Life Insurance Change Of Beneficiary

Dallas insurance lawyers need to understand when a change of beneficiary is valid in a life insurance policy. A 1984, Texas Supreme Court case had this as an issue. Here is some relevant information about that case:
Herschel Tomlinson, Sr. brought this suit against Sally O. Jones to recover $39,700 in life insurance proceeds which Mr. Tomlinson, Sr. alleged were wrongfully paid to Ms. Jones after the death of Herschel “Tommy” Tomlinson, Jr. Tommy was the son of Herschel Tomlinson, Sr. and the husband of Sally O. Jones. After a jury trial, the trial judge granted Ms. Jones judgment notwithstanding the verdict.
Tommy was employed by Producers Grain Company in Amarillo, Texas and was covered by two life insurance policies issued in 1968 and 1969.
Two provisions of the policies administered by Producers said this:
Section 5.07–In the event of the death of a participant prior to normal retirement date, the Trustees shall instruct the life insurance company to pay to the beneficiary or beneficiaries designated by the employee in the policy or policies on his life or annuity, or, if none be so designated, to his estate, the death benefits provided by the terms of such policy or policies.
Section 9.02–If any participant shall fail to instruct the Trustees to designate a beneficiary or beneficiaries, the Trustees shall designate as beneficiary or beneficiaries on his behalf, in the order named, these persons in the following classes who survive the participant: (1) spouse, (2) issue, per stirpes, (3) parents, (4) brothers and sisters, (5) nephews and nieces, and (6) estate of the participant.
On December 15, 1974, Tommy Tomlinson was involved in an automobile accident and sustained second and third degree burns over fifty percent of his body. Because of this severe injury, he was taken immediately to a burn Texas where he stayed until his death on January 25, 1975. On January 18, 1975, one week prior to Tommy’s death, Sally Jones and two witnesses met with Tommy in the hospital, where Tommy was under 24-hour a day medical care. At that meeting, Tommy allegedly consented to the execution of a special power of attorney authorizing Sally to change the beneficiary of Tommy’s life insurance policies from Tommy’s father to Sally. Tommy did not actually sign this document himself (his hands were too badly burned to have permitted that in any case); Sally signed the document in his behalf. Nevertheless, Sally and the two witnesses present testified at trial that it was their belief that Tommy was alert, understood what was being contemplated, and affirmatively consented to the execution of the document in question.
Two years later, in May of 1977, Tommy’s father, Herschel Tomlinson, Sr., brought this suit against Sally Jones. Mr. Tomlinson, Sr. alleged that Tommy had lacked sufficient mental capacity on January 18, 1975 to consent to the execution of the special power of attorney and therefore the beneficiary change was a nullity. At trial, the jury found that Tommy had indeed lacked sufficient mental capacity on January 18, 1975 to effectuate the change in beneficiary. The trial judge granted Ms. Jones a judgment notwithstanding the verdict, however, on the grounds that (1) there was no evidence to support the jury finding of no capacity and (2) such jury finding was irrelevant anyway because the insurance contract between the Trust and the insuror gave the trustees the power to change the beneficiary on their own initiative.
This Court found there was some evidence to support the jury’s finding of no capacity. Tommy’s medical records, which were properly admitted into evidence at trial, paint a grim picture of a man critically injured and in great pain, at times heavily drugged, at times hallucinating, with little possibility of survival. Indeed, the discharge summary prepared by Tommy’s physician after Tommy’s death stated that “in spite of all [the medical] measures [drugs, respirator, etc.], the patient continued his downhill course.” This Court held that this constitutes some evidence of “physical problems … consistent with mental incapacity.
Having held there was some evidence to support the jury’s finding of no capacity, the Court examined the effect of that finding and said it was critically important whether Tommy had sufficient mental capacity, at the moment the special power of attorney was executed, to effect a change in beneficiary.
Given the jury finding of no capacity, it is clear that Mr. Tomlinson, Sr., was the rightful beneficiary of the two life insurance policies at the time of Tommy’s death in 1975. But for the special power of attorney allegedly executed on behalf of Tommy on January 18, 1975–which power of attorney must be considered a nullity in light of the jury finding of no capacity–Mr. Tomlinson, Sr. would have received the insurance proceeds in dispute.
This Court ruled in favor of the dad.