Life Insurance And Spouses

Are spouses entitled to life insurance benefits?  That is a normal question in a lot of life insurance cases.  Here is some law in that regard.

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 made clear in the 1994, Fort Worth Court of Appeals opinion, Street v. Skipper.

The 1981, Eastland Court of Appeals opinion styled, Pilot Life Insurance Co. v. Koch, says, policies may contain provisions automatically divesting a spouse of any interest in the proceeds, if the parties are “legally separated” or divorced.  Also, according to the 1987, 14th District Court of Appeals opinion styled, Novotny v. Wittner, the divorce decree may divest the former spouse of any right to the insurance proceeds.  By statute, Texas Family Code, Section 9.301, 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.

In a United States Supreme Court opinion styled, Egelhoff v. Egelhoff, the Supreme Court held that ERISA preempts a state law that revokes a life insurance beneficiary designation when spouses divorce.  The Washington State statute reviewed in that decision provided that if the life insurance beneficiary designation of the ex-spouse was made before the divorce, that designation was considered revoked.  Because the insurance was part of an employee benefit plan, the Supreme Court held that ERISA preempted state law so that the benefits would be paid in accordance with the plan documents.  The insured had not changed the beneficiary designation according to the plan, so his ex-wife received the benefits.  Texas has a similar provision in the Family Code, which also would be preempted.