CIS/1839/2009

DECISION OF THE UPPER TRIBUNAL

(ADMINISTRATIVE APPEALS CHAMBER)

Hearing and Decision

1. In a technical sense, this appeal by the claimant succeeds and I set aside the decision of the Social Entitlement Chamber of the First-tier Tribunal sitting at Exeter on 22^nd April 2009 and made under reference 919/087/03335. However, this does not assist the claimant because in accordance with the provisions of section 12(2)(b)(ii) of the Tribunals, Courts and Enforcement Act 2007 I substitute my own decision to the same effect. This is that in respect of the funeral expenses incurred after the death of the deceased, the claimant is entitled to a payment of £56.65 from the social fund but not to any greater amount.

2. I held an oral hearing of this appeal on 28^th January 2010. The claimant did not attend in person but was represented by her daughter, Mrs D. The Secretary of State was represented by Mr S. Cooper, instructed by the Solicitor to the Department for Work and Pensions. I am grateful to all of them for their assistance.

3. Following the hearing I issued a Direction requesting further written submissions on the question of insurable interest. Unfortunately the response from the Secretary of State seems to show that his officials did not understand the issue and did not seek legal advice on it. Nevertheless I have proceeded to make my decision.

Background and Procedure

4. In the case of a funeral expenses payment from the social fund, a claim is not made until after the death of the deceased and is not made on behalf of the deceased or by or on behalf of his or her estate but by the person who has accepted responsibility for payment of the funeral expenses.

5. The deceased (Mrs D’s grandmother) was born on 1^st August 1908 and died on 12^th May 2008 at the age of 99. Her daughter, the claimant, took responsibility for the funeral, which took place on 23^rd May 2008. The claimant herself was born on 22^nd May 1927 and has financial difficulties, being entitled to pension credit and council tax benefit, as well as having to repay a sizeable bank loan. The charges for the funeral were £2371 and on 3^rd June 2008 the claimant made a claim for a payment of funeral expenses from the social fund. On 11^th July 2008 the Secretary of State decided that of the total bill, only £1298 could be taken into account under the regulations (this is not disputed) and that a payment from the social fund was payable, but because of proceeds of insurance policies that were available, the payment was limited to £56.65 (this limitation is the subject matter of the dispute). In order to pay the funeral directors the claimant took out a bank loan of £1500 which was consolidated with other, much larger, loans that she had taken out for home improvements.

6. The claimant appealed to the tribunal against that decision of the Secretary of State. The First-tier Tribunal considered the matter on 22^nd April 2009 and confirmed the decision of the Secretary of State. On 24^th June 2009 the presiding judge of the tribunal refused to set aside the decision of the tribunal but on 13^th July 2009 he gave the claimant permission to appeal to the Upper Tribunal against the decision of the First-tier Tribunal. The Secretary of State accepts that there were problems with the decision of the First-tier Tribunal but submits that ultimately it reached the correct decision.

7. Mrs D represented her mother, the claimant, at the hearing in the tribunal below and has made certain criticisms of the procedure. It is not necessary for me to express a view on those criticisms because she accepts that at the Upper Tribunal hearing the basic facts were not in dispute and that she had a full and proper opportunity to put her case in an unhurried manner.

The Insurance Policies

8. The deceased had taken out a number of insurance policies on her own life, although I understand that at some stage the claimant took over payment of the premiums. These were payable on the death of the deceased and formed part of the estate. The proceeds totalled £350.78. There were two further policies that that the claimant had taken out on the life of the deceased, the proceeds of which totalled £890.57. The claimant was the proposer for, paid the premiums for and was the beneficiary of these policies. Mrs D states that this was her mother’s way of saving. There is evidence from the insurance company, in a letter of 7^th May 2009 (page 91 of the file) to the effect that the policies could have been cashed before the death of the deceased. This information was not available to the tribunal, which assumed that the policies were only payable on the death of the deceased. That was an error which went to its reasoning in the case and that is why I have set aside its decision. However, that does not assist the claimant.

Legal Provisions

9. Section 138(1) of the Social Security Contributions and Benefits Act 1992, so far as is relevant, provides:

138(1) There may be made out of the social fund, in accordance with this Part of this Act-

(a)   payments of prescribed amounts, whether in respect of prescribed items or otherwise, to meet, in prescribed circumstances, … funeral expenses …

10. Section 175 of the Act provides very wide powers to make regulations, including regulations prescribing the circumstances to be covered by the provisions of section 138(1).

11. The main provisions are to be found in the Social Fund Maternity and Funeral Expenses (General) Regulations 2005 as amended. It is not necessary to go through the whole of the regulations. It is sufficient to refer to the following provisions:

10(1) There shall be deducted from the amount of any award of funeral payment which would otherwise be payable –

(a)   the amount of any assets of the deceased which are available to the responsible person …

(b)  the amount of any lump sum due to the responsible person or any other member of [her] family on the death of the deceased by virtue of any insurance policy, occupational pension scheme or burial club, or any analogous arrangement

It is well established and not disputed that the word “due” in regulation 10(1)(b) means legally due, in the sense that the responsible person or family member concerned must have a right to legally enforce payment.

The Insurable Interest Issue

12. The position was summarised in paragraph 1.8 of “Insurance Contract Law Issues Paper 4: Insurable Interest” published on 14^th January 2008 by the Law Commission and the Scottish Law Commission:

“1.8 Policyholders may take out unlimited insurance on their own lives, or on the life of a spouse or civil partner. However, the law does not recognise other classes of natural affection. For example, parents have no insurable interest in the lives of their children and, in England, children have no interest in the lives of their parents. Nor do cohabitees have a general right to insure each other’s lives.”

13. What concerned me was a possible argument that if the claimant had no insurable interest in the life of the deceased, then payment under the relevant policy is unenforceable and is not “due” within the meaning of regulation 10(1)(b).

14. There is no dispute in the present case (and it is clear from the documentation) that the insurance company accepted premiums from the claimant and regarded itself as legally obliged to pay her on the death of the deceased. In these circumstances I do not see that a court (or, in the absence of court action, the regulatory mechanisms for the insurance and life assurance industry) would have refused to enforce payment. In the circumstances I regard the payment as “due”. Even if this was not, technically speaking, an “insurance policy” within the meaning of regulation 10(1)(b), it was an “analogous arrangement”.

Conclusions

15. The maximum amount of payment that could be considered under the regulations was £1298. Deducting £350.78 in respect of the policies taken out by the deceased leaves £947.22. Deducting a further £890.57 in respect of the policies taken out by the claimant leaves £56.65, which was the amount allowed by the Secretary of State.

16. The claimant argues that because she could have cashed in at least some of the policies at an earlier stage and spent the money, they should not now be taken into account. However, the fact that she did not cash them in at an earlier stage does mean that they were due on the death of the deceased and, as a matter of law, they have to be taken into account. The claimant also argues that account should be taken of any similar policies held by other members of the family. Regulation 10(1)(b) only covers amount due to the responsible person (the claimant) and member of her family, narrowly defined in regulation 3 to refer to members of a couple and people in the same household. The claimant suggests that she has been a victim of her own honesty and that if she had not declared the policies, she would not be in this position. However, in those circumstances she would probably have been committing a criminal offence. Finally she queries whether it was fair for her to have to pay for the funeral in the first place as there are many members of the (wider) family who are in a better financial position. Neither the Secretary of State not the Tribunal Service forced her to become the responsible person. If she chose to do so, and to make a claim under the social fund scheme, she was bound by its rules.

H. Levenson

Judge of the Upper Tribunal

19^th May 2010