Pay on Death Provisions; Life Insurance, ERISA, Constructive Trusts
Pay on death provisions are arrangements between a bank or credit union and an account holder who has designated specific beneficiaries to receive some or all of the account holder’s assets in the bank or credit union. The immediate transfer of the assets is triggered by the death of the account holder. Pay on death provisions may be in effect for a person’s checking account, savings account, security deposits, savings bonds and other deposit certificates.
Pay on death provisions may be useful to secure payment for the recipient spouse, but are not secure since the account owner (obligor) retains control of the asset, the ability to spend the funds, and the ability to change the pay on death designation at will.
It is important for the attorney to remind the client after the divorce is final to review all of his or her assets and to change any pay on death provisions which may have been established during the marriage, since the bank or credit union must release the funds to the named beneficiary on death of the account owner.
Life insurance is possibly the most efficient and effective way to secure payment of support obligations and property settlement debts assumed by the obligor spouse, in the event of his or her death before the obligations are satisfied, provided certain safeguards are in place. The parties must first determine whether private insurance will be used to secure payment, or if an employer funded plan will be used.
Both parties should refrain from changing the beneficiary designations of their life insurance policies (assuming they have already named each other as primary beneficiaries) during the settlement negotiations.
The amount of the obligation to be paid should be clearly stated in the settlement agreement or judgment of divorce. The judgment or settlement agreement should describe the terms under which the obligation is determined to be satisfied, thus allowing the obligor spouse to change the beneficiary designation of the policy when he or she has paid the amount of the obligation.
The judgment or settlement agreement should state that any proceeds from the life insurance policy in excess of the outstanding support obligation/property settlement obligations at the time of death will revert to the decedent’s estate (effectively creating a constructive trust in the recipient spouse for the proceeds in excess of the debt).
If an employer paid insurance policy is used to secure the obligations, the recipient spouse may bargain for a provision that a privately owned policy will be purchased, if possible, should employment or the employer-funded insurance benefit terminate.
Use care in drafting and confirming compliance with the agreement if the life insurance is provided as part of a package of qualified employments benefits under the Employees Retirement Income Security Act of 1974 (ERISA). Federal law controls over state law in this area, according to the Sixth Circuit Court of Appeals. In this circumstance, the beneficiary may only be named in compliance with the plan’s internal procedures. The beneficiary’s attorney should ensure the obligor spouse completes all the benefit plan’s beneficiary forms correctly post-judgment in order to maintain coverage. The attorneys should obtain descriptions of the plans while gathering information during the discovery period in settlement negotiations.
A word of caution to the attorney representing the insured spouse when life insurance is not being used to secure support or debt obligations. It is important that the insured client is advised to change the beneficiary designations on his or her policy after entry of the judgment, since the insurance provider will disburse the proceeds according to the beneficiary designation. This may lead to expensive litigation between a former spouse and the decedent’s current heirs.
ERISA (Employees Retirement Income Security Act of 1974) is the federal law that sets the minimum standards for pension plans in private industry. ERISA requires that any employer who establishes a pension plan meet certain minimum standards. The general rule is that, except in certain limited circumstances, qualified retirement plans must provide benefits which cannot be assigned to others. ERISA contains an express state law preemption provision, which establishes private pension plan regulation as exclusively federal. Due to concern about the effect of the preemption provision on the division of retirement plan benefits in state court divorce actions, Congress passed the Retirement Equity Act of 1984 (REA), which established qualified domestic relations orders (QDROs) as exceptions to the anti-assignment provisions of ERISA .
If a state court domestic relations order is qualified, the plan administrator must honor its’ terms. QDROs may be used to divide retirement benefits, pay support obligations or secure property settlement payments. These rules apply to:
private employer tax-qualified pension plans
profit-sharing plans
stock bonus plans
defined benefit plans
401(k) plans
money purchase pension plans; and
employee stock ownership plans (ESOPs)
They do not apply to governmental plans or most church plans. However, state and local government retirement plans in Michigan are subject to anti-assignment rules under the Public Employee Retirement Benefit Protection Act (PERBPA) MCL 38.1681 et seq. It includes a specific exception to allow division of benefits in divorce actions. Eligible Domestic Relations Orders (EDROs) are used to divide these plan benefits. It allows an alternate payee to be considered a surviving spouse for purposes of the plan’s preretirement and post retirement survivor benefits, if the alternate payee is designated as the surviving spouse in the EDRO.
