Group Life, Late Premium and a Contested Death Benefit
Mr Okafor, a 47-year-old logistics manager, died in a road accident on 12 February. His employer, Kano-based Sahel Agro Ltd, maintains a group life scheme for its 240 staff at three times annual emolument. Mr Okafor earned ₦9.6m a year, so his cover was ₦28.8m. The scheme renewed on 1 January. The ₦18.6m premium was deducted from salaries in January, but Sahel Agro paid the broker on 20 February and the broker remitted to the insurer on 28 February. The policy contains a condition precedent that no cover exists until premium is received, and a 30-day grace period for renewal. A broker-issued cover note dated 1 January was in the file, but the insurer's underwriting department has no record of authorising it. Mr Okafor also held a ₦10m individual endowment policy, premium due 1 January and still unpaid; it had 30 days' grace, a surrender value of ₦1.4m and no automatic premium loan option. He nominated his girlfriend for that policy; his widow and two children survive him. His RSA balance is ₦22m.
1. Advise the insurer on the group life claim. Address the premium condition, the grace period, the cover note and the employer's statutory duty.
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The condition precedent governs: cover does not attach until premium is received. Under section 50 of the Insurance Act 2003 a licensed broker is treated as the insurer's agent for receiving premium, so receipt by the broker on 28 February is receipt by the insurer. But 28 February is after the 12 February death.
The renewal grace period ran 30 days from 1 January, ending 30 January. The death is 13 days outside it. Deduction from salaries is not payment to the insurer.
The broker-issued cover note binds the insurer only if the broker had actual or apparent authority. The underwriter's private acceptance of authority assists the claimant, but past practice must be evidenced. Check whether the insurer habitually accepted late premiums without reservation; if so, waiver or estoppel may defeat the condition.
Under the Pension Reform Act 2014, Sahel Agro was required to maintain group life cover of at least three times emolument. Its failure to remit is a breach, and the dependants have a direct claim against the employer for ₦28.8m.
Recommendation: decline in writing, give the dependants the evidence they need, report the employer to PENCOM, and consider an ex gratia payment without admission of liability.
2. Who should receive the ₦10m individual policy proceeds, and does the nomination bind the insurer? Address the lapse and the widow's position.
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Premium was due 1 January and unpaid at death on 12 February - 42 days. The 30-day grace period ended on 31 January. With no automatic premium loan, the policy had lapsed before death, so no ₦10m death benefit is payable.
The surrender value of ₦1.4m is payable to the estate, less any outstanding premium or policy loan. The insurer should confirm the surrender quotation before paying.
Because the policy had lapsed, the nomination of the girlfriend is irrelevant to a death benefit. If the policy had been in force, a bare nomination is generally not a trust under Nigerian law: proceeds would fall into the estate and be distributed to the widow and children on intestacy. A trust nomination, by contrast, would transfer the benefit to the nominee, though dependants might still seek relief.
The insurer should not pay the girlfriend without a discharge from the estate. The widow should apply for letters of administration. Advise her that her remedy, if any, lies in the estate or family provision, not in an insurance claim.