Attorney Handling Life Insurance Claims That Are Denied – Beneficiary?

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.

Mary filed a summary judgment wherein she argued that because all premiums of the life insurance policy were paid by John Camp’s employer, no funds from the Camp community ever were actually expended to make any premium payments on the policy.  She argued that because the policy was purchased before John married Rebecca, it is his separate property and she, as beneficiary, is now entitled to the entire proceeds of the policy.  On this same date, Mary also filed a counter claim for declaratory relief and attorneys’ fees.  By her response to the summary judgment motion, Rebecca argued there are “numerous disputed issues of material fact” which would preclude summary judgment.  She alleged these facts in the written response, and attached a supporting personal affidavit in support of the allegations.

The trial court issued a final judgment in the cause, ordering that Mary Camp is entitled to the $35,000 proceeds of the life insurance policy, less $1568.88 to Rebecca Camp for the value of her community interest in the life insurance premiums.

Mary contended that the inception of title rule governs the disposition of this case, i.e., because John acquired title to the insurance policy before his marriage to Rebecca, it is his separate property and his designation of his mother as beneficiary stands.  It is undisputed that John acquired title to the insurance policy through his employment compensation prior to his marriage to Rebecca and that Mary is the named beneficiary.  Texas case law supports the conclusions that the policy was his separate property with his wife entitled to reimbursement for her share of the premiums paid with community funds (John’s earnings during the marriage).

Rebecca argues that, as applied to the instant case, inception of title analysis is inopposite because term life insurance is too ephemeral to constitute property.  Unlike other life insurance, she argues, term life insurance does not build up cash value; it merely pays upon the insured’s death; thus it would not seem something which John could have acquired as property, especially separate property.  Rebecca presents no Texas authority in support of this position.  As per the Government Code, Section 312.011(13), property contemplated by family code provisions relating to the characterization of marital property must be understood to include not only life insurance policies, but also “the effects of life insurance policies.”  The undisputed effect of the term life policy John acquired was that it would pay $35,000 to a named beneficiary upon John’s death.  Thus, even if it does not build up cash value, the term life insurance policy produces a tangible effect, and John’s title to it relates back to a time prior to his marriage to Rebecca.

Because the insurance policy was his separate property, moreover, constructive fraud against the community cannot be presumed in relation to the proceeds of the policy the $35,000.  Fraud against the community arises only from a spouse disposing of the other spouse’s interest in community property.  Community funds, of course, ultimately were expended toward the insurance policy premiums; but the trial court awarded Rebecca reimbursement for her community interest in the policy premiums.

Contact Information