Analysis
Jocelyn Walia died on 25 March 2011 aged 38. She had married Mr Walia in July 2003 and they had a daughter Emma-Kaur in November 2004.
In 21 May 2002, they bought a fixed-term life insurance. On the first death the survivor would be paid the sum insured. On proof of one of the life insured was suffering a terminal illness then the payment was brought forward and then no death benefit would be payable.
After they separated Mrs Walia moved to the Philippines and had a son Philip Lim in July 2009. In February 2011 she was diagnosed with terminal cancer.
Mrs Walia died intestate and her estranged husband Mr Walia inherited her entire estate. Mr Walia received £113,000 under the policy.
Claims on behalf of Philip and Emma and by Mr Lim were all made under the Inheritance Act.
At first instance it was ordered that Mrs Walia was beneficially entitled to a joint tenancy under the policy to benefit from her (assumed) terminal illness before her death and Mr Walia was ordered to pay into court one-half of the death benefit.
Mr Walia appealed on the ground that the benefit would only be paid out on a terminal illness claim if the insured suffering from the terminal illness was alive. Therefore at the moment before her death the deceased was not beneficially entitled to a right under the policy to benefit from her terminal illness. Her death would cause the death benefit to be payable and extinguish any prospect of a terminal illness claim. In the alternative if she was entitled at the moment before her death to a right to benefit from her terminal illness then the right was valueless because on her death the benefit would become payable by reason of her death.
Held (appeal allowed – majority verdict)
- 1) The judge had to decide two points – whether the deceased had a severable interest in the terminal illness benefit payable under the life insurance policy and the value of that interest immediately prior to the deceased’s death. He did not determine the value.
- 2) Only one sum could be paid under the policy – either on the first death or prior to the first death on proof of a terminal illness. There were not two sums, each with a realisable value.
- 3) The terminal illness benefit was held on a joint tenancy. It was to be paid to them both as the policy made no provision for payment to be made to one of them. The right to receive it was contingent as it was dependent on an appropriate claim being made.
- 4) No claim had been made for the terminal illness benefit before death. In those circumstances, the insurer was justified in paying the death benefit to Mr Walia. Therefore the value of the severable interest in the terminal illness benefit immediately prior to death was nil.
- 5) McCombe LJ dissenting – immediately before her death the deceased had a half share of the terminal death benefit which amounted to a proprietary right that could be treated as part of the net estate. The fact that the insurer paid out for another reason does not negate the existence of the right at the relevant time.