claim was repudiated because of the Bank’s negligence in administering her account.


Our investigation ascertained that as per the terms and conditions of the account the Complainant agreed to maintain a minimum balance on the account and that the two debit orders for the insurance premium were returned unpaid due to insufficient funds.


The matter turned on whether, at any time prior to the lapsing of the policy, the Complainant was placed in a position to remedy the situation. As the SMS notifications and the meeting with the Bank occurred prior to the policy lapsing, the Complainant was fully aware that her premiums were not being met. The Complainant was placed in a position to rectify the situation by making the necessary arrangements to ensure that her outstanding premiums were paid. Her failure to act on this information timeously and remedy the situation by making payment resulted in her insurance claim being declined.


We had to be mindful of the fact that there were two separate agreements in place in this instance, one between the Complainant and the Bank and one between the Complainant and the insurance company. In respect of her agreement with the insurance company, it was the Complainant’s responsibility to ensure that her premiums were paid and her failure to attend to these payments constituted a breach of the agreement between the Complainant and the insurance company.


This office accordingly found that there was no basis to hold the Bank liable for the Complainant’s claim being denied by the insurance company as a result of the Complainant not ensuring that there were sufficient funds in her account and/or ensuring that her premium was paid after being informed that the debit order had been returned unpaid.


PRINCIPLE: It is extremely important to familiarise yourself with the terms and conditions of your contractual relationship with your Bank. In respect of your payment obligations to third parties, it is your responsibility to ensure that these obligations are met to avoid finding yourself in a precarious position.

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