Articles Posted in Life Insurance

Who are those who have an insurable interest in the life of a person?  The answer is usually obvious, but not always.

Here’s an answer.

Those who have an insurable interest in the life of another fall into three general classes:

Life insurance lawyers know that a beneficiary of a life insurance policy must have an “insurable interest” in the life of the insured.

Those who have an insurable interest in the life of another fall into three general classes:

(1)  one so closely related by blood or affinity that he or she wants the other to continue to live, irrespective of monetary considerations;

What if the person who is the named beneficiary of a life insurance policy, intentionally caused the death of the insured?  Who gets the money?

Pursuant to the 1987, Texas Supreme Court opinion, Crawford v. Coleman, a beneficiary who willfully participates in bringing about the insured’s death, either as a principal or as an accomplice, forfeits any right to benefits.  The benefits are payable to any innocent contingent beneficiary or to the insured’s nearest relative.

Sandra Shoaf was stabbed to death by her husband, Cornelius Shoaf.  Sandra’s life was insured under four insurance policies, each designating Cornelius as the primary beneficiary.  The trial court disqualified Cornelius from receiving Sandra’s death benefits because the jury found that Cornelius willfully caused Sandra’s death.

Who is the named beneficiary primary beneficiary under the policy and will that person always be the person who receives the policy benefits is a question many life insurance attorneys are asked by prospective client.

This issue is discussed in a 1981 Eastland Court of Appeals opinion styled, Pilot Life Insurance Company v. Koch.  This is a declaratory judgement case.

Pilot sought a judgment declaring it had no duty to pay life insurance proceeds to Lawrence Koch because of the death of his wife.  Pilot has issued a group policy to Koch’s employer.  The policy afforded life insurance coverage for employees and their eligible dependents.  Eligible dependents were defined to include “your husband or wife, unless you were legally separated or divorced.”  Pilot alleged that Mr. and Mrs. Koch were legally separated on the date of her death.  Koch filed a counterclaim seeking the policy proceeds.  The jury found that Mr. and Mrs. Koch were separated at the time of her death.  Although that separation was pursuant to a “temporary” court order entered in the pending divorce proceedings between the Koch’s, the trial court entered judgment for Koch notwithstanding the verdict on the theory that under Texas law there is no status of legal separation of a husband and wife before the marriage is dissolved by a decree of divorce.

Are spouses always entitled to life insurance benefits when the other spouse dies?  Life insurance lawyers need to be able to discuss this with prospective clients.

One spouse can designate his or her estate as the beneficiary of the policy, at the expense of the other spouse, absent any showing of actual or constructive fraud.  This was discussed and made clear in the 1994 Fort Worth Court of Appeals opinion styled, Street v. Skipper.

Policies may contain provisions automatically divesting a spouse of any interest in the proceeds, if the parties are “legally separated” or divorced.  This was discussed in the 1981 Eastland Court of Appeals decision styled, Pilot Life Insurance Co. v. Koch.  Also, the divorce decree may divest the former spouse of any right to the insurance proceeds.  This was discussed in the 1987 14th District Court of Appeals in an opinion styled, Novotny v. Wittner.  By statute, a divorce invalidates any pre-divorce designation of the former spouse as beneficiary, unless the former spouse is redesignated.  If the pre-divorce designation is invalidated, the proceeds go to any alternate beneficiary or to the insured’s estate.  If the insurer pays the former spouse based on an invalidated designation, the insurer is liable to pay the proper beneficiary.  This is found in the Texas Family Code, Section 9.301.

For attorneys handling life insurance claim, a 1998, opinion from the Corpus Christi Court of Appeals is a good read.  The opinion is styled, Camp v. Camp.

In this opinion, Rebecca Camp  (“Rebecca”) appeals a summary judgment denying her the proceeds of her deceased husband’s term life insurance policy.  Rebecca alleges the trial court erred in applying the “inception of title” rule to award the life insurance proceeds to the beneficiary named in her husband’s policy, which was purchased before his marriage to Rebecca.

John Camp (“John”) received the life insurance policy at issue as an employment benefit while he was still single and without children.  He named his mother, Mary E. Camp (“Mary”), beneficiary of the policy.  He did not change the insurance policy’s beneficiary designation to wife Rebecca after they were married.  Premiums from the policy were paid from John’s employment earnings during the years of his marriage to Rebecca until his death. Rebecca sued for a declaratory judgment against Mary as to the ownership of the policy.  She claimed John’s failure to name her as a beneficiary under the policy constituted a constructive fraud on the community estate.

Life Insurance cases run a wide gamut of issues.  Here is a 1997, Austin Court of Appeals decision that deals with the denial of life insurance benefits due to an aviation exclusion.  The style of the case is, Board of Trustees of the Employees Retirement System of Texas v. Linda Benge.

Linda is the beneficiary under the life insurance policy at issue in this case.  The policy is an Accidental Death policy and contained an exclusion for air travel or flight.  The insured, Mr. Hury, flew his plan in an air show and upon landing his plane, went into a “ground loop” before stopping on an adjoining runway.  Another plane, while landing, collided with the plane of the insured killing the insured.

The beneficiary of the insured made the claim for benefits which was denied due to the exclusion.  A Judge ruled in favor of Linda and this appealed followed.  This Court ruled in favor of the insurer.

Life insurance claim denials are more common than most people realize.  The majority of denials have to do with the allegation by the life insurance company that the insured misrepresented their health in the life insurance application.  The second most common reason has to do with exclusions in the policy.

Here is a 1998, opinion from the Austin Court of Appeals that deals with an exclusion.  The opinion is styled, Butler v. Group Life and Health Insurance Company.

During a social occasion, the decedent and a number of friends picked up an unloaded gun and began to point the gun into their mouths and pull the trigger.  At some point, ammunition was placed in the gun.  Decedent did not know this.  After the gun was loaded, but while the decedent still believed it was not loaded, decedent picked up the gun, pointed it to his mouth, pulled the trigger and killed himself.  Decedent’s beneficiary made a claim for life insurance benefits, accidental death benefits and attorney fees and interest as provided by the Texas Insurance Code.  The policy in question was issued by Group Life under the terms of the Texas Employees Uniform Group Insurance Act.  The Board administering the policy denied the claim because the decedent died as a result of intentionally self-inflicted injuries and because his death was not accidental.  The district court affirmed and Butler appealed.

Attorneys who handle claim denials in accidental death cases need to know the opinions handed down by the courts on these types of claim.  Here is a 1997, opinion from the Dallas Court of Appeals.  The opinion is styled, Grant v. Group Life & Health Insurance Company.

Grant used a pry bar to break into the residence of Stokes.  When grant entered the residence, Stokes shot him five times, killing him.  Grant’s wife sued Group Life to recover benefits under an accident policy for the death of her husband.  Group Life moved for summary judgement on the basis that Grant died while committing a burglary and, therefore, his death was not accidental.  The trial court granted the summary judgment and Grant appealed.

The Court held that because Grant’s death was not accidental, the trial court correctly granted Group Life’s Motion for Summary Judgement.  Grant argues that because Group Life did not furnish her with a certificate of insurance, it is estopped from relying on undisclosed exclusions.  Because the policy in question does not provide coverage for Grant’s death the policy’s exclusions are irrelevant.