If the EDRO states the alternate payee is guaranteed payment of his or her portion of the preretirement survivor benefits, the alternate payee is guaranteed to receive the payment even if the plan participant (obligor) dies before the alternate has begun to receive payments.
If the obligor predeceases the alternate payee after the payments to the alternate payee have begun, in a defined benefit plan, and the alternate payee receives the benefit in the form of a life annuity based on the alternate payee’s life, the alternate payee’s benefit is not affected at all by the participant’s death. But, if the alternate payee’s benefit is in the form of an annuity based on the participant’s life, the benefit terminates when the participant dies.
In order to insure the alternate payee receives payments for his or her lifetime, if that is the intent, the alternate payee must select a life annuity based on his or her own life, or a joint and survivor annuity benefit, with the alternate payee as the surviving spouse.
Under the EDRO act, if the alternate payee dies before he or she has begun to receive benefits, the alternate payee’s benefit reverts to the plan participant, if the benefits are in a defined benefit plan.
For purposes of this discussion, we assume the parties have chosen the deferred division method to award the retirement assets to the parties. The non participant spouse (the alternate payee) will receive the share awarded to him or her directly from the plan. We are concerned with securing the awarded benefit on death of either of the parties. It is imperative that the practitioner who is negotiating for a portion of retirement benefits as part of a property settlement obtain a copy of the plan’s Summary Plan Description, which will include the plan’s rules for obtaining distribution and the guidelines for dividing the plan assets with a divorcing spouse.
Pursuant to MCL 552.101(4), each divorce judgment must include a provision which determines all the rights, including the continent rights the spouses have in any vested pension, annuity or retirement benefits; any accumulated contributions in any pension, annuity or retirement system and any unvested pension, annuity or retirement benefits.
Until the domestic relations order is entered by the court and accepted as a “qualified” domestic relations order by the plan administrator, there is concern the alternate payee is not entitled to any benefits under the retirement plan. The practitioner must draft the judgment with concern for the consequences if the plan participant dies, retires or terminates employment prior to entry and acceptance of the QDRO.
Dept. of Labor regulations, effective April 6, 2007 have provided some guidance, stating a Domestic Relations Order does not fail solely because it is issued after the participant’s death. They also allow an alternate payee to be designated in a QDRO as a surviving spouse, even after a divorce is final.
It is imperative the divorce judgment states clearly the parties intent that the death of the participant prior to entry of the domestic relations order, or prior to submission and acceptance of the order by the plan, should not prevent acceptance of the order or designation of the alternate payee as the recipient of the benefits awarded in the property settlement and divorce judgment. It is best practice to notify the plan administrator that an order to award benefits to an alternate payee is being prepared for submission. You may request the plan administrator to place a “hold” on the account, preventing its disbursement until the DRO is received and qualified. WWW.ATTORNEYBANKERT.COM
Thursday, April 21, 2011
Sunday, April 3, 2011
ST CLAIR BANKRUPTCY AND DIVORCE
