Suicide in Japan: Part Eight - Supreme Court Rules that Insurance Companies Must Pay out in Suicide Cases
J. Sean Curtin (Fellow, GLOCOM)
A full list of articles in this series can be found here.
The Supreme Court has made an important ruling in favour of suicide victims, obliging insurers to pay out benefits in suicide cases provided the policy is valid and the terms of the contract fulfilled. This is a landmark ruling because it represents the first time the nation's top court has given its opinion on policyholders who commit suicide. In this specifically case, it detailed the rights of clients who commit suicide for the sole purpose of releasing insurance money for beneficiaries.
The legal judgment will have major repercussions for the already hard hit insurance sector. New policies are likely to be more strictly drafted and premiums will probably be raised. In an earlier article in this series, the measures life insurance companies have already adopted to deal with the rapid rise in suicide cases was discussed.
On 25 March 2004, the Supreme Court ruled that insurance companies must pay out on valid life insurance policies even in cases where the policyholder deliberately commits suicide for the express purpose of providing insurance payments to beneficiaries. The only proviso accompanying this ruling was that the policyholder's death must occur after any agreed suicide immunity period has expired, and the death was not the result of any kind of criminal or illegal activity.
Suicide payout contested in court
The Supreme Court case revolved around a heavily indebted company president who took out ten different life-insurance contracts with different insurers between 1994 and 1995. The combined worth of the policies was about 1.98 billion yen. His wife and company were listed as beneficiaries in the event of his demise. Each of the separate policies contained a "hold harmless agreement" clause which stipulated insurance money would not be paid in the event of a suicide occurring within a specified time period of the contract commencing.
In October 1995, after some of the exemption periods had expired, the man killed himself by jumping from the roof of a building in Saitama Prefecture. The life insurers rejected the subsequent claim, arguing that the man invalidated the policies by committing suicide in order that his beneficiaries could receive insurance money. The dispute went to the Tokyo District Court, which ordered those life insurance companies whose "hold harmless agreement" had expired to pay out to the beneficiaries a total of about 600 million yen.
Tokyo High Court overturns lower court decision
However, the life insurers filed an appeal with the Tokyo High Court, insisting the man committed suicide with the primary intention of receiving insurance payouts, which they claimed constituted sufficient grounds to terminate the contracts. The high court ruled in their favour. Its decision basically said that if the insurers could effectively prove the suicide was committed solely for the purpose of receiving insurance benefit payments, the companies would be under no obligation to pay out in accordance with a provision contained in the Commercial Code. This enabled the insurance firms to refuse to pay the benefits on the basis that they were exempt from doing so because the policyholder had committed suicide primarily for the purpose of obtaining insurance payouts.
In rejecting the plaintiff's claim, the Tokyo High Court ruling stated, "If payouts were to be made even for suicides, it would be likely to induce greater numbers of suicides and make upholding administration of the life insurance system extremely problematic."
Supreme Court quashes Tokyo High Court ruling
The losing party lodged an appeal at the Supreme Court, which quashed the Tokyo High Court's decision and delivered a ruling in line with the initial Tokyo District Court decision. In his judgment, presiding Judge Tatsuo Kainaka of the First Petty Bench of the Supreme Court did recognize the life insurers' contention that the underlying motivation and purpose behind the suicide was to ensure that the beneficiaries received insurance money. However, the judge ruled that regardless of this, the life insurers were still obliged to make payments in accordance with the terms of the individual policies.
The Yomiuri Newspaper quoted the decision as stating, "Even if the client committed suicide to gain insurance money, it can be interpreted that insurance companies are obligated to make such payouts if the period of immunity contained in the hold harmless agreement had expired, and provided the death was not the result of criminal activities."
The court sought to clarify the situation regarding suicide by stating that in cases where deaths arose due to criminal activities or other such violations, the insurance companies could be exempted from making payments even after policy exemption periods had expired. This was an important clarification as in recent years life insurers have risen the suicide exemption period from two to three years and consequently there have been a number of cases in which policyholders have hired criminals to assassinate them in order to circumvent the exemption period.
Now that the Supreme Court has made its decision, the case will be remanded back to the Tokyo High Court, which will amend its original ruling accordingly. The Supreme Court also ordered the lower court to deliberate payments for the insurance policies and other matters pertaining to the case.
Life insurance industry hit by ruling
The decision is likely to have a big impact on new policies drawn up by life insurance firms, which will probably extend suicide exemption periods to three, four or five years or may even offer cheaper policies with no-pay suicide agreements. During the decade-long economic downturn, there has been a sharp increase in the number of heavily indebted people taking out life-insurance policies and then killing themselves to generate insurance payouts. The high suicide rate is forcing the insurance industry to continually adapt its policies in order to cope with the spiraling cost of the suicide epidemic. This tragic situation is just one aspect of the suicide issue, a terrible social phenomenon which is impacting on all areas of society.
A full list of articles in this series can be found here.