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Kuwait: Heirs not liable for debts if insurance coverage in place

KUWAIT CITY: The Court of Cassation confirmed in a ruling issued by the Commercial Circuit that financial institutions, including banks, cannot hold heirs responsible for paying off the debts of a deceased person as long as all loan contracts signed with the individual before their death included life insurance. In its ruling, the court stated that the insurance companies with which the banks had signed loan insurance agreements are responsible for repaying the loans in case of the person’s death or inability to work.

The case in question involved a civil commercial lawsuit filed by the first contested bank against the appellant and other parties, demanding a joint obligation to pay KD 6,878,559, along with the agreed compensation for the delay, set at 10 percent annually from the date the account was closed until full payment was made. In a statement, the bank stated that under a banking facilities contract, the heirs of the appellants and respondents had obtained a loan of KD 7,000 with an interest rate of 10 percent per annum, to be repaid in monthly installments.

The borrower continued to make payments until his death. Upon his death, all outstanding installments, amounting to KD 7,000, along with the interest due until the account closure date, became due. The loan had been insured with an insurance company to cover its value in the event of disability or death. As such, the insurance company was obligated to pay the remaining loan balance and the due interest, but the insurance company refused.

The heirs of the borrower were required to pay the loan jointly with the insurance company, within the limits of what they received from the deceased’s estate. As a result, the bank filed the lawsuit. The court ruled that the lawsuit had lapsed due to the statute of limitations regarding the second respondent and rejected the case concerning the remaining parties.