Bank sues Jubilee over Sh95m loan to deceased man

An insurance firm has been sued for failing to repay a loan taken by a terminally ill patient using his life cover as guarantee.

Consolidated Bank of Kenya, in its case against Jubilee Insurance Company, claimed that between 2016 and 2017, Mustafa Athman Mohammed approached it for credit facilities and was granted asset financing facilities totaling Sh95 million.

He was further given an overdraft of Sh5 million on condition that he got life insurance to cover the loan facility.  

According to the bank, the loans were secured through a guarantee of the Mortgage Protection Policy issued by Jubilee.

Mr Mohammed died in July 2017 and his loan balance was Sh87 million. The bank filed a claim with the insurer in accordance with the life policy taken by Mohammed to secure the loan.

Non-disclosure

But Jubilee rejected the claim, alleging that there was non-disclosure of material facts in the application for the policy by Athman.

The insurance company stated that Athman had failed to disclose he was suffering from a terminal disease.

The bank, through the law firm of Nyamodi and Advocates, has argued that the responsibility to conduct due diligence prior to issuing the policy lay solely with Jubilee.

According to the lawyers, the bank only acted as a third party when granting the loan facility.

The bank accused the insurer of breaching its responsibilities by refusing to clear the outstanding amount at the time of Athman’s death.

The bank argued that it would not have disbursed the loan to Mohammed if he did not have a life cover. 

It wants the insurance firm compelled to pay the outstanding balance and damages for breaching the terms of the insurance contract.