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Payouts for life (annuity)

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In the 1980s, Mr. A. purchased an annuity so that he and his wife would have a monthly income over the course of their lives. When one passed away, the annuity would continue to provide income to the surviving spouse.

Mr. A. passed away in 2015 and, after this, payments stopped. The insurance company’s final position letter to Mrs. A. explained that it was a single life annuity, which terminated upon the annuitant’s death. Mr. A. was the annuitant.

Mrs. A. asked OLHI to become involved. Our Dispute Resolution Officer (DRO) received all relevant documents from her and the insurance company. He learned from Mrs. A. that, over the years, their advisor had consistently confirmed to them in conversations that they had a joint annuity policy. The insurance company had also sent them a letter confirming that payments would be made to Mr. A. for the rest of his life and, should he die before his wife, the payments would roll over to her.

The DRO recommended that the complaint be escalated to an OmbudService Officer (OSO) for additional investigation. The OSO’s review revealed that the policy was in fact referred to as a single life policy in the contract. It outlined a 15-year payment guarantee to Mr. A. If he died within that period, the remaining payments would transfer to his wife. However, if he died after 15 years, no further payments would be made. The insurance company had honoured its guarantee, making payments for three decades before Mr. A. died.

The OSO agreed that the contract clearly stated that this was a single life policy. However, he also felt that it was reasonable for Mr. and Mrs. A. to believe they had a joint annuity for several reasons: First, it was what they intended to buy. Second, their agent had confirmed to them that it was a joint annuity. And, third, the insurance company had also confirmed in a letter to them that payments would be made to Mrs. A. for the rest of her life, upon Mr. A.’s death.

After the OSO and the insurance company discussed all the facts, the company agreed to reconsider. They compensated Mrs. A. for the lost income and also resumed monthly payments.

Disclaimer: Names, places and facts have been modified in order to protect the privacy of the parties involved. This case study is for illustration purposes only. Each complaint OLHI reviews contains different facts and contract wording may vary. As a result, the application of the principles expressed here may lead to different results in different cases.