- 20 Marks
POB-LAW-AND-PRACTICE – APRIL 2024 – LEVEL III – Q6 – Realizing Assignment of Life Insurance Policy
Case study on bank's surrender of an assigned life insurance policy as security, followed by death of the borrower; advise on procedure for realization upon death and handling executor's demands.
Question
Parkinson Mainnoo, a retired Company Director, has a limit of GHC200,000 on his current account, but with a borrowing at GHC 150,000 the account became inactive twelve months ago. There was no response to your letters and last December you called in the borrowing. Again, there was no response and as you held a legal charge by Mainnoo over an Endowment Life Policy, nominal value GHC 250,000, with a surrender value of GHC 215,000, you surrendered the policy.
Now, seven (7) weeks later, you had a visit from Mr. Mainnoo’s son, David who told you that his father died in hospital last week and that he is named as Executor in the will. He enquires about the Life Policy and is astounded to learn that the bank has surrendered it. He claims that as sole beneficiary, he has, by your action, been deprived of the Capital Value which would have accrued to the estate upon his father’s death. He further states that had the bank required, they would have learnt that his father was seriously ill in hospital. Mr. David Mainnoo, who is a legal executive with a firm of solicitors, says that in any even the bank should have given three (3) months’ notice before realizing the Security and he threatens action as Executor and sole beneficiary.
(a) Advise the bank on the procedure for realizing an Assignment of a Life Insurance Policy in the event of death of the Life Assured. [15 marks]
(b) How should the bank deal with David’s demand? [5 marks]
[Total: 20 marks]
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