(a) Procedure for Realizing an Assignment of a Life Insurance Policy in the Event of Death of the Life Assured [15 marks]

In Ghanaian banking practice, life insurance policies are commonly accepted as security for advances under the Borrowers and Lenders Act, 2020 (Act 1052), which regulates movable securities including assignments. The assignment creates a legal or equitable interest for the bank (assignee) over the policy, allowing realization upon default. However, realization upon the death of the life assured (the policyholder/borrower) differs from surrender during lifetime, as it triggers maturity of the policy. The bank must follow a structured procedure to enforce its rights, ensuring compliance with the Insurance Act, 2021 (Act 1061), the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), and common law principles to avoid claims of wrongful realization or breach of duty.

The key steps are as follows:

1. Verify the Assignment and Default Status:
   • Confirm the assignment is valid and perfected. Under Ghanaian law, assignments of life policies must be in writing, with notice given to the insurer (as per Section 63 of the Insurance Act, 2021). The bank should hold the original policy document or a memorandum of assignment.
   • Establish default: Review loan agreements for events of default (e.g., non-payment, inactivity as in this case). Demand letters (like the one sent last December) should have been issued, giving reasonable notice (typically 30-90 days per facility terms or BoG guidelines on loan recovery).
   • Practical example: In cases like those during the 2017-2019 banking cleanup, banks like GCB Bank reviewed assignments meticulously before enforcement to avoid litigation.
2. Obtain Proof of Death:
   • Upon notification of death (e.g., from the executor or family), require official proof: A certified death certificate from the Births and Deaths Registry under the Registration of Births and Deaths Act, 2020 (Act 1027).
   • If not provided, the bank may independently verify via public records or legal inquiries to mitigate fraud risks, aligning with BoG’s Anti-Money Laundering directives.
3. Notify the Insurer and Submit Claim:
   • As assignee, the bank submits a claim to the insurer for the policy proceeds (capital sum assured, plus bonuses if applicable). Include:
     • The assignment deed.
     • Proof of death.
     • Evidence of outstanding debt (e.g., account statements showing GHC 150,000 borrowing).
   • The insurer verifies the claim and pays the proceeds directly to the bank up to the secured amount. Excess (if any) goes to the estate or beneficiaries.
   • Timeline: Insurers typically process within 30-60 days under Insurance Act guidelines, but delays can occur; banks like Ecobank Ghana often follow up via legal teams.
4. Handle Surplus Proceeds:
   • Apply proceeds first to the debt (principal, interest, charges) as per the assignment terms.
   • Remit any surplus to the executor/administrator of the estate, after deducting realization costs. This prevents claims of over-realization, as seen in historical cases where banks faced suits for withholding surpluses.
5. Legal Considerations and Protections:
   • No automatic three-month notice for realization upon death, as maturity is triggered naturally. However, pre-death demands should comply with facility agreements.
   • If the policy was assigned absolutely, the bank has priority over beneficiaries. Reference cases like Barclays Bank v. Astley Industrial Trust (international comparison) for assignee rights.
   • Register the security if required under the Collateral Registry (per Act 1052) for priority against other creditors.
   • Involve legal counsel: Engage solicitors to handle claims, especially if contested, to ensure BoG compliance on risk management.

Failure to follow this could expose the bank to claims under tort (e.g., conversion) or breach of contract. In practice, post-DDEP recovery efforts in 2023-2024, Ghanaian banks emphasized documentation to secure realizations.

(b) How Should the Bank Deal with David’s Demand? [5 marks]

The bank’s surrender of the policy pre-death was valid based on default, but David’s claims (deprivation of capital value, lack of inquiry into illness, insufficient notice) require careful handling to mitigate litigation risks under Act 930 and common law duties.

• Review Internal Actions: Confirm surrender complied with terms – no duty to inquire into health unless specified (banks aren’t insurers). The three-month notice isn’t statutory for assignments; it’s per contract.
• Respond Professionally: Advise David in writing: The bank acted as secured creditor; surrender realized GHC 215,000 against GHC 150,000 debt, with surplus (if any) available. Provide account reconciliation.
• Offer Settlement: Propose amicable resolution, e.g., remitting surplus or explaining that death post-surrender doesn’t retroactively invalidate (policy was already encashed).
• Prepare for Legal Defense: If sued, rely on assignment clauses and default evidence. Reference BoG’s Corporate Governance Directive 2018 for prudent enforcement.
• Escalate Internally: Involve compliance/risk teams; document all interactions to avoid reputational damage, as seen in past Ghanaian bank disputes.

This approach protects the bank while maintaining ethical practices.