Primerica v. Cruz, et al is a recent decision in a life insurance beneficiary interpleader case from the North District of Texas. The case involved a dispute over life insurance proceeds for a policy issued by Primerica to Patrick McClevland.

Many people obtain life insurance through their employer.  If it is through a private employer, the life insurance benefits are governed by a federal law: the Employee Retirement Income Security Act of 1974, commonly referred to as ERISA.

One common issue that I often encounter is a disagreement about whether a former spouse is entitled to receive life insurance benefits. A typical scenario is that a married couple buys life insurance and designates each other as the beneficiary. But when they get divorced, they forget to update the beneficiary designation.

A common situation is that a decedent owns life insurance that names their former spouse as the beneficiary. There are reasons for someone to designate their ex-spouse as the beneficiary of life insurance proceeds. Those situations usually involve children.

But it is also very common that the deceased simply forgot to remove their ex-spouse as the beneficiary. I often get calls in heartbreaking situations: such as a man who remarries, has children with his current wife, but never changed the designation from his former wife. That can be understandably devastating to the current wife with minor children.

Faced with competing and conflicting claims, a life insurance company will file an interpleader lawsuit. It is important to hire a lawyer experienced in handling interpleader cases.

In Guzman v. Allstate, the Fifth Circuit reversed a summary judgment the trial court granted to a life insurance company.. A gentleman applied for and was approved for a life insurance policy. In the application he was asked whether he was a smoker. He responded "no." The insurance company obtained some limited medical records and ordered a urine test. None of those records apparently showed that he was a smoker. Neither did the test

Under Texas law, an insurer may avoid liability on a life insurance policy because of the misrepresentation of the insured in the policy application. Life insurance companies generally have two years after issuing a policy to rescind it based on the alleged misrepresentation. Section 705.051 of the Texas insurance Code s entitled “Immaterial Misrepresentation in Life, Accident, or Health Insurance Application.” It provides that “[a] misrepresentation in an application for a life, accident, or health insurance policy does not defeat recovery under the policy unless the misrepresentation: (1) is of a material fact; and (2) affects the risks assumed.”

A fairly common life insurance beneficiary dispute involves designations in favor of former spouses. Under the Texas family code designations in favor of former spouses are automatically revoked by operation of law. However an exception is if the divorce decree specifically provides that the former spouse will be designated as the beneficiary of a life insurance policy.

The insurance company had denied payout on an accidental death and dismemberment claim and the court of appeals upheld that denial. A woman fell down a flight of stairs and suffered severe hemorrhaging and died. Her family made a claim under the accidental death policy.

I represent quite a few clients in life insurance beneficiary interpleader cases. No two cases are the same. In some cases, I represent the designated beneficiaries. Other times I represent the contestant. Sometimes mental capacity and undue influence are primary issues. Other times, there is a dispute stemming from a marriage or claimed community property interests.

Life insurance is an asset of a marriage. Under Texas law, assets acquired during marriage are typically considered community property, owned by both spouses. Under some circumstances, a spouse may have a claim to life insurance proceeds even if they are not the designated beneficiary.

Beneficiary designations can be overturned. But you must have a solid legal and factual basis to successfully overturn a beneficiary designation. Otherwise, you are wasting time and possibly money. We have over a decade of experience evaluating designation challenges.

Accidental death insurance is not life insurance. Life insurance typically pays out upon the insured's death, regardless of the cause. However, accidental death insurance pays out only if the death meets the criteria of the policy terms.

Can a former spouse receive life insurance benefits as the designated beneficiary? The answer is . . . maybe. It depends on whether Texas or federal law applies to the policy. And the circumstances surrounding the designation.

Accidental death insurance is not the same as life insurance. For life insurance, the cause of death is generally not important. However, for accidental death insurance, the cause of death is extremely important. Accidental death insurance only pays out for deaths causes by accidents. But only “accidents’ as defined by the policy terms.

In RELIASTAR LIFE INSURANCE COMPANY v. MILLENI, Civil Action No. 4: 17-CV-02818 (S.D. Tex. Mar. 11, 2019). The United States District Court, Southern District of Texas, Houston Division presided over an interpleader lawsuit filed by Reliastar Life Insurance Company ("Reliastar"), the provider of the Decedent's life insurance policy, based on allegations that the Decedent’s husband was connected to her death and thus precluded under the Texas Slayer Statute from receiving the insurance policy proceeds.

In Transamerica Life Ins. Co. v. Quarm (No. EP-16-CV-295-KC, 2017 WL 5476471 (W.D. Tex. November 13, 2017) the Western District of Texas, El paso, considered whether the son of a decedent/power of attorney for the decedent could name himself a beneficiary of the decedent’s life insurance policy.  The court ruled that the power of attorney holder was not authorized to name himself as a beneficiary of the decedent’s life insurance policy, but could name his sister.

In Mckenzie v. Mckenzie, Magistrate Judge Bemporad of the Western District of Texas considered whether a purported designation was valid.  He decided that it was not.

In  Dohnalik v. Somner, 467 F.3d 488, 489 (5th Cir. 2006), the Fifth Circuit Court of Appeals addressed the question of whether an ex-spouse’s designation as a beneficiary under a Servicemembers' Group Life Insurance (SGLI) policy survives a state divorce decree purporting to divest the designee of any such interests.