A wife may not be entitled to benefits under her husband's life insurance policy if the husband's former wife is the named beneficiary.

The Applicant, who was the second wife of the deceased, sought, unsuccessfully, a declaration that she was entitled to proceeds of the deceased’s life insurance policy. The Respondent was the deceased’s first wife and the named beneficiary under the policy.

Ferguson v. Mew [2008] O.J. No. 4892 Ontario Superior Court of Justice Strathy J. October 14, 2008.

 

At issue was whether someone other than the named beneficiary under a life insurance policy could claim under the policy. The Applicant was the deceased’s second wife whom he had been married to at the time of his death. They had 3 children together and had been married for a period of 14 years.

The Respondent was the deceased’s first wife and had been married to him for 26 years and they had 2 children together.  Two years prior to their divorce he had purchased a life insurance policy (“the policy”) which named her as the sole beneficiary. Upon their separation, they entered into an agreement that provided that he would maintain her as the sole beneficiary under the policy until February 28, 1995. The agreement erroneously stated that the policy expired on February 29, 1995.

After the Applicant and the deceased were married the premiums on the policy were paid out of a joint account. When he became unable to manage his affairs in 2006 the Applicant paid the premiums herself. It was her evidence that when they married it was the deceased’s intention to remove his first wife from the policy and designate her as the beneficiary. However, he never did so. The Applicant argued that a constructive trust in her favour should be invoked to prevent the deceased’s first wife from being the recipient of an unintended windfall. Alternatively, she claimed for rectification of the policy. 

The Court dismissed the Application and directed that the proceeds be paid to the named beneficiary. A number of cases were noted which have held that the Insurance Act requirements with respect to changing a beneficiary under a policy for life insurance should be interpreted strictly.  More specifically, the designation should be determinative of who receives the proceeds, except in exceptional circumstances.

A constructive trust requires, inter alia, that there be a lack of a “juristic reason” for the enrichment. The Court held that the receipt of funds because one is the named beneficiary under a life insurance policy is anything but a lack of a juristic reason for the enrichment. Therefore, the provisions of the Insurance Act should not be overridden. It is irrelevant whether one party may be more deserving or more in need than the other.

The Court noted that in certain circumstances a policy can be rectified if it does not reflect the intentions of the insured with respect to the designation of a beneficiary. However, in this case it was not clear that there was a mistake. The deceased may have had his reasons for deciding not to change the designation. The separation agreement provided that the life insurance policy was a temporary arrangement, but it also contemplated that further life insurance arrangements may be made following the expiration of the policy. The fact that he continued to pay the premiums on the policy reflect his intention not to change the policy.

This case was originally summarized by kyee@harpergrey.com and originally edited by dpilley@harpergrey.com

 

 

 

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