Life Insurance And The Named Beneficiary Having Died

This case is a dispute over who is entitled to the life insurance proceeds.  The case is from the Southern District of Texas, Houston Division, and is styled, John Hancock Life Insurance Company v. Marilyn J. Greer, Individually, As Independent Executor of The Estate of Marilyn B. Greer, and As Trustee of The Marilyn J. Greer Trust; and The Estate of William J. Greer.

William owned and was the sole named beneficiary of the policy at issue, which was a policy insuring the life of his mother Mary.  William predeceased Mary.  Mary then died.

The executor of William’s estate is Kennedy.

Marilyn submitted claims to John Hancock for proceeds on behalf of Mary’s estate for which she was the executrix.  John Hancock declined to pay, responding that the Policy’s proceeds were payable to William’s estate because he was the Policy’s owner and beneficiary.  William executed a will dated May 12, 2005, which was submitted to probate in January of 2019.  The will does not specifically devise insurance proceeds but devises the residual estate to various charities.

Marilyn and Kennedy moved for summary judgment seeking entitlement to the policy proceeds.

The parties agree that the relevant facts are not in dispute and contest only the legal question of to whom the Policy’s proceeds are payable under the contract and Texas law.

The Policy is a contract governed by Texas law.  Section 16 of the Policy states that when the insured dies, the insurance benefit is payable:

(a) to any primary beneficiaries who are alive when the life insured dies; or

(b) if no primary beneficiary is then alive, to any secondary beneficiaries who are then alive; or

( C) if no primary or secondary beneficiary is then alive, to any final beneficiaries who are then alive.

… If no beneficiary is alive when the life insured dies, the Insurance Benefit will be payable to you; or if you are the life insured, to your estate. 

“You” and “your” refer to the owner of the Policy, William.  The parties disagree about whether Marilyn is a final beneficiary and whether ownership of the Policy passed to William’s estate upon his death.  Marilyn argues that although the Policy does not designate any final beneficiaries, Texas law defines her as one.  She argues that because the Policy does not specifically define “final beneficiary,” the court should refer to the Texas law of intestate inheritance to determine who is a final beneficiary.  But the court’s analysis of the Policy is limited to the four corners of the contract unless a provision is ambiguous.  A policy term is ambiguous if it is subject to two or more reasonable interpretations.  The Policy refers to final beneficiaries under a heading labeled “Beneficiary Classification,” which states that “[the owner] can appoint beneficiaries for the Insurance Benefit in three classes: primary, secondary, and final.  Beneficiaries in the same class will share equally in the Insurance Benefit payable to them.”  This provision leaves no doubt that “final beneficiaries” are simply a class of appointed beneficiaries.  The court is therefore not persuaded by Marilyn’s argument that the court should look beyond the four corners of the contract to define final beneficiary.

Marilyn also argues that Texas law entitles her to receive the proceeds because there is no living named beneficiary under the Policy.  She relies on Section 1103.152(c) of the Texas Insurance Code, which states: “If there is not a contingent beneficiary entitled to receive the proceeds of a life insurance policy or contract under Subsection (a) , the nearest relative of the insured is entitled to receive those proceeds.”  Section 1103 .152 (a) states: “If a beneficiary of a life insurance policy or contract forfeits an interest in the policy or contract under Section 1103.151, a contingent beneficiary named by the insured in the policy or contract is entitled to receive the proceeds of the policy or contract.”  Section 1103.151 is commonly known as the Texas “slayer statute.”  It states that a beneficiary of a life insurance policy or contract forfeits the beneficiary’s interest in the policy or contract if the beneficiary is a principal or an accomplice in wilfully bringing about the death of the insured.”  Section 1103.152 refers to and applies only if the slayer statute applies.  Because no party has suggested that William willfully brought about Mary’s death and thus forfeited his right to the insurance proceeds, Section 1103.152(c) is inapplicable.

Because the parties agree there were no living appointed beneficiaries under the Policy at the time of Mary’s death, the provision that the proceeds will be paid to the Policy owner controls. Kennedy argues that the Policy proceeds should therefore be paid to William’s estate.  Marilyn argues that William’s interest in the future proceeds under the Policy cannot have passed to his estate and that his estate’s interest is limited to the value of the Policy if it had been surrendered on the day of his death – $0.  Tex. Est. Code, Section 22.012 defines an estate to mean “decedent’s property” regardless of how that property exists, changes, is augmented, or is diminished.  The Texas Government Code, Section 311.005(4) states, “Property” includes “real and personal property.”  The right to receive insurance proceeds payable at a future but uncertain date is a type of property known as a chose in action.  The Estates Code, Section 22.028, states that a chose in action is personal property.  As such, William’s interest in the insurance proceeds as the owner of the Policy – a chose in action – is property that survived his death and became part of his estate.

Finally, Marilyn argues that “equity requires” that she be awarded the Policy because it was intended to cover taxes on Mary’s estate, and the Policy would have lapsed but for Marilyn’s paying the premium in August of 2017.  But Marilyn has not identified any principle of equity that would entitle her to all of the Policy’s proceeds under the facts presented to the court.  The court concludes that the Policy’s proceeds are payable to William’s estate and that Marilyn and Mary’s estate have no legal

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