Discovery wins R6m life insurance case after KZN woman’s deceased mother ‘misrepresented’ income

A woman’s attempt to claim R6 million in life insurance from Discovery following her mother’s death has ended in disappointment after her case was dismissed.

Viantha Naidoo had taken legal action against Discovery after the financial services group refused to pay out on the policy.

However, the KwaZulu-Natal (KZN) High Court in Durban ruled in favour of the insurer, citing misrepresentation in the application process.

Mother takes out life insurance policy with Discovery

Naidoo’s mother, Sandra, passed away in January 2016 after a brief illness.

In August 2015, a few months before her death, she applied for a life insurance policy with Discovery, claiming to earn a monthly salary of R35 000 as an employee at a Shoprite in Chatsworth.

However, when Naidoo attempted to claim the payout in May 2016, Discovery rejected the request, revealing that Sandra’s actual gross salary was closer to R5 500.

The company argued that she had “misrepresented” her income and had failed to disclose that she had simultaneously applied for life insurance policies with two other insurers.

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Discovery stated that due to these material misrepresentations, the policy was deemed void, and the premiums paid were retained as a penalty.

The insurer maintained that had it been aware of the true facts, it would have either declined to issue the policy or done so under different terms.

Naidoo, however, contended that her mother was employed at Shoprite at the time and had additional income from “other sources”, making her total earnings significantly higher than her salary from Shoprite.

She argued that her mother had not breached the contract and that Discovery was obligated to pay out the R6 million policy.

Court testimonies

During the court proceedings, Chatsworth Shoprite’s human resource manager, Andrew Adams, testified that Sandra’s salary was nearly R5 500, with a take-home pay of just over R3 600.

According to records, she was a full-time employee working as a front-end controller for 40 hours per week.

Naidoo claimed her mother also earned income from a family business, Distinctive Workwear, and commissions as a sales agent for Avon.

However, Anna Maria Bopp, Avon’s credit control manager, testified that there was no evidence that Sandra had ever been registered as a sales representative.

More evidence heard

Prelan Moonsamy, a legal advisor at Old Mutual, also provided testimony, revealing that Sandra had applied for a policy with Old Mutual on the same day she applied to Discovery.

In that application, she claimed to be a Shoprite supervisor earning R70 000.

She had also not disclosed to Old Mutual that she had applied for policies with other insurers.

Despite this, Old Mutual paid out claims to Naidoo upon Sandra’s death.

The policies included R3 million in death benefits, R3.3 million in severe illness benefits, and R3 million for disability.

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Moonsamy noted that Sandra’s policy had been investigated as part of a probe into the “pacemaker syndicate”, where clients were suspected of misrepresenting their income when applying for insurance.

Johannes Mouton, a former investigator at Discovery, testified that the deceased’s bank account was used as a “mule account” to funnel funds to various individuals.

Mouton also contended that there was no record of R20 000 in monthly payments into Sandra’s account from Distinctive Workwear, the company allegedly owned by her sister, Sadia.

KZN high court ruling

In a recent judgment, Judge Mahendra Chetty pointed out that Naidoo failed to call key witnesses, including Sadia, to support her claims.

Chetty highlighted that Naidoo admitted in court that she had limited knowledge of her mother’s finances.

“Having regard to the evidence before me, as well as the documentary evidence, in particular the bank statements of the deceased, I am satisfied that the only income, which was verifiable and corroborated, was that from her employment as a supervisor at Checkers.

“Other sources of income, as alleged, were not. The plaintiff had the opportunity to call witnesses to do so but did not,” he said.

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Although Sandra was suspected of being part of the “pacemaker syndicate”, the judge acknowledged that there was no direct evidence proving her involvement.

“A bird’s-eye view of the financial transactions involving Sandra Naidoo, in my view, casts a cloud of suspicion over her affairs.

“It is not entirely clear exactly how she may have benefitted from these transactions through her account, other than serving to disguise the true beneficiaries of the payment into her account.

“In any event, according to Mouton, the matter has been the subject of a criminal investigation over many years, without any finality in sight,” the judgment further reads.

Discovery wins life insurance policy case

Ultimately, the court ruled that Sandra had misrepresented her income, leading to the dismissal of Naidoo’s application with costs.

“In the result, I am satisfied that the plaintiff has failed to prove its case.

“The first defendant, Discovery, was induced into the contract by a material representation and non-disclosure by Sandra Naidoo and is consequently entitled to avoid the contract and refuse to pay the death benefit stipulated therein to the nominated beneficiary,” Chetty concluded.

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