IS YOUR CASE IN THE EASTERN DISTRICT OF MICHIGAN BANKRUPTCY COURT? BANKRUPTCY FLINT / BAY CITY ,ATTORNEY POSTING BY Flint / Bay City Bankruptcy Attorney Terry R. Bankert 810-235-1970. Flint /BAY CITY Bankruptcy lawyer Terry R. Bankert , http://www.attorneybankert.com If you have bankruptcy questions call today 810-235-1970 this article presented in a SEO format.We are a debt relief agency that assists consumers filing for Bankruptcy. 2. Bankruptcy Judges §1.5 Even though Congress allocated to the federal district courts the power to administer bankruptcy cases and to adjudicate controversies connected to those cases, they generally do not exercise these powers. Rather, these matters are automatically referred to the bankruptcy judges appointed in each district court. 28 USC 151. Bankruptcy judges may exercise the powers delegated to the district court “with respect to any action, suit, or proceeding,” except as otherwise provided by law or district court order. Id. In the Eastern District of Michigan, which encompasses approximately the eastern half of the Lower Peninsula, ED Mich LR 83.50(a)(1) refers all bankruptcy cases and proceedings to the bankruptcy judges of that district. WD Mich LCivR 83.2(a) does the same with respect to bankruptcy cases and proceedings filed in the Western District of Michigan. Although the issue has not yet been finally resolved, the U.S. District Court for the Western District of Michigan has held that a bankruptcy judge lacks the power to conduct criminal contempt proceedings and to impose criminal contempt sanctions. In re Lawrence, 164 BR 73 (WD Mich 1993); see also In re Hake, No 06-8014, 2006 Bankr LEXIS 2428 (6th Cir BAP Oct 3, 2006) (stating that there is serious question whether bankruptcy court has power to impose criminal contempt sanctions). Note that it has been held that a bankruptcy judge may impose civil contempt sanctions. In re Burkman Supply, 217 BR 223 (WD Mich 1998). Under certain circumstances, the reference may be withdrawn. See §§1.11–1.14. The Bankruptcy Reform Act of 1994, Pub L No 103-394, amended section 105 of the Bankruptcy Code by specifically authorizing bankruptcy judges to conduct status conferences in cases and proceedings on the court’s own motion or on the request of a party in interest. 11 USC 105(d)(1). At this conference, the bankruptcy judge may issue orders to ensure that the bankruptcy case “is handled expeditiously and economically.” 11 USC 105(d)(2). For example, in a Chapter 11 case, the bankruptcy judge may fix a date by which a debtor must file a disclosure statement and plan. 11 USC 105(d)(2)(B)(i). In the Eastern District in Michigan, Phillip J. Shefferly is the Chief Judge. Marci B. McIvor, Steven W. Rhodes, Walter Shapero, and Thomas J. Tucker are judges in the Southern Division, while Daniel J. Opperman sits in Bay City and Flint to administer cases filed in the Flint and Bay City administrative units. In the Western District of Michigan, three bankruptcy judges sit in Grand Rapids and administer all the cases filed in that district. They ride the circuit and administer cases from the cities of Grand Rapids, Kalamazoo, Lansing, Traverse City, and Marquette. James D. Gregg, Jeffrey R. Hughes, and Scott W. Dales fill these positions.
Tuesday, June 15, 2010
StClair County Divorce goes to the Michgian Supreme Court.
Before the SUpreme Court-St.Clair County Divorce, Flint lawyer comments here , Step Mom and insurance proceeds, who gets what?
ST.CLAIR COUNTY DIVORCE DECISION GOES TO SUPREME COURT, These Issues presented by Flint Divorce lawyer Terry Bankert 235-1979:
1.Claims related to the erroneous payment of insurance proceeds to defendant-Cindy Genaw;
2,Interpretation of MCL 552.101(2); Houdek v. Centerville Twp.; Metropolitan Life Ins. Co. v. Church; Notice; Schepke v. Department of Natural Res.; Thom v. Washington Nat'l Ins. Co.; ERISA; Sweebe v. Sweebe; Moore v. Moore
St. Clair Divorce insurance issue to be reviewed by the Michigan Supreme Court Order in its order of ,June 4, 2010. For reference Supreme Court #SC: 140017, Michigan Court of Appeals #COA: 284214
The case is based on a St, Clair Divorce decision litigated in St Clair Probate Court : 07-000069-CZ
Case Name: Genaw v. Genaw ,GAYLORD GENAW, JR., Personal Representative of the Estate of Gaylord Genaw, Sr., Plaintiff-Appellee, v CINDY GENAW, Defendant,and
UNUM LIFE INSURANCE COMPANY, Defendant-Appellant. e-Journal Number: 46010
Judge(s): Cavanagh, Weaver, Corrigan, Young, Jr., and Markman; Dissent - Kelly; Voting to deny leave to appeal - Hathaway. Additions for lay understanding and SEO noted as CAP headlines or [trb]
MICHIGAN SUPREME COURT SAYS THE MICHIGAN COURT OF APPEALS GOT IT WRONG
In an order in lieu of granting leave to appeal, the court reversed the judgment of the Court of Appeals in a published opinion for the reasons stated in the Court of Appeals dissenting opinion, and remanded to the probate court for entry of an order granting defendant-Unum's motion for summary disposition.
