Ex-wife awarded portion of life insurance proceeds

In Gray v. Nash, 259 S.W.3d 286 (Tex. App. 2008) the 14th Court of Appeals in Houston considered the claim of an ex-wife to life insurance proceeds. The court was presented with competing claims to a life insurance policy by the decedent’s spouse and ex-spouse. In this case, the appeals court reversed a trial court finding that the decedent’s spouse was the beneficiary of the policy and thus was entitled to the proceeds of a life insurance policy which a portion of the proceeds had been treated as additional child support under a court order issued after the couple’s divorce. The court reasoned that since Texas Family Code § 9.301(a) “limits its application to life insurance policies issued before a trial court renders a decree of divorce or an annulment, we hold that it does not apply in this case and does not nullify the ex-spouse’s designation as beneficiary of the disputed proceeds.”

 The decedent, Brent Nash, and Brenda were divorced in 1997. The divorce decree required Brent, to purchase a life insurance policy with a death benefit of at least $60,000 naming Brenda as irrevocable beneficiary. The court treated the policy as “additional child support,” whereby Brenda would serve as trustee for the benefit of Brent and Brenda’s daughter, Amanda.

 In line with the court’s decree, in July 1997, Brent purchased a $500,000 life insurance policy from Pan–American Life Insurance Co. which designated Amanda as the beneficiary.

 In 1998 Brent remarried to Maria Gloria. Later that year Brent submitted a change of beneficiary form to Pan–American designating that “$60,000.00 shall be paid to [Brenda]. The balance of the net proceeds, if any, shall be paid to [Gloria], wife.”  

In July 2001, the divorce court issued its “Order in Suit to Modify Parent-Child Relationship and Motion for Enforcement,” appointing Brent to serve as Amanda’s primary joint managing conservator. The divorce court found that Brent was “current in all child support and medical support payment obligations” and ordered that Brent’s child support obligation was terminated.

 Brent died on October 14, 2006, in a motor vehicle accident. After Brent’s death, Gloria submitted a claim for payment of the full $500,000 death benefit on the Pan–American policy. Two months later, Pan–American filed an interpleader action and deposited $60,460.27 (the proceeds plus interest) into the trial court’s registry representing the court ordered amount for additional child support. Pan–American paid the rest of the death benefit to Gloria.

 Brenda and Gloria filed traditional cross-motions for summary judgment. The trial court denied Brenda’s motion and granted Gloria’s and awarded Gloria the $58,960.27 remaining in the court’s registry. Brenda appealed the trial court’s ruling. 

On appeal, Brenda presented a straightforward argument stating that she was entitled to the disputed proceeds give the fact she was listed as the designated beneficiary. Conversely, Gloria argued that in light of the divorce court’s July 2001 order appointing Brent as Amanda’s primary joint managing conservator was tantamount to a divorce decree which under Texas Family Code Section 9.301(a) would have terminated Brenda’s rights to the policy.

 Texas Lawyers Handling Life Insurance Claims

 

In weighing the arguments before it, the court held that the statute governing the applicability of a pre-divorce decree designation of an ex-spouse as the beneficiary under a life insurance policy did not apply to invalidate insured’s designation of ex-wife as the beneficiary of $60,000 of insured’s life insurance proceeds. As such the ex-wife had a continuing insurable interest in insured’s life at the time of his death. Further, the termination of the insured’s child support obligation did not override insured’s designation of his ex-wife as the beneficiary of $60,000 in life insurance proceeds.

J. Michael YoungComment