ESTATE PLANNING NEWSLETTER – BE DILIGENT AND PRUDENT IN CHANGING BENEFICIARIES OF LIFE INSURANCE POLICIES

In the case of Globe Life and Accident Insurance Company vs. Nicholson and Oliver, the court dealt with the issue of the beneficiary of a life  insurance policy after Mr. Nicholson passed away. In April 2000, Globe Life and Accident Insurance Company (“Globe”) issued a $10,000.00 term life insurance policy to James Nicholson. The beneficiary on the policy was shown as his wife, Marie Nicholson. Two years later, the Nicholson’s were divorced. Mr. Nicholson died in January 2003. At the time of his death, Globe’s records reflected the ex-wife was the beneficiary of the policy. The widow made a claim for Globe for the policy proceeds. Shortly thereafter, Globe received a letter from Nicholson’s daughter stating that Mr. Nicholson has executed a change of beneficiary form that the daughter had mailed to Globe prior to his death. The form allegedly named the daughter as the new beneficiary.

Because of the competing claims, Globe filed an interpleader action to deposit the money with the court asking the court to determine the  rightful beneficiary. Globe set forth in the pleadings that no change of beneficiary form was received by its office prior to Mr. Nicholson’s death.

The trial court dealt with the issue of whether or not the decedent during his lifetime “materially complied” with the rules and regulations of  Globe with regard to a change of beneficiary. The policy provided that to change a beneficiary, a satisfactory written request must be received by Globe.

The court pointed out that Tennessee has long recognized the “substantial compliance” test for a change of beneficiary in a life insurance  policy. Essentially, Tennessee courts will give effect to the intention of the insured by holding that the change of beneficiary has been  accomplished when the insured has done “all that he could” to comply with the provisions of the policy. Whether the insured has done “all  that he could” to change a beneficiary compliance requires a necessary fact finding inquiry.

The court stated that the critical question in the Nicholson case was whether Mr. Nicholson took reasonable steps to comply with the change  of beneficiary requirement set out in the policy. Both the trial court and the Court of Appeals found that Mr. Nicholson had substantially  complied with the policy requirements for a change of beneficiary. Also, the court pointed out that Mr. Nicholson and his daughter had  received communications from Globe after the change of beneficiary form was sent to the address noted on it, giving them no reason to  believe the change of beneficiary form had not been processed by Globe.

My Comment: It is not unusual after a divorce that a divorced spouse wants to change the beneficiary on life insurance policies, retirement  accounts, annuities, and other assets for which there are beneficiary designations. Divorced spouses should be especially diligent, intentional, and prudent to make sure these things take place. Even though the daughter won the litigation as to the life insurance proceeds, she had the  expense of a trial and an appeal to get to that result.

Yours very truly,
RAINEY, KIZER, REVIERE & BELL, P.L.C.
William C. Bell, Jr., Attorney at Law