INSURANCE COMPANY OFF THE HOOK
The defendant-insurer was discharged from all liability under MCL 552.101(2) when it paid the policy benefits to the named beneficiary prior to receiving any notice of a competing or adverse claim to those benefits.
JUSTICE KELLY DOES NOT AGREEIn her dissent, Justice Kelly would grant leave to appeal to resolve the differing interpretations of MCL 552.101(2), which addresses entitlement to life insurance proceeds after a divorce.
UNLESS YOUR DIVORCE JUDGEMENT SAYS OTHERWISE INSURANCE PROCEEDS WILL GO TO INSURED.
The statute declares, "absent an express designation to the contrary, once a divorce is final all policy benefits are payable to the insured."
WHAT HAPPENS WHEN EX SPOUSE LEFT OFF AFTER DIVORCE
This addresses the problems posed when an ex-spouse is inadvertently left as the named beneficiary after a divorce. Another clause protects insurance carriers. It provides a carrier is discharged from liability for distribution of the insurance proceeds if it pays them to the named beneficiary, absent notice of a competing claim.
THE HIGHER COURT’S JOB IS TO CLARIFY THE LAW
The Supreme Court should resolve the correct interpretation of MCL 552.101(2). The majority "hastily accepted the dissenting opinion as correct" without full briefing or oral argument.
THE EX WIFE IS A PERSON OF INTEREST
Under the language of the statute, petitioner's ex-wife, a named beneficiary of the policy, appeared to be a "person having interest in the policy." The statute does not contain a requirement the notice be given by someone other than the named beneficiary or the insurer be advised of a competing claim to the insurance benefits.
SUPREME COURT REVERSES THE COURT OF APPEALS
On order of the Court, the application for leave to appeal the October 6, 2009
judgment of the Court of Appeals is considered and, pursuant to MCR 7.302(H)(1), in
lieu of granting leave to appeal, we REVERSE the judgment of the Court of Appeals
THE SUPREME COURT AGREES WITH THE COURT OF APPEALS DISSENTBY C.J.KELLY
for the reasons stated in the Court of Appeals dissenting opinion, and REMAND this case to
the St. Clair Probate Court for entry of an order granting defendant Unum Life Insurance
Company’s motion for summary disposition.
INSURANCE COMPANY OFF THE HOOK
The defendant insurer was discharged from all liability under MCL 552.101(2) when it paid the policy benefits to the named beneficiary prior to receiving any notice of a competing or adverse claim to those
benefits.
KELLY, C.J. (dissenting).
I would grant leave to appeal.
WHAT HAPPENS TO INSURANCE IN A MICHIGAN DIVORCE
At issue in this case is the interpretation of MCL 552.101(2), a statute that addresses entitlement to life insurance proceeds after a divorce.
THE LAW IS CLEAR SO WHAT IS THE PROBLEM
The statute declares that, absent an express designation to the contrary, once a divorce is
final all policy benefits are payable to the insured.
WHAT IF THE DIVORCE COURT ORDER WAS FOR THE SURVIVING SPOUSE NOT TO GET BENEFITS? BUT A MICHGIANDIVORCE ATTORNEY MAKES A MISTAKE AND THE INSURANCE BENIFICIARY WAS NOT CHANGED? WAS IT THE MICHIGAN DIVORCE LAWYERS FAULT/.
This addresses the problems posed when an ex-spouse is inadvertently left as the named beneficiary after a divorce.
MISTAKE OR NO MISTAKE BIG BUSINESS IS OFF THE HOOK
An additional clause protects insurance carriers. It provides that a carrier is discharged from
liability for distribution of the insurance proceeds if it pays them to the named
beneficiary, absent notice of a competing claim.1
GETTING TO THE POINT
The issue in this case is whether notice was provided to the insurance company.
Gaylord Genaw, Sr. was killed in a traffic accident just three days after he was divorced
from his wife.
