Beneficiaries under a life insurance contract are not entitled to interest on proceeds for the time between an insured’s disappearance and the date that a presumption of a death certificate is procured

Sylvester Estate v. Sylvester, [2006] M.J. No. 375, Manitoba Court of Queen’s Bench

Mr. Sylvester (the “Insured”) had a life insurance contract that provided a $100,000 death benefit payable to his beneficiaries. The Insured was a member of the Outlaws Motorcycle Gang in Manitoba. He disappeared on May 29, 1998. He was never found. Pursuant to a consent order made seven years after his disappearance, the Insured was declared presumed dead as of May 29, 1998. Following the declaration, the insurance company paid out the insurance proceeds of $100,000 and returned the premiums paid from the date of the disappearance to the date of the presumption of death. The beneficiaries commenced this action in an attempt to recover the interest on the $100,000 death benefit for those seven years.

The policy of insurance was silent as to whether interest should be paid during this period. In reviewing the matter, Kennedy J. noted that the Insured was clearly associated with an outlaw gang and that he was associated with persons and activities that led him to criminal activity. His disappearance was mysterious. When his close acquaintance was shot to death by bullets to the head, it is possible that an inference could be raised that the Insured probably suffered a similar fate. There was no evidence that the Insured intended to disappear– he had made plans for his children, started a business, which was deserted, and his financial and other possessions were left unattended. In addition, police information indicated that they believed that the Insured had been killed.

The Estate argued that well before the passage of seven years, the insurance company ought to have acted on the available evidence and paid out the insurance proceeds. Since the insurer did not do so, the insurer should now pay interest on the death benefits. Kennedy J. noted that counsel for the Estate had advised their client of the cost of applying for a death certificate and the uncertainty that may arise with that application before the expiration of seven years. The Estate, based on the advice of their lawyer, elected to wait until the expiration of seven years.

Kennedy J. could not conclude that the insurance company’s actions warranted the entitlement to interest, as the option to proceed earlier was available to the Estate and they chose to delay the application until the expiration of seven years. However, the evidence demonstrated that the insurance company did not take a particularly helpful approach to the beneficiaries. While the Estate made the decision not to proceed before the expiration of seven years, the insurance company had informal evidence, which in Kennedy J.’s view, could have supported a successful interim application for presumption of death. In the result, the application was dismissed without costs.

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