In (not so) Full and Final Settlement

Have you ever wondered why this disclaimer is contained in every claims settlement letter?

The latest newsletter from the Long-term Ombud contains details of why merely stating “In full and final settlement” is not good enough.

There was a delay in finalising a claim. After payment of the sum assured, the beneficiary claimed interest, which the assurer declined to pay in view of the fact that the claims payment letter contained the standard disclaimer.

The matter was referred to the Long-term Ombud, who ruled as follows:

“Although the insurer stated that the claim was paid in full and final settlement it did not have the complainant’s agreement to this effect. The insurer may have paid the claim with that intention but the complainant did not receive it as such. In terms of our practice, interest has to be paid on late payment of a claim.”

If an insurer wishes to settle a claim on the basis that it is in full and final settlement it has to obtain the agreement of the complainant prior to payment. In the absence of such an agreement it is a normal payment in terms of the policy provisions (even if the insurer regarded it as a so-called ex gratia payment). Without agreement that the payment is in full and final settlement a complainant would be entitled to request interest and compensation in our office and we would consider the request in terms of our Rules and normal practice.”

Please click here to read the full background to this interesting ruling

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