MASSACHUSETTS SUPREME JUDICIAL COURT FINDS STATUTE THAT REVOKES DESIGNATION OF EX-SPOUSE AS NAMED BENEFICIARY IN LIFE INSURANCE POLICIES IS CONSTITUTIONAL AND APPLIES RETROACTIVELY
This statute comes into play on life insurance claims where the ex-spouse of a deceased policyholder remains the beneficiary of a policy at the time of the insured’s death and neither the divorce agreement nor orders from a court finalizing a divorce specify that the spouse’s beneficiary designation was intended to continue post-divorce. Chapter 190B, §2-804 operates as a revocation of the designation of a spouse as a beneficiary, unless there is an express agreement that the designation continue.
Sean and Dawn Parker married in 1999. In 2010, Sean purchased a twenty-year term life insurance policy naming Dawn as the primary beneficiary. The alternate beneficiary was Sean’s mother, Joann. Shortly after purchasing the policy, Sean lost his job and Dawn began paying the premium. She made the premium payments at Sean’s direction. In 2016, Sean and Dawn divorced. Representing themselves, they used a court provided form separation agreement. The agreement did not address life insurance even though there were places on the form that prompted users to provide life insurance for the benefit of their children.
According to Dawn, Sean instructed her to keep paying premium on the policy until he died in 2018. Dawn filed a claim with AFLAC, but upon the company learning that Dawn and Sean were divorced, the company requested the divorce agreement. After reviewing the agreement, AFLAC determined that it could not pay the proceeds to Dawn and instructed Joann to file a claim. The competing beneficiaries could not resolve the claim among themselves. AFLAC filed an interpleader action, paid the benefits into court, and was discharged from the case. The trial court found that Chapter 190B, §2-804 revoked the designation of Dawn as beneficiary and awarded the benefits to Joann.
Dawn appealed and the SJC on its own initiative transferred the case from the Appeals Court. The appeal focused on four areas. First, that the statute does not apply to life insurance. However, the SJC found the plain language of the statute was clear that it applies to life insurance.
Second, Dawn argued that the statute was unconstitutional and did not apply retroactively. The statute was enacted in 2012. Dawn’s position was that the statue should not apply to a life insurance policy issued in 2010. But, the statute has a provision which applies the law retroactively, and the SJC explained that the U.S. Supreme Court had already interpreted an almost identical law in Minnesota as constitutional in Sveen v. Melin, 138 S. Ct. 1815 (2018).
Dawn next argued that she had an oral agreement with Sean to continue the life insurance by agreeing to pay the premiums. But, the separation agreement never provided for Dawn continuing on as the named beneficiary post-divorce. That doomed her argument because the statute specifically requires an express agreement to counteract the revocation of a spouse as beneficiary post-divorce.
Finally, Dawn argued that the express terms of the policy did not mention divorce as an act that would revoke a beneficiary designation by the policyholder. Once again the SJC relied on the requirement in Chapter 190B, §2-804 that there be “express” language in a governing instrument providing for the ex-spouse to continue as the named beneficiary post-divorce.
The SJC affirmed the trial court’s decision and awarded the benefits to Joann.
The opinion confirms that Chapter 190B, §2-804 revokes the designation of a spouse as a beneficiary post-divorce. The statute passes constitutional scrutiny and it applies retroactively. Therefore, life insurance policies issued before the law’s enactment are also governed by its language. Claim departments managing life insurance claims in Massachusetts, upon learning that the policyholder is divorced and a former spouse is named as the primary beneficiary, must make inquiry as to whether there is an express agreement allowing for the beneficiary designation to continue after the dissolution of the marriage. Once on notice of the divorce, an insurer risks having to pay the claim twice if it wrongfully pays an ex-spouse. If there is any question about the applicability of Chapter 190B, §2-804, interpleader is always a safe option.
Family law practitioners should also keep this statute front of mind when drafting separation agreements. The failure to specifically provide for a spouse to continue on as a named beneficiary post-divorce can have serious consequences. It is easy to comply with the statute. All that is needed is an express agreement stating that after the divorce the named ex-spouse will continue on as beneficiary.
