Life Insurance – Commercial Court of Appeals Stated That the Right to the Surrender Value Belongs to the Policyholder

The plaintiff filed the claim with the purpose of collecting the surrender value of a life insurance policy, where the plaintiff was the insured. The surrender value had been previously paid by the insurer to the policyholder. The lawsuit was filed against the insurer and the policyholder.

The claimant argued in the lawsuit that the insurer could not have paid the policyholder since the policy provided that the right to the surrender value was of the insured.

The insurer answered the complaint stating that the policy conditions foresee the common scenario where the policyholder and the insured are the same person. However, when the policyholder differs from the insured, the only person entitled to collect the surrender value is the policyholder, since the insured is merely the person whose life may be affected by a loss (Section 128 of Insurance Law).

The policyholder, co-defendant in the case, argued that the limitation period has expired, and submitted similar defenses to those posed by the insurer.

On October 23, 2012, the first instance judge rejected the lawsuit under the following grounds: i) with respect to the policyholder, the claim had not been filed within the two-year limitation period established in Section 4037 of the Argentine Civil Code (for non-contractual liability) that ran between the date when the surrender value was paid by the insurer and the first mediation hearing; and ii) with respect to the insurer, the contractual relationship was between the insurer and the policyholder, and not between the plaintiff (insured) and the insurer.

The claimant appealed the judgment and the final decision was rendered by Division B of the Commercial Court of Appeals on June 28, 2013. The Commercial Court of Appeals confirmed the first instance ruling, and sustained that: a) the surrender value can only be collected by the insured if he is also the policyholder; b) despite the policy wording, which set forth that the insured was obliged to pay the premiums, it had to be understood that it was an obligation of the policyholder, under the terms of Section 27 of the Insurance Law; c) there was no doubt that premiums had been paid by the co-defendant, who was the policyholder; and d) the different terms and conditions of the policy should be construed as a whole. The Commercial Court of Appeals concluded that the right to collect the surrender value belonged to the policyholder.

The ruling is a leading case, which confirms that when the policyholder differs from the insured, the right to collect the surrender value under a life policy corresponds to the policyholder.