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Technical Defect in Changing Life Insurance Beneficiary Designation Fails

By:  Jeffrey Skatoff, Esq.

Life insurance death benefit can often be the most valuable asset when someone dies.  Litigation over who the beneficiary is can result when family composition changes, often as a result of divorce.  In Am Gen Life Ins Co v OHM, (11th Cir. 2023), 22-10220, the Decedent named his daughter as the 100% beneficiary of his life insurance policy initially, O.H.M.  The Decedent then divorced O.H.M.’s mother and married Lisa.  The Decedent attempted to change the beneficiary designation on the policy by naming Lisa as 75% primary beneficiary, and O.H.M. as 25% primary beneficiary.  He also listed O.H.M. and Lisa’s child from another relationship as “fifty percent contingent beneficiaries.”

The new primary beneficiaries were clear:  O.H.M. and Lisa, 75%/25%.  But the contingent beneficiaries were not clear, so the insurance company sent the Decedent a letter, as follows:

We are unable to complete your request until such time as the item(s) below have been resolved: • Separate parties should be assigned for primary and contingent beneficiary designations. • Please provide the relationship of the new contingent beneficiary [redacted] to the insured. Please complete, sign, and date the enclosed change form(s) and return it to our office.

As is often the case in these disputes, the Decedent did not respond and then died.  The insurance company took the position that the new beneficiary designation was rejected and the previous one should be followed, giving O.H.M. all of the death benefit.  Although the opinion does not explain Lisa’s argument, it was surely that, even though the contingent beneficiary portion of the new form may have been defective, the primary beneficiary portion was clear and compliant and should have been followed.

In rejecting Lisa’s position, the Court reasoned as follows:

Under Florida law, an insured’s right to change the beneficiary of a life insurance policy depends on the terms of the policy. McDaniel v. Liberty Nat’l Life Ins., 722 So.2d 865, 866 (Fla. Dist. Ct. App. 1998). The insured must strictly comply with the terms of the policy to effectuate a change in the beneficiary. Id. The doctrine of strict compliance exists to protect the insurer, and only the insurer may waive it. Miller v. Gulf Life Ins., 12 So.2d 127, 130 (Fla. 1942).

Lisa argues that the decedent’s 2009 beneficiary request controls because the decedent strictly complied with the terms of his policy governing changes of beneficiary. The relevant policy provision provided:

While this policy is in force the owner may change the beneficiary or ownership by written notice to us. When  we record the change, it will take effect as of the date the owner signed the notice, subject to any payment we make or other action we take before recording.

Florida law requires that we read the phrase “subject to any payment we make or other action we take before recording” “as creating some objectively reasonable standard.” See O’Brien, 44 So.3d at 1278-79 (interpreting the similar phrase “Your request must be in writing and in a form that meets our needs”). In other words, any such “other action” must be “objectively reasonable.” This reading allows the insurer to protect itself from liability when faced with a defective beneficiary request. Cf. id. (“If a policy holder submitted a beneficiary change form that named ‘John Smith of New York’ as a new beneficiary, it would not be feasible for [the insurer] to act on the request without additional identifying information.”). In such cases, strict compliance with the policy may require the insured to respond appropriately in curing any defects.

The insurer provided the decedent with written notice that identified (a) how the beneficiary request was defective and (b) how to resolve the defects. It even provided him with the necessary form along with instructions for filling it out. Because the decedent neither responded to the notice nor inquired as to the status of his filing in the ten years that followed, we conclude that the decedent did not strictly comply with the terms of the policy.

Jeffrey Skatoff is a Florida probate attorney.  To have Mr. Skatoff review your case free of charge, please go to his website.

Jeffrey Skatoff Esq

Jeffrey H. Skatoff, Esq.

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