The Kuwaiti Court of Cassation issued a landmark ruling by its Commercial Circuit, clarifying that financial institutions, including banks, cannot hold heirs responsible for paying off a deceased person's debts if the individual had signed loan contracts with life insurance. The court emphasized that the insurance companies with which the banks had entered into loan insurance agreements are obligated to cover the outstanding loan balance in the event of the borrower's death or disability.

The Case and Court’s Ruling

The case revolved around a civil commercial lawsuit filed by the first contested bank against the appellant and other parties. The bank sought joint responsibility for a KD 6,878,559 debt, along with 10% annual compensation for the delay, from the date the account was closed until full payment. The bank argued that under a banking facilities contract, the borrower’s heirs were responsible for repaying a KD 7,000 loan, which had an interest rate of 10% per annum and was due in monthly installments.

The borrower continued to make payments until his death. Upon his passing, all outstanding installments, amounting to KD 7,000, along with the interest, became due. However, the loan was insured with an insurance company, which was supposed to cover the remaining balance and interest in case of death or disability. When the insurance company refused to pay, the heirs were required to pay the loan within the limits of the deceased’s estate. In response, the bank filed the lawsuit.

The Court of Cassation ruled that the lawsuit had lapsed due to the statute of limitations concerning one of the parties and rejected the case regarding the remaining respondents. The court upheld that life insurance provided on the loan was the responsibility of the insurance company, not the deceased’s heirs.

Significance of the Ruling

This ruling has significant implications for financial institutions, insurance companies, and heirs alike. It sets a clear precedent that banks cannot pursue heirs for debts if a life insurance policy covers the loan, highlighting the importance of such insurance agreements in protecting both borrowers and their families.