Estate Planning

Interest Not Payable on Insurance Proceeds Until Declaration of Death

By Hull & Hull LLP

Interest is normally paid on the proceeds of a policy of life insurance thirty days after the insurer receives sufficient evidence of the claim. The requirements are mandated by statute. What happens, however, where the insured “disappears”, and the beneficiary brings an application for a declaration of death? Is interest payable from the date of death (as declared by the court), or from the date of the declaration itself?

This issue was considered by the Court of Appeal of Manitoba in Antonation v. Sylvester, 2007 MBCA 110 (CanLII). There, the “deceased” disappeared on May 29, 1998. In May 2005, the beneficiary under a policy of insurance on the deceased’s life brought an application for a declaration that the deceased was presumed dead because of the passage of seven years from his disappearance. The court granted an Order on July 4, 2005 declaring that the deceased “shall be presumed to have died on May 29, 1998.”

The proceeds of the insurance policy were paid to the beneficiary within 30 days of the date that the court made the declaration: July 4, 2005. However, the beneficiary claimed interest from the date of disappearance (ie. the date of death as declared by the court: May 29, 1998).

The Court below and the Court of Appeal both held that no interest was payable until 30 days after the date upon which the declaration of death was made. This declaration was part of the “sufficient evidence” that the insurer required in order to trigger the obligation to pay under the applicable legislation. Until this declaration was made by the court, there was no obligation on the part of the insurer to make the payment.

The legislation in Ontario is essentially similar to the applicable Manitoba legislation considered by the court. In fact, the Court of Appeal of Manitoba relied on an Ontario Divisional Court case directly on point.

Thank you for reading.

Paul Trudelle

Full post as published by Toronto Estate Law Blog on December 20, 2007 (boomark / email).