It is not uncommon for there to be competing claims for life insurance benefits between a recently widowed spouse and a former spouse. For the people seeking life insurance benefits, these disputes are emotional and different.
These disputes typically occur when the deceased spouse neglected to change the beneficiary after a divorce. The rules on this issue are complex and vary from state-to-state. If you find yourself in a beneficiary dispute, you should seek the assistance of an experienced insurance attorney.
Isn’t a Divorced Spouse Automatically Removed as A Beneficiary?
Not always. Some but not all states have enacted a “revocation-on-divorce” law that states that a divorced spouse must be removed as a life insurance beneficiary. Typical exceptions to these laws are when there is a divorce settlement agreement for the ex-spouse to remain a life insurance beneficiary or the ex-spouse has been re-designated as a beneficiary.
In other words, states with “revocation-on-divorce” laws require there be some affirmative act to prove that the insured intended for the ex-spouse to be a life insurance beneficiary.
Even if there is no revocation-on-divorce law in your state, a spouse may still be entitled to at least a portion of the insurance proceeds. In community property states, a spouse may be entitled to at least one-half the life insurance benefits from a term life policy. Benefits from whole life insurance policies may be allocated based on the percentage of premiums paid during the marriage.
Another consideration is when an insured attempts to change the beneficiary on an insurance policy but for a variety of reasons the beneficiary is never changed. In these situations, it is wise to consult our insurance attorneys who can guide you through your options and inform you of your legal rights.
What About ERISA?
Many life insurance policies are a fringe benefit provided by an employer. Life insurance policies issued through an employer are governed by a complex federal law called the Employee Retirement and Income Security Act of 1974 (ERISA), which governs most employer-provided benefits to employees.
ERISA-governed life insurance policies have specific rules that are entirely different from the state-specific framework of laws and rules that govern non-ERISA insurance policies. Under ERISA, the most recent named beneficiary is the rightful claimant. This means that under ERISA, an ex-spouse who remains the designated beneficiary on a policy will normally receive the life insurance proceeds unless one of a few specific exclusions apply.
What Will the Insurance Company Do If There Are Competing Claims?
If there are multiple people claiming life insurance benefits, the insurance company will likely file an interpleader or concursus action. In this situation, the insurance company will deposit the insurance proceeds into the court’s registry. It is then up to each claimant to make a claim for the insurance benefits.
An interpleader or concursus action is a complex legal proceeding that will require each claimant to assert their claims in court. If the life insurance company has filed an interpleader or concursus action, you need to retain an experienced insurance lawyer to provide legal representation through this process.
You should assume the other person(s) claiming life insurance benefits will have legal representation and will be intent on recovering the full amount of life insurance proceeds to your detriment. Failing to make a claim or making a misstep in court, could result in you not recovering the insurance benefits you are entitled to.
Getting Legal Help is the First Step
If you are involved in a beneficiary dispute, or just want to better understand your rights, contact our team of insurance attorneys. We have assisted hundreds of policyholders and claimants in complex insurance matters.