Metropolitan cites obscure rule to withhold full amount of interest from Durbanville man

First published by GroundUp

One of South Africa’s largest financial service companies, Momentum Metropolitan Life Limited, has cited an obscure law to justify not paying a Durbanville man the full R100,000 in interest accrued on a policy.

When Clive van Roodt’s brother Gerald died in 2000, the death was ruled a suicide by police. Van Roodt submitted a claim to Metropolitan and received a capital benefit R56,892.32. In 2018, new information revealed the death was not a suicide, but an accident, adding an accident benefit to the life cover van Roodt had already received. He was paid an additional capital benefit of R48,211.32 including interest of R35.32 for the week between when the information was discovered and when the payment was made.

The final concern was the remaining interest accrued over 18 years.

Metropolitan denied owing further interest so van Roodt submitted the matter to the Ombudsman for Long-term Insurance. The Ombudsman, retired Judge Ron McLaren, ruled in August 2019 that Metropolitan owed van Roodt additional interest, on the grounds that “If the accident benefit was paid in 2000 then Metropolitan would not have had the use of these monies, but as it was not paid, Metropolitan had such use in the general pool of funds catering for the payment of benefits.”

The Ombudsman provisionally ruled that Metropolitan owed van Roodt R104,297.06 in interest on his brother’s policy.

Metropolitan responded by citing the in duplum rule. This rule states that the interest on a debt stops when it surpasses the amount of the original debt. This aims to protect borrowers from exploitation by lenders who let interest grow unchecked. It is not intended for large corporations to use to withhold funds from beneficiaries in life insurance cases.

Metropolitan argued that it did not owe van Roodt further interest but would offer R52,000 as a “goodwill gesture.” Van Roodt declined the offer and the matter was resubmitted to the Ombudsman’s office in October. The Ombudsman then sought legal counsel to determine the validity of the in duplum rule in this matter (interest on a benefit as opposed to a loan).

The legal consultant ruled that the in duplum rule was applicable in this case because Metropolitan’s offer of R52,000 exceeded the accident benefit amount and the interest had stopped accruing when it reached that amount. The consultant’s opinion was that the rule is not confined to interest accruing on a loan only, but on any debt. The opinion was circulated to both parties at the end of October and beginning of November.

The consultant also said the liability for the interest on the accident benefit had started, not in 2000, but in 2018 when the new information became available.

Judge McLaren in turn ruled that Metropolitan’s offer of R52,000 was reasonable.

Van Roodt has consented to this offer, but says his brother “will never be forgotten as a police officer who fought and worked hard for his country. It’s of no relevance to seek affirmation any more. I hope no one goes through such difficult times ever in their life, not knowing what happened to their family members and going through a battle with big companies such as Metropolitan/MMI Holdings, needing to claim what is rightfully yours.”

The Ombudsman’s office declined to comment to maintain confidentiality.

Head of client care at Metropolitan Mariza Schlusche told GroundUp: “In this case, if Metropolitan were to apply standard industry rules only, the outcome would have been that Mr. van Roodt would receive R35.32 in interest. However, in the interest of the beneficiary Metropolitan elected to offer an ex gratia payment of R52,000.”

“The in duplum rule was not applied, however, it served as an indicator of whether the settlement amount was fair. Theoretically, had we applied the in duplum rule, the interest amount would not be more than R48,176.”

“A number of other factors were considered in our decision, including Metropolitan’s claims policy, industry standards, the late submission (18 years) of the outstanding requirements and the ASISA standard for unclaimed benefits effective from May 2013.” DM

ASISA is the Association for Savings and Investment South Africa.