THE ST.CLAIR COUNTY DIVORCE JUDGEMENT SAID WIFE NOT ENTITLED
The judgment expressly indicated that his ex-wife was not entitled to the
proceeds of his life insurance policy.
IT APPEARS THE ST. CLAIR COUNTY DIVORCE LAWYER DID NOT NOTIFY THE INSURANCE COMPANY OF WIFE’S DISENTITLEMENT!
However, his ex-wife’s designation as beneficiary on the policy was never changed. She took advantage of this after the accident and made a claim for the proceeds.
AT HUSBANDS DEATH WIFE TOLD THE,M ABOUT THE DIVORCE, THEY NEVER READ IT AND PAID HER ANYWAY. WHY IS BIG ISURANCE LET OFF THE HOOK AGAIN?
Defendant paid them to her, even though she disclosed the divorce on the claim form and the death certificate she submitted to defendant also indicated that Gaylord was divorced.
STEP SON IN A LOVING THOUGHTFUL MANNER SUES HIS EX STEP MOTHER
When Gaylord’s son discovered that she had improperly collected the policy proceeds, he brought this action against her and against the insurance company.
ST.CLAIR COUNTY PROBATE COURT SAYS STEP MOM GIVE IT UP!
The trial court ordered the ex-wife to turn over to plaintiff what remained of the
proceeds. The court then held defendant liable for the remainder.
THE MICHGIAN COURT OF APPEALS ALSO SAID STEP MOM KEEP THE MONEY!
The Court of Appeals affirmed this action in a published split opinion.2 It found that the ex-wife qualified
As “any other person having interest in the policy” under MCL 552.101(2).
SHE TOLD THE INSURANCE COMPANY THERE WAS A DIVORCE, WHY NOT KEEP THE MONEY?
Because she Had given defendant written notice of the divorce, the court found that defendant had received
notice according to the statute and was therefore responsible for wrongfully disbursing
1
ST.CLAIR COUNTY, MICHIGAN, DIVORCE AND INSURANCE
MCL 552.101(2) states, in its entirety:
Each judgment of divorce or judgment of separate maintenance shall
determine all rights of the wife in and to the proceeds of any policy or
contract of life insurance, endowment, or annuity upon the life of the
husband in which the wife was named or designated as beneficiary, or to
which the wife became entitled by assignment or change of beneficiary
during the marriage or in anticipation of marriage. If the judgment of
divorce or judgment of separate maintenance does not determine the rights
of the wife in and to a policy of life insurance, endowment, or annuity, the
policy shall be payable to the estate of the husband or to the named
beneficiary if the husband so designates. However, the company issuing
the policy shall be discharged of all liability on the policy by payment of its
proceeds in accordance with the terms of the policy unless before the
payment the company receives written notice, by or on behalf of the insured
or the estate of the insured, 1 of the heirs of the insured, or any other
person having an interest in the policy, of a claim under the policy and the
divorce. [Emphasis added.]
2 In re Genaw Estate, 285 Mich App 660 (2009).
3
the funds.3 The dissenting judge would have held that a named beneficiary cannot
qualify as an “other person having interest in the policy.”4
WHAT IS THE CORRECT INTERPRETATION? WHAT IT SAYS OR WHAT IT MEANS J
The Supreme Court should resolve the correct interpretation of MCL 552.101(2).
THE COURT OF APPEALS WAS IN A SLOPPY HURRY?
The majority has hastily accepted the dissenting opinion as correct without the benefit of
full briefing or oral argument.
ONE SUPREME COURT JUSTICE IS TROUBLED!
I find this troublesome because, under the language of the statute, petitioner’s ex-wife, a named beneficiary of the policy, appears to be a “person having interest in the policy.”
JUST WHAT KIND OF NOTICE IS ADEQUATE
Nowhere does the statute contain a requirement that notice be given by someone other than the named beneficiary or that the insurer be advised of a competing claim to the insurance benefits.
THEY NEED PERMISSION OF LEAVE TO APPEAL, IT WAS GIVEN.
Accordingly, I would grant leave to appeal to resolve the differing interpretations
of the statute.
