In the cases of MLC Limited v Crickitt  FCA 898 (3 August 2017)
and MLC Limited v Crickitt (No 2)  FCA 937 (15 August 2017)
insurers are reminded that where the beneficiary of a life insurance payment is in doubt, the costs involved in an application to discharge the insurer's liability by paying the amount 'into Court' must be monitored.
A life insurance policy was issued in 2005 for the benefit of the deceased and her husband the respondent, Brian Crickitt. It named the deceased and the respondent (in their capacity as trustees of the Heart and Soul Superannuation Fund) as policy owners and the deceased as the 'life insured'.
Brian Crickitt was subsequently convicted of the murder of his wife and therefore deemed potentially ineligible to receive the sum arising from the policy. However, this was dependent on the outcome of criminal proceedings which at that time were being heard on appeal.
In circumstances where it is unclear to whom a life insurance policy payment should be made, under section 215 of the Life Insurance Act 1995 (Cth)
insurers may apply to discharge their liability by paying the amount due 'into Court', to be dealt with in accordance with the order of the Court at a later stage:
Section 215 - Power to pay money into Court
- A life company may pay into the Court any money payable by the company in respect of a policy for which, in the company's opinion, no sufficient discharge can otherwise be obtained.
- Payment of the money into the Court discharges the company from any liability under the policy in relation to the money.
- Any money paid into the Court under this section is to be dealt with according to the order of the Court.
- This section has effect subject to the Rules of the Court.
The benefit of making an application under section 215 is that it relieves the insurer from the burden of increasing expenses pending the resolution of concurrent proceedings and/or identification of the proper beneficiary. In this case the insurer's application was accepted. While the costs involved in making a section 215 application may be recovered out of the benefit funds, the Court indicated that the question of costs for these applications should be treated with caution. Accordingly, it delivered a separate judgment dealing with this issue.
In doing so the Court noted that section 215 applications are 'tolerably straightforward' and can be seen as 'an aspect of doing business as a life insurer'. It also took into consideration that such applications usually relate to a modest policy, where the amount of policy proceeds are nevertheless likely to be of significance to the beneficiary, who in the circumstances may well be of modest means. Citing the decision of Westpac Life Insurance Services Limited v Mahony  FCA 1071
, His Honour stated that while the insurer is entitled to have all proper costs from the proceeds of insurance, the Court may 'make an appropriate order.'
In this instance, the insurer sought to recover $18,000 in costs. The Court ordered costs in the insurer's favour, but reduced by approximately 30% to $13,000.
This decision reminds life insurers that where the identity of the beneficiary is in doubt, section 215 provides the option of payment and discharge of liability at an early stage; however, costs in relation to such an application should be monitored, at the risk of being moderated by the Court, if allowed at all.
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