Dispute between KGA Life and Multisure goes to Supreme Court of Appeal

KGA Life has been granted leave to appeal the Eastern Cape High Court’s judgment that ordered it to release the group funeral scheme it underwrote for Multisure Corporation.

It was hoped that the High Court’s ruling would bring legal certainty on the implications for group funeral schemes of the 2018 amendment to the Policyholder Protection Rules issued under the Long-term Insurance Act.

However, funeral parlours, insurers, intermediaries and policyholders will have to wait for the Supreme Court of Appeal (SCA) to hand down its judgment.

KGA, which specialises in underwriting group funeral insurance schemes, and Multisure, which mainly sells funeral cover plans, have been in a dispute since the second half of 2021 after Multisure informed KGA that it wanted to move its book to African Unity Life (AUL).

Most of the members of Multisure’s funeral group scheme receive grants from the South African Social Security Agency (Sassa). Q Link administers the premium deductions from their Sassa grants.

Multisure asked KGA to provide Q Link with written confirmation that their agreement had been cancelled so that Q Link could alter the deduction codes and pay the premiums to AUL.

KGA contends that the cancellation of the intermediary agreement does not authorise it to instruct Q Link to cease collecting premiums from policyholders and pay them to another insurer, because the underlying relationship with the policyholders remains intact. It maintains that each policyholder must conclude a new individual policy with AUL.

In her judgment, Judge Irma Schoeman made the following orders:

• The intermediary agreement between KGA and Multisure, as well as the master policy that formed part of the agreement, had been cancelled from 1 September last year.
• The group scheme underwritten by KGA had been cancelled from 1 September last year and was no longer in effect.
• Q Link must alter the deduction codes so that the premiums are paid to AUL.
• KGA must pay AUL the premiums it has received from members of the group scheme since 1 September 2021.
• KGA must pay the costs of the application.

KGA’s response

Approached for comment on the judgment, KGA’s head of legal and compliance, Rudi Kotze, said that, as a result of the appeal, “we do not at this stage have any further comments, save to note that KGA Life remains confident in its interpretation of the matter and keenly awaits the outcome of the appeal proceedings”.

Multisure’s response

Multisure’s chief executive, Denton Goodford, provided Moonstone with the following response:

“We have consistently stated that we are entitled to cancel the underwriting of our clients’ policies with KGA Life, and we are therefore pleased with the judgment by Judge Schoeman, which is in line with the scathing view expressed by the Western Cape High Court during 2017 already against this same company where Judge O’Brien stated, ‘Reading this documentation (the underwriting agreement and other documentation), the … respondents (intermediaries) had a contractual right to cancel KGA’s underwriting of their schemes … KGA denied this while knowing the true state of affairs.’

“The judge found that KGA hid important information from the court and punished it with a punitive cost order for the unethical manner in which it conducted its case.

“The Eastern Cape High Court judgment also reiterates the view expressed by retired Appeal Court Justice Brand in a 2018 arbitration award where this same company, KGA Life, resorted to similar tactics in trying to force itself on intermediaries and their clients.

“In the arbitration matter, KGA tried to argue that the intermediaries ‘could only cancel the individual policies if they had a mandate from the individual insured to do so’. Justice Brand, however, strongly disagreed with KGA’s view and stated: ‘I find no merit in this argument.’

“Furthermore, KGA tried to argue that the intermediaries could not cancel the policies because the clients were not fully aware of the terms and conditions of the policy. Justice Brand, however, found that, ‘this is a rather cynical point for KGA to take’, dismissed KGA’s case and made another cost order against it.

“KGA accepted the outcomes of both these matters, but now it has, of course, indicated that it will appeal the EC High Court judgment. Does it now expect a different outcome on appeal due to a change in the law which it thinks will convince the SCA to decide in its favour when KGA itself ignored the same law and rules for three years?

“In view of the above judgments, as well as other factors, we believe that KGA has very little chance of success on appeal and that the appeal has only been filed to delay the inevitable.”