By: Boonswang Law Firm

Contesting a life insurance beneficiary designation

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Can a Life Insurance Beneficiary Designation Be Contested?

Yes, you can contest a life insurance beneficiary designation and you may be able to sue for life insurance proceeds.

Common reasons to dispute a life insurance beneficiary designation include:

  • the beneficiary designation was forged,
  • the beneficiary designation was fraudulent,
  • the beneficiary designation was made under duress,
  • there were errors on the change of beneficiary form, and
  • state law mandates a beneficiary change.

When a policyholder passes away, his or her life insurance benefit is supposed to go to the named beneficiary, often a spouse, family member, or close friend.

However, when multiple beneficiaries claim the death benefit, things can quickly become complicated under life insurance beneficiary rules. Alleged forgery/fraud, errors on change of beneficiary forms, and specific circumstances regarding divorce are all typical reasons for fighting life insurance beneficiary designations.

Cases involving life insurance beneficiary disputes can be complex and there are always mitigating circumstances. Reach out to our office today to speak with a life insurance dispute lawyer that can guide you through a potentially complex legal situation, such as an interpleader action.

Challenging a Life Insurance Beneficiary Designation because there was a Forged Life Insurance Beneficiary Change

Yes, this is one of the most common reasons for life insurance disputes. Where there are allegations of a forged life insurance beneficiary change, typically, a family member may have originally been named beneficiary, yet the policyholder recently designated someone else to receive benefits in their place.

It is important to note that fraudulent changes in beneficiary designation are exceedingly difficult to prove. Anyone can legally be named as a beneficiary by the policyholder regardless of the relationship between both parties.

Still, there are specific circumstances during which a change of beneficiary can be fraudulent.

For instance, written or eyewitness evidence may be able to prove that the change of beneficiary form signed by the policyholder was completed under duress or by someone other than the policyholder.

The policyholder may also have been mentally compromised by dementia, Alzheimer’s, or some other condition, which would invalidate any change in beneficiary. Without concrete evidence, however, allegations of fraud are nearly impossible to prove.

We’ve been able to prove them in certain circumstances.

For example, in one case the insured was bedridden, and her daughter gave herself power of attorney and changed the life insurance beneficiary from our client to herself. We got our client paid.

Challenging a Life Insurance Beneficiary Designation because the Change was Fraudulent

It is important to note that fraudulent changes in beneficiary designation are exceedingly difficult to prove. Anyone can legally be named as a beneficiary by an insured regardless of the relationship between both parties.

Even so, circumstances may prove that a change of beneficiary was fraudulent. For example, if the insured was mentally compromised by dementia, Alzheimer’s, or some other condition when they changed the beneficiary designation, that would invalidate any change in beneficiary.

Challenging a Life Insurance Beneficiary Designation because the Change was Made under Duress

Unfortunately, we have had cases where a caregiver or purported romantic partner manipulated or forced the insured to change the life insurance beneficiary designation to themselves. Any late-in-life beneficiary change, or a last-minute beneficiary change, should be treated as suspicious.

Can someone with power of attorney change a life insurance beneficiary?

Yes, but if that change was not authorized by the insured or was clearly self-serving, that can be challenged. For example, in one of our recent cases, the insured was bedridden. Her daughter gave herself power of attorney and changed the life insurance beneficiary from our client to herself. We got our client paid.

Was there a mistake made on the change of beneficiary form?

Sometimes, the policyholder may intend to change the beneficiary on a life insurance policy but make mistakes when completing or filing the change of beneficiary form. Insurance companies will often reject forms which are incomplete or improperly formatted, in which case the originally designated beneficiary receives the death benefit instead of the “new” one. In contrast to allegations of fraud, invalid forms provide a strong argument in favor of the “new” beneficiary.

What happens when a life insurance policy is contested for these reasons? Example: in Williamson v. Western-Southern Life Ins. Co., the court ruled in favor of the “new” beneficiary since the available evidence suggested that the policyholder intended to enact the change.