3 Under the factual circumstances of this case, it is undisputed that Unum received a
claim from Genaw that specifically acknowledged both her status as the ex-wife of the
decedent and the existence of a divorce. Consequently, this information, submitted in
conjunction with her claim, was sufficient to meet the notice requirement imposed by the
existing statutory language, and the insurance company was not absolved of its liability
for payment of the proceeds to the designated beneficiary. [Id. at 669.]
PLAIN LANGUAGE
4 [T]he plain language of the statute absolves an insurer of liability for paying its
proceeds in accordance with the terms of the policy unless before the payment it receives
written notice of a claim and of the divorce from one of the persons identified in the
statute.
SPECIFIED PERSONS
These specified persons—(1) the insured or the estate of the insured, (2) the heirs
of the insured, or (3) any other person having an interest in the policy—are plainly ones
who could have an interest in the policy if the beneficiary designated in the policy no
longer had a right to the benefits of the policy.
CLAIM MAKING
A claim by such a person would clearly
give the insurer notice of the extinguishment of the former wife/beneficiary’s interest in
the policy and of the existence of a claim by one other than the beneficiary designated in
the policy. Thus, “other person” logically means a person other than the claimant
(beneficiary) already known to the insurer.
WRITTEN NOTICE NEEDED
Absent written notice of a claim under the
policy by one of the persons identified in the statute before making payment on its policy,
the insurer is discharged of all liability on the policy for payment of its proceeds in
accordance with the terms of the policy.
MOST IMPORTANT TO LET THE INSURANCE COMPANY OFF THE HOOK
This interpretation advances the clear purpose
of the statutory language at issue, which is to protect an insurer that pays its policy
proceeds in accordance with the terms of the policy absent the requisite notice of a claim
by someone other than the beneficiary designated in the policy. In my view, the plain
language of the statute mandates this conclusion. [Id. at 675-676; emphasis in original
(FITZGERALD, J., dissenting).]
HATHAWAY, J., would grant leave to appeal.
Posted 06/15/2010 here by
Terry R. Bankert
A Flint Michigan Divorce Lawyer
http://attorneybankert.com
Or
http://dumpmyspouse.com
ST.CLAIR COUNTY DIVORCE DECISION GOES TO SUPREME COURT, These Issues presented by Flint Divorce lawyer Terry Bankert 235-1979:
1.Claims related to the erroneous payment of insurance proceeds to defendant-Cindy Genaw;
2,Interpretation of MCL 552.101(2); Houdek v. Centerville Twp.; Metropolitan Life Ins. Co. v. Church; Notice; Schepke v. Department of Natural Res.; Thom v. Washington Nat'l Ins. Co.; ERISA; Sweebe v. Sweebe; Moore v. Moore
St. Clair Divorce insurance issue to be reviewed by the Michigan Supreme Court Order in its order of ,June 4, 2010. For reference Supreme Court #SC: 140017, Michigan Court of Appeals #COA: 284214
The case is based on a St, Clair Divorce decision litigated in St Clair Probate Court : 07-000069-CZ
Case Name: Genaw v. Genaw ,GAYLORD GENAW, JR., Personal Representative of the Estate of Gaylord Genaw, Sr., Plaintiff-Appellee, v CINDY GENAW, Defendant,and
UNUM LIFE INSURANCE COMPANY, Defendant-Appellant. e-Journal Number: 46010
Judge(s): Cavanagh, Weaver, Corrigan, Young, Jr., and Markman; Dissent - Kelly; Voting to deny leave to appeal - Hathaway. Additions for lay understanding and SEO noted as CAP headlines or [trb]
MICHIGAN SUPREME COURT SAYS THE MICHIGAN COURT OF APPEALS GOT IT WRONG
In an order in lieu of granting leave to appeal, the court reversed the judgment of the Court of Appeals in a published opinion for the reasons stated in the Court of Appeals dissenting opinion, and remanded to the probate court for entry of an order granting defendant-Unum's motion for summary disposition.
INSURANCE COMPANY OFF THE HOOK
The defendant-insurer was discharged from all liability under MCL 552.101(2) when it paid the policy benefits to the named beneficiary prior to receiving any notice of a competing or adverse claim to those benefits.
