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Life Insurance And Subsequent Divorce

Life insurance and a subsequent divorce will present problems, one of which was addressed by the United States 5th Circuit Court of Appeals.  This is a June 2024, opinion styled, Transamerica Life Insurance Company v. Holly L. Moore versus Jeffrey H. Simpson.

Texas Family Code, section 9.301 generally operates to strip “the insured’s spouse” of beneficiary interests in insurance policies once a divorce decree renders the policy beneficiary an ex-spouse.  This case turns on whether “the insured’s spouse” includes someone who was named a policy beneficiary before she became the insured’s spouse: Ian Simpson took out a life insurance policy and named his fiancée Holly Moore primary beneficiary and his father Jeffrey Simpson contingent beneficiary.  The couple then married, then divorced, and then Ian died without ever changing the policy beneficiaries.

The district court held that section 9.301 comes into play only if the insured and the beneficiary were married when the insurance policy was purchased.  The court reasoned that because a policy purchased prior to marriage did not name “the insured’s spouse,” a later divorce decree would not divest the beneficiary of insurance proceeds.  But section 9.301’s text indicates that “the insured’s spouse” centers on an individual’s status at the time a divorce decree is rendered, regardless of when a policy was first obtained.  Therefore, the Court reversed the district court’s judgment awarding Ian’s policy proceeds to Holly and rendering judgment in favor of Jeffrey Simpson.

This case is a must read for life insurance lawyer’s dealing with a policy insuring an ex-spouse.

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