October 20th, 2017 •
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COURT RULES ON BENEFICIARY OF LIFE INSURANCE POLICY
In the case of Estate of Charles Lane vs. Courteaux, the Court of Appeals reversed the Trial Court and ruled in favor of a designated beneficiary on an insurance policy. The facts in the Lane Case were that Mr. and Mrs. Lane were married and had one son, Conner. Mrs. Lane had a $600,000.00 life insurance policy in which she initially designated her husband as the sole beneficiary. When Conner was twelve years old, Mrs. Lane was diagnosed with a terminal cancer. A few weeks before her death, Mrs. Lane added her sister, Amanda Courteaux, as co-beneficiary of the life insurance policy. Mrs. Lane designated Mr. Lane and her sister to receive $300,000.00 each. Thereafter, Mr. Lane received a diagnosis of terminal cancer, and he was not expected to outlive his wife. However, the wife died unexpectedly, without warning. Mr. Lane died before the trial, but the executor of his estate was substituted as a party. The testimony at trial was that Conner was Mrs. Lane’s main priority and the center of her life and she wanted to be sure he was taken care of after she and her husband died. Before she died, Mrs. Lane informed her sister that there would be money available to take care of Conner, but the sister did not know that she (the sister) had been made beneficiary of Mrs. Lane’s life insurance policy until after Mrs. Lane died.
At the trial of the case, the Trial Court ruling was in favor of Conner, and he was granted a judgment in the amount of $297,000.00 on the grounds of promissory estoppel. By Mrs. Lane’s sister promising Mrs. Lane that she would care for Conner, and Mrs. Lane’s immediate response was that money would be available, the Trial Court ruled that it was undeniably reasonable for Ms. Lane’s sister to expect that Mrs. Lane would take steps to insure that the stated funds would be made available for Conner.
The Court of Appeals reversed the Trial Court and held that the money went to Mrs. Lane’s sister. The Court of Appeals wrote that an insurance policy is a contract between the policy owner and the insurance company. When interpreting an insurance policy, courts do not look outside the four corners of the document when there are no ambiguities, because a party’s intent is irrelevant when the language of the policy is clear and unambiguous. The Court of Appeals contrasted the facts in the Lane case with other opinions in which marital dissolution agreements impose a contractual obligation on a party to maintain a beneficiary designation. Unlike the cases involving marital dissolution agreements, Mrs. Lane was not legally mandated to name anyone in particular as a beneficiary of her life insurance policy. Although the estate and Conner submitted uncontroverted evidence showing Mrs. Lane’s intent was that the money was to be used for Conner’s benefit, the Court of Appeals wrote that no amount of evidence regarding Mrs. Lane’s intent changed the fact that Mrs. Lane named her sister as a co-beneficiary.
MY RECOMMENDATION: The Court of Appeals in the Lane case showed that equitable remedies did not come into play under the facts of that case because the express terms of the insurance policy controlled the outcome. The Lane case is a strong opinion in favor of designated beneficiaries, in spite of overwhelming evidence of a different intent of the policy owner. For those parties that are left out when it seems that an obvious disservice is the result, there are occasions where equitable remedies, such as promissory estoppel, constructive trusts, unjust enrichment, and reformation of a contract can be viable legal theories to carve out a remedy.
Yours very truly,
RAINEY, KIZER, REVIERE & BELL, P.L.C.
William C. Bell, Jr., Attorney at Law