Life insurance exclusion clauses spark social media debate

Many ordinary South Africans who seldom read “the small print” in contracts were recently puzzled by funeral insurance provider Icebolethu Group’s refusal to pay out the death benefit for a person who died while allegedly part of a kidnapping.

Icebolethu revealed that in the course of processing the claim lodged by the policyholder, a relative who had included the deceased as a covered life in her policy, it emerged that the deceased was killed in a shootout between suspects and police.

According to the insurer, the deceased had, at the time of the incident, been the driver of a vehicle in which a kidnapping victim was being conveyed.

Icebolethu’s refusal to pay (repudiation of the claim) has triggered curiosity and debate on social media platforms. The most common response has been Are they allowed to do that?”.

The answer is yesnd here’s why.

It all boils down to funeral cover policies being underpinned by a contract between the policyholder and the insurance provider.

Exclusion clauses to the effect that the insurance provider will not pay out in the event of the person whose life is covered by the policy dying as a result of his/her involvement in a number of activities are standard in the long-term life and funeral insurance industry.

One of the Standard Bank Liberty Group’s terms, for example, reads: “If you die [or are injured or disabled] because you committed a crime or did something illegal, you will lose all benefits. Liberty Group may cancel all cover and you will lose all premiums paid.”

Sanlam’s cover policy document reads: “These policies will not pay out in the case of any act or omission by the covered person which is in violation of any law.”

Icebolethu’s funeral plan document states: “No claim will be admitted in terms of this scheme if the event giving rise to the claim is caused directly or indirectly by or is in any way attributable to any of the following:

The willing participation by the principal insured and such other insured persons under this scheme in any of the following:
Any act or deed by the principal insured deliberately committed in violation of any law as well as any other insured person under the individual policy."

While some believe the exclusions are expressly or by implication provided for in statutes such as the Long Term Insurance Act 52 of 1998, they instead appear to have a more direct rooting in the principles in our law that govern the legality of contracts or contractual clauses.

Exclusion clauses are founded on the element of legality and enforceability of contracts, known as “public policy” in law.

Public policy represents the norms of society through whose expression we collectively say that certain contracts or clauses are undesirable and therefore invalid.

Public policy considerations generally guide instances when a departure is warranted and justifiable from the sacrosanct principles governing contract law that provide, in the main, for our freedom to contract with whoever we wish to, and on terms we may agree with the other party (freedom of contract), and that contracts are binding and must be honoured (pacta sunt servanda).

One element of public policy has to do with protection of public interest. This orients contract law towards guarding against contracts and clauses whose effect would be harmful to society in general.

It is on this basis that a contract, for example, through which “Person A” agrees with “Person B” that A will donate their kidney to B in exchange for money is prohibited. It’s generally understood allowing such contracts would spawn trade in human organs and exploitation of people which would undermine public interest.

Unlike in the example of the kidney sale contract, or a contract between two people to commit a crime, where it is the agreements’ unenforceability that upholds public policy norms, with the life and funeral cover exclusion clauses, it is their enforceability that has that effect. It would underminepublic interest as an element of public policy if exclusion clauses providing for an insurer to not pay out benefits in the event of the insured person dying while in the course of committing a criminal offence were to be deemed unenforceable.

The result, even if not specifically designed or desired, would be to provide insurance cover for risks and hazards people incur while undertaking unlawful activities.

It is for the same reasons injury or death occasioned by a person’s participation in such acts as rioting, insurrection, looting, war, insurgency and similar acts of lawlessness are generally not covered.

Viewed as part of our broader body of law, such exclusion clauses tread a well-worn path that refuses to let perpetrators of unlawful and criminal activities benefit from their acts or the protection of the law in redeeming their illicit gains.

In the law of successionthis finds expression in the principle encapsulated in the Roman-Dutch law maxim de bloedige hand neemt geen erf (the bloody hand gains no inheritance), which prevents a person who kills another from inheriting as a beneficiary to his or her victim’s estate.

In contract law it is cemented in the Latin maxim of ex turpi causa non oritur actio (also known as the turpi causa principle which precludes a person from having resort to, and the courts coming to that person’s aid, in trying to enforce an illegal contract).

While the public policy underpinnings of the exclusion clauses appear to be sound, there is something to be said for the long-term, life and funeral insurance industry enhancing transparency around their enforcement. This is especially so in the context in which 2025 confronted us with the reality that sometimes law enforcement officials engage in criminal activities and cover-ups.

In such circumstances, there is a voice in our society that questions whether it is, or should, remain sufficient for an insurer to base their decision on the say-so of a police docket to take such a consequential decision.

This may be an important point of reflection for the industry that would take on board the realities of our troubled times.