Wills, Trusts, and Estates, Pages 473–476

Cook v. Equitable Life Assurance Society

Court of Appeals of Indiana, 1981

Facts:

In 1953, Douglas purchased a whole life insurance policy from Equitable, naming his wife, Doris, as the beneficiary. Douglas and Doris divorced 12 years later, in 1965. The divorce decree did not mention the insurance policy, but stated it was "full satisfaction of all claims by either of said parties against the other".

After the divorce, Douglas stopped paying premiums on the policy, and his policy was automatically converted into a paid-up term policy ending in 1986. Douglas was allowed to change the insurance beneficiary by writing to Equitable and having them endorse the change. Douglas never gave such written notice.

Douglas then married and had a son with Margaret later in 1965. In 1976, Douglas made a holographic will in which he bequeathed his life insurance policy to Margaret and their son. In 1979, Douglas died. Margaret filed a claim with Equitable for the proceeds of the policy, but Equitable gave the money to the circuit court.

Procedural History:

Trial court found that there was no genuine issue of fact and gave the money to Doris.

Issue:

Is an attempt to change the beneficiary of a life insurance policy in violation of the terms of that policy effective?

Margaret Argument:

Indiana law does not always require strict compliance with the terms of an insurance policy's method of changing beneficiaries. It was clearly Douglas's intention that the proceeds go to her and her son.

Doris Argument:

While strict compliance with a policy's terms are not needed where the insured did everything he could to effect the change, Douglas did not do everything he could. He just wrote it in his will, which in Indiana—like in most states, is ineffective to change the beneficiary.

Rule:

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[A]n attempt to change the beneficiary of a life insurance contract[1] by will and in disregard of the methods prescribed under the contract will be unsuccessful.

Reasoning:

There are three exceptions to this rule, but Indiana has specifically rejected Margaret's argument that the rule should be for the exclusive protection of the insurer. The beneficiary has a right in the insurance contract, which can only be defeated in accordance with the terms of the contract. This also saves judicial energy.

While we may be sympathetic to Margaret and her son, if Douglas wanted to change the beneficiaries, he should have done so properly.

Holding:

No, the beneficiaries must be changed in accordance with the terms of the policy if it is possible to do so. Affirmed.

Note:

UPC § 2-804 would fix this issue, but it is not commonly adopted.


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