“Public Policy” Does Not Require That a Spouse be Deemed the Beneficiary of a Life Insurance Policy

Fox v. Lincoln Financial Group, 439 N.J. Super. 375 (App. Div. 2015).  A man had a life insurance policy on which he designated his sister as beneficiary.  He then married, and allegedly promised his new wife that he would name her as the beneficiary instead.  The man then died, without having changed the beneficiary.  His wife filed suit against his sister and the insurance company, Lincoln.  Plaintiff contended that where an insured designates someone as a beneficiary of life insurance and then marries, “there should be a presumption that [the insured] intended to revoke that [earlier policy] designation.”  Plaintiff conceded, however, that no New Jersey case supported that argument.  The sister moved to dismiss for failure to state a claim and plaintiff cross-moved for summary judgment.  The Chancery Division granted the sister’s motion and denied that of plaintiff.  Plaintiff appealed, but the Appellate Division affirmed in an opinion by Judge Carroll, issued today, that rejected plaintiff’s “broad public policy argument.”

Since this was a pure issue of law, the Appellate Division owed no deference to the Chancery Division’s ruling.  Judge Carroll noted the settled law to the effect that an insured can change a beneficiary only in accordance, or in substantial compliance, with the provisions of the insurance policy.  That did not happen here.  Instead, plaintiff sought to treat the facts as a “reciprocal” of those in Vasconi v. Guardian Life Ins. Co., 124 N.J. 338 (1991).  Plaintiff viewed Vasconi as having held that a divorce changed the beneficiary designation to take it away from the now-former spouse.  But Judge Carroll did not agree that that was the import of Vasconi.  Rather, that case held that “[a] beneficiary designation must yield to the provisions of a separation agreement expressing an intent contrary to the policy provision.”  The existence of such a separation agreement, not the mere fact of divorce, was the basis of Vasconi.  Thus, there was nothing from which to create a “reciprocal” rule that marriage automatically makes the new wife a beneficiary.

In declining to adopt plaintiff’s proposed “bright-line” rule that “an insured who marries thereby intends to designate his or her spouse as beneficiary on his or her life insurance policy,” Judge Carroll also observed that such a result would contravene the intent of the Legislature.  N.J.S.A. 3B:3-14 provides that “divorce automatically revokes a disposition of property made by a divorced individual to his former spouse in a governing instrument, which, by definition, includes an insurance policy.  N.J.S.A. 3B:3-1.  It could similarly pass legislation granting presumptive beneficiary rights to a spouse upon marriage should it determine to do so.”  Similarly, N.J.S.A. 3B:5-15 “provides an intestate share to a surviving spouse unintentionally omitted from a premarital will, based on the rebuttable presumption that the decedent would have provided for him or her.”  But that statute is limited to wills and does not cover insurance policies, and Judge Carroll presumed that the Legislature understood that difference.

Finally, Judge Carroll determined that plaintiff had not shown that the decedent had manifested an intent to comply with the insurer’s requirements for changing his beneficiary.  All that plaintiff offered was the decedent’s statement to her that he planned to designate her.  But he never took any actual action, and “mere verbal expression of an intent to change a beneficiary designation is ineffective.”

Plaintiff’s theory here was a creative one.  But its acceptance required judicial activism, and the Appellate Division rightly stayed within its role and did not adopt plaintiff’s position, instead leaving it to the Legislature to consider whether plaintiff’s position is in fact wise public policy.