Articles Posted in Life Insurance

Here is a life insurance case that went to trial in 2023.  The case is styled, Mirna Guzman v. Allstate Assurance Company.  The case was tried in the Northern District of Texas, Amarillo Division.

Allstate filed a declaratory judgment action against Guzman to have the life insurance policy she had applied for, rescinded due to misrepresentations in the policy application.

This was a lawsuit originally filed by Guzman and Allstate had countered with the declaratory judgment action.

Can someone who is not related by blood have a pecuniary interest in the life of another as it relates to life insurance policy?  This answer is discussed in a 1942, Texas Supreme Court opinion styled, Drane v. Jefferson Standard Life Ins. Co.

Here is what the court discussed in that case.

Although not related by blood or marriage to Harry Ezell, Jr. not indebted to him in any way, his godmother Dorothy Drane named him as beneficiary in two life insurance policies.  Upon her death, the executor of her estate, her brother, asserted that Ezell had n insurable interest.  The facts showed Miss Drane had bought clothes for the boy for fifteen years, had paid for his medical care, had cared for him while his mother was ill, had taken him on vacation, and sadly was killed in a wreck as she drove to visit him his freshman year in college, “taking him a radio, a cop and an apple pie.”  The court concluded that Ezell did have an insurable interest  based on a reasonable expectation of pecuniary benefit and advantage from Miss Drane’s continued life .  “We think that when Dorothy Drane was killed ‘his temporal affairs, his just hopes and well grounded expectations of support, of patronage, and advantage in life’ were impaired ….  It is inconceivable, under the facts of this record, that he would ever have been tempted to destroy her life in order to collect the proceeds of the two policies in suit.

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.