Ex-wife denied life insurance proceeds

 In  Branch v. Monumental Life Ins. Co., 422 S.W.3d 919, 920 (Tex. App.-Houston [14th Dist.] 2014, no pet. The 14th Court of Appeals in Houston considered the claim of an ex-wife to life insurance proceeds The court was presented with questions arising from an interpleader action brought by life insurer Monumental Life Insurance Company to resolve competing claims to life insurance proceeds.  

In this case, the appeals court upheld a trial court finding that a former spouse named as a life insurance beneficiary who, under the Texas Family Code § 9.301(a) could not benefit from her ex spouse’s life insurance after divorce unless:   

  1. She was designated as the beneficiary of the policy proceeds in a divorce decree;

  2. She was re-designated as a beneficiary after the divorce by her ex spouse; or

  3. She was designated to receive the insurance proceeds in trust for, on behalf of, or for the benefit of a child or a dependent of either of her former spouses was not entitled to the proceeds of a life insurance policy.

The competing claims involved the proceeds of a $10,000 policy insuring the life of Archie Branch Sr. which was obtained during Archie’s marriage to Loretta Young Branch. Loretta was the named beneficiary on the policy. The couple later divorced on May 3, 2011. Six weeks later, Archie died. Upon Archie’s death, Loretta demanded the insurance proceeds as the named beneficiary, but Monumental refused payment.

 Shortly after that Monumental discovered a newspaper obituary which identified five individuals as Archie’s children: Sheila Thompson, Edward Branch Sr., Roy Branch; Wanda Ford; and Graylyn Judkins, based on the discovery of this information monumental filed an interpleader action, after which the trial court issued an order allowing Monumental to deposit the insurance proceeds into the registry of the court until Archie's estate "has been properly probated" and the identity of his legal heirs has been determined.

 In finding that Loretta "has no legal claim or right" to the deposited funds, the trial court reasoned that Archie's legal heirs should receive the policy.

 With regard to Loretta’s claim that the trial court erred in finding that she did not have a legal right or claim to the policy proceeds the appeals court noted that by statute, “if an insured's spouse is designated as a life-insurance beneficiary but the couple later divorces, or their marriage is annulled, the earlier designation of the spouse as a policy beneficiary is ineffective.” If these conditions are triggered the policy proceeds are payable to the named alternative beneficiary, or if there is none, then the proceeds are payable to the insured's estate. Id. § 9.301(b).

 The court further noted the three statutory exceptions to this rule in which the earlier designation of a former spouse as a life-insurance beneficiary is not rendered ineffective did not apply.  In this case, the appeals court noted that the evidence Loretta presented before the trial court did not  meet any of the three statutory exceptions. In these circumstances, no marital-property agreement was executed as part of the couple’s divorce stating that she should receive the proceeds of the policy and that the remaining two statutory exceptions were also not present. As such, the divorce's effect on the designation of a spouse as a life-insurance beneficiary would be governed by the conditions for potential ex-spouse beneficiaries in Texas Family Code § 9.301(a) 

Her primary argument was:

Loretta contends that the trial court erred in excluding as irrelevant her testimony that she paid the policy premiums. According to Loretta, this evidence was relevant to her claim that she owned the policy and was therefore entitled to the policy proceeds. Her position appears to be based on the implicit assumption that if she paid the premiums on the insurance policy, then she has a right to the policy proceeds. W

The court of appeals rejected that argument:

Upon divorce, the trial court was required to—and did—“specifically divide or award the rights of each spouse in an insurance policy.” TEX. FAM. CODE ANN. § 7.004 (West 2006). Ownership of the policy has already been adjudicated, and the trial court in the divorce case awarded the policy to Archie. During the trial of 10 this interpleader action, Loretta’s counsel acknowledged on the record that in the divorce, Loretta was divested of her interest in the policy.5 The ruling awarding the policy to Archie is not subject to collateral attack in this interpleader action. See Shanks v. Treadway, 110 S.W.3d 444, 449 (Tex. 2003) (“[A former spouse’s] remedy for a substantive error of law [in the original divorce decree] by the trial court was by direct appeal, and he cannot now collaterally attack the judgment.”). 6 Because the divorce decree divested Loretta of any ownership interest in the policy and rendered her designation as a named beneficiary ineffective as a matter of law, the trial court did not abuse its discretion by excluding evidence that she paid for the policy premiums as irrelevant to the determination of whether she was entitled to the policy proceeds.

Anyone involved in a life insurance dispute should contact an experienced life insurance lawyer.