When murder is the cause of a claim, life insurance can be a deadly business. But, ask Alex Forsyth and Alex Isted, how do we deal with such cases?
In cases of murder and insurance, the Forfeiture Rule (under the Forfeiture Rule and Law Succession Act 2011, see below) comes into play.
This is a principle of public policy that a person who ‘unlawfully kills' another should not benefit financially from this.
Where murder has occurred, the insurer should wait until the end of the court process as a payment made too early and to the wrong person may not be recoverable.
While the basic principle is simple, the Forfeiture Rule can be hard to apply.
The rule has been developed in numerous cases, including the aptly-named Cleaver v Mutual Reserve Fund (1892).
The life claims we see at Munich Re typically involve spouses or partners where the surviving spouse is both the killer and the potential claimant.
The Forfeiture Rule extends to ‘unlawful killing', and therefore covers manslaughter as well as murder.
This means that, while the Courts are obliged to apply the rule strictly in murder cases, they have considerable discretion with manslaughter (from the Forfeiture Act 1982).
We have seen cases where the Courts have allowed payment of the policy proceeds to spouses who have killed the insured person because they have been convicted of manslaughter rather than murder.
The Forfeiture Rule applies also to third parties claiming through the wrong-doer, as the third-party claim is ‘tainted by illegality'.
For example, where the killer is prevented by forfeiture from claiming life policy proceeds, anyone who claims a share of his estate will be barred from claiming.
However, where the killer is forfeited from claiming, Cleaver v Mutual Reserve suggests that, usually, the insurer will be expected to pay to someone as the insurer would otherwise receive a ‘windfall'.
The insurer's obligation to make a payment can depend upon the precise nature of the policy.
For instance, if the killer took out a policy on the victim's life, it is unlikely that the victim's estate has any claim by default.
CURBING FRAUDULENT POLICY APPLICATIONS
In some cases, benefiting from the life policies is part of the ‘motive' of the crime.
Fraud involving murder may be suspected with over-insurance, where cover is on the victim's life only; and doubtful signatures on the proposal form, where it seems the victim was unaware of the cover.
The burden is on the insurer to prove fraud. This can be difficult, although it may be possible in murder cases to liaise with the police in building a case.
Regarding children, in view of the tragic nature of murder cases, the insurer may not want to take a strict legal position.
The insurer may be asked to pay on an ‘ex gratia' basis, where there are surviving children or the policy protects the mortgage on the family home.
Where an insurer supports an ex gratia payment it is important to seek sign-off from all interested parties.
This minimises any risk of payment to the wrong party, or of double payment.
Alex Forsyth is a solicitor and Alex Isted is head of claims management at Munich Re
