Beneficiary Disputes

There are many different types of life insurance beneficiary disputes. Some of the most common ones are highlighted below.

Divorced Spouses

Beneficiary disputes can arise when there has been a divorce and the former spouse was not replaced as the life insurance beneficiary.

However, New York and New Jersey have enacted laws that prevent a former spouse from receiving the death benefit, unless certain conditions are met. These are referred to as Divorce Revocation Laws and they can be found at Estates, Powers and Trusts Law § 5-1.4 (New York) and N.J.S.A. § 3B:3-14 (New Jersey).

These statutes function to automatically remove the former spouse as beneficiary upon the entry of divorce. In effect, they treat the divorced spouse as if he or she had predeceased the insured. These laws were enacted because many divorced persons do not wish to maintain life insurance coverage for a former spouse, but there were situations where they neglected to remove him or her as beneficiary.

That said, exceptions to these laws exist so that the former spouse can receive the death benefit under certain circumstances. Most commonly, a divorce decree, marital settlement agreement, or court order will require one spouse to maintain a life insurance policy to serve as security for alimony payments in the event of death. In that case, the former spouse will have a right to the death benefit even though there has been a divorce.

But even this analysis is not clear cut and can be the subject of litigation if the amount of the life insurance policy is greater than the amount of remaining alimony payments.

Undue Influence, Sound Mind, Fraud and Duress

There are life insurance beneficiary disputes where it is alleged that the insured made a beneficiary based on the undue influence of another person. The legal requirement for undue influence is that another person improperly influenced the insured to make a beneficiary change that he or she would not have made.

A person is not of sound mind if he does not comprehend the nature of a transaction. A typical example is an insured who is suffering from illness or is on medications so that he lacks understanding that he is signing a form that will change his life insurance beneficiary. A beneficiary change is invalid if made when the insured is not of sound mind.

Relatedly, fraud occurs when another person intentionally misleads the insured to sign a beneficiary change. An example would be if the person falsely tells the insured he is signing a medical authorization when it is actually a beneficiary change form.

Duress occurs when an insured is forced to make a beneficiary change in the face of a meaningful threat from another person.

Whether the Beneficiary was Changed

Beneficiary disputes can involve whether the beneficiary was in fact changed, or if the life insurance company was negligent and failed to process the change.

The doctrine of substantial compliance often comes into play in the former situation. Even if the insured failed to satisfy the formal requirements under the policy for a beneficiary change, the courts will treat it as changed under certain circumstances. This can occur if the insured had the intent to change the beneficiary prior to death but was thwarted or prevented from doing so or otherwise was unable to carry out all the necessary requirements.

Forgery

Some beneficiary changes may be the result of forgery. Under these circumstances, the named beneficiary may not be allowed to recover the death benefit. We have worked with expert forensic handwriting analysts to determine whether a signature is real or forged.

Slayer Laws

In some cases, the life insurance beneficiary is a suspect in the insured’s death. In virtually all states, there exist what are called “Slayer Laws” that legally prohibit a person responsible for the intentional killing of a life insurance policyholder from recovering the death benefit.

In these cases, the claimants for the policy must litigate the issue of whether the beneficiary intentionally killed the insured—mirroring what happens in a criminal case, but subject to a lesser standard of “preponderance of the evidence” instead of the criminal standard of “beyond a reasonable doubt.”

If you are involved with a New York or New Jersey life insurance beneficiary dispute, you can call the Law Offices of Eric Dinnocenzo at (212)933-1675 for a free consultation.