Case No. 1098, (Ohio Ct. App., April 19, 1977). Even though there was no official form on file with the insurance company, multiple pieces of corroborating evidence demonstrated that the policyholder wanted to change the beneficiary designation on the policy.

In similar cases, even handwritten notes may be sufficient to prove the policyholder’s intent to change the beneficiary.

We’ve had many cases like this.  In one recent case, our client was married to the insured for many years.

The insured’s daughter was originally the beneficiary of his life insurance policy, but they became estranged during that time, and he filled out and submitted a change of beneficiary form changing the beneficiary to his wife, our client.

He never received notice that the form was deficient in any way, so assumed the change was valid.

After he passed, the insurer asserted that the beneficiary change form was not filled out correctly and wanted to pay the daughter.  We got our client paid.

What Happens When the Life Insurance Beneficiary is an Ex-Spouse?

The law is complex regarding life insurance and divorce. After divorce, an insured will likely want to change the primary beneficiary on their life insurance policy from an ex-spouse to someone else, such as a child or relative. However, there are instances when they might not be able to, or the ex-spouse is removed as beneficiary by operation of state law.

Change of Beneficiary Due to Revocation-Upon-Divorce State Statute

Life insurance beneficiary rules after divorce vary by state. About half of all states maintain a “revocation-on-divorce” statute which provides that divorce effectively removes an ex-spouse as beneficiary. However, a revocation-upon-divorce statute is overridden if:

  • the insured re-designates their ex-spouse as beneficiary, or;
  • if the divorce decree states that an ex-spouse will remain the beneficiary.

Divorce decrees often require that an ex-spouse receiving alimony be the beneficiary of a life insurance policy on the ex-spouse paying the alimony. Whenever a divorce decree specifies the beneficiary of a life insurance policy, the beneficiary becomes “irrevocable.” The insured is then prevented from “revoking” his or her ex-spouse as beneficiary without consent. If the insured does change the beneficiary designation, the former beneficiary has a strong case for a beneficiary dispute.

Change of Life Insurance Beneficiary Designation in Community Property States

In the nine (9) community property states, courts may also enforce “equitable division” of paid-up “whole life” policies regardless of who is the named beneficiary.

If term life insurance premiums were paid with marital assets, the spouse or ex-spouse may be entitled to some or all of the death benefit regardless of who is the named beneficiary.

State law varies on these issues, and federal ERISA law may override state life insurance law if the policy is group life insurance through an employer. Check out the life insurance rules in NY, the life insurance rules in Texas, the life insurance rules in Florida, and the life insurance rules in California.

An example of a life insurance policy after a divorce

Let’s take the example of Mary, Bill, and John.

Mary and Bill married, had children, and divorced. The divorce decree gave full custody of their children to Bill, who receives monthly child support payments from Mary.

The decree also specified that Mary maintain her existing life insurance policy to provide extra financial security for Bill and their children.

Years later, Mary marries John and files a change of beneficiary form with her insurance provider such that John is now listed as beneficiary in place of Bill.

When Mary passes away, the insurance company pays John the death benefit. However, this goes against the divorce decree, which explicitly states that Bill should remain beneficiary.

Bill now may have legal grounds to sue either Mary’s estate or the insurance company since he, not John, was the legally valid beneficiary to Mary’s policy. This is one of the rare circumstances where the life insurance beneficiary be changed after death.

What Do I Do if I am the Named Beneficiary on a Life Insurance Policy and Someone Disputes that?

Challenging a life insurance beneficiary designation can be a complex, difficult, and heavily litigated process. Defending your designation as beneficiary in a life insurance beneficiary dispute is equally difficult. This makes it all the more important to enlist the help of an expert in either case.

We’ve gotten our clients paid in beneficiary disputes. If you are the rightful beneficiary of a life insurance policy yet your claim has been denied, or if you are defending in a beneficiary dispute, don’t hesitate to contact us for help.