JUSTICE KELLY DOES NOT AGREEIn her dissent, Justice Kelly would grant leave to appeal to resolve the differing interpretations of MCL 552.101(2), which addresses entitlement to life insurance proceeds after a divorce.
UNLESS YOUR DIVORCE JUDGEMENT SAYS OTHERWISE INSURANCE PROCEEDS WILL GO TO INSURED.
The statute declares, "absent an express designation to the contrary, once a divorce is final all policy benefits are payable to the insured."
WHAT HAPPENS WHEN EX SPOUSE LEFT OFF AFTER DIVORCE
This addresses the problems posed when an ex-spouse is inadvertently left as the named beneficiary after a divorce. Another clause protects insurance carriers. It provides a carrier is discharged from liability for distribution of the insurance proceeds if it pays them to the named beneficiary, absent notice of a competing claim.
THE HIGHER COURT’S JOB IS TO CLARIFY THE LAW
The Supreme Court should resolve the correct interpretation of MCL 552.101(2). The majority "hastily accepted the dissenting opinion as correct" without full briefing or oral argument.
THE EX WIFE IS A PERSON OF INTEREST
Under the language of the statute, petitioner's ex-wife, a named beneficiary of the policy, appeared to be a "person having interest in the policy." The statute does not contain a requirement the notice be given by someone other than the named beneficiary or the insurer be advised of a competing claim to the insurance benefits.
SUPREME COURT REVERSES THE COURT OF APPEALS
On order of the Court, the application for leave to appeal the October 6, 2009
judgment of the Court of Appeals is considered and, pursuant to MCR 7.302(H)(1), in
lieu of granting leave to appeal, we REVERSE the judgment of the Court of Appeals
THE SUPREME COURT AGREES WITH THE COURT OF APPEALS DISSENTBY C.J.KELLY
for the reasons stated in the Court of Appeals dissenting opinion, and REMAND this case to
the St. Clair Probate Court for entry of an order granting defendant Unum Life Insurance
Company’s motion for summary disposition.
INSURANCE COMPANY OFF THE HOOK
The defendant insurer was discharged from all liability under MCL 552.101(2) when it paid the policy benefits to the named beneficiary prior to receiving any notice of a competing or adverse claim to those
benefits.
KELLY, C.J. (dissenting).
I would grant leave to appeal.
WHAT HAPPENS TO INSURANCE IN A MICHIGAN DIVORCE
At issue in this case is the interpretation of MCL 552.101(2), a statute that addresses entitlement to life insurance proceeds after a divorce.
THE LAW IS CLEAR SO WHAT IS THE PROBLEM
The statute declares that, absent an express designation to the contrary, once a divorce is
final all policy benefits are payable to the insured.
WHAT IF THE DIVORCE COURT ORDER WAS FOR THE SURVIVING SPOUSE NOT TO GET BENEFITS? BUT A MICHGIANDIVORCE ATTORNEY MAKES A MISTAKE AND THE INSURANCE BENIFICIARY WAS NOT CHANGED? WAS IT THE MICHIGAN DIVORCE LAWYERS FAULT/.
This addresses the problems posed when an ex-spouse is inadvertently left as the named beneficiary after a divorce.
MISTAKE OR NO MISTAKE BIG BUSINESS IS OFF THE HOOK
An additional clause protects insurance carriers. It provides that a carrier is discharged from
liability for distribution of the insurance proceeds if it pays them to the named
beneficiary, absent notice of a competing claim.1
GETTING TO THE POINT
The issue in this case is whether notice was provided to the insurance company.
Gaylord Genaw, Sr. was killed in a traffic accident just three days after he was divorced
from his wife.
THE ST.CLAIR COUNTY DIVORCE JUDGEMENT SAID WIFE NOT ENTITLED
The judgment expressly indicated that his ex-wife was not entitled to the
proceeds of his life insurance policy.
IT APPEARS THE ST. CLAIR COUNTY DIVORCE LAWYER DID NOT NOTIFY THE INSURANCE COMPANY OF WIFE’S DISENTITLEMENT!
However, his ex-wife’s designation as beneficiary on the policy was never changed. She took advantage of this after the accident and made a claim for the proceeds.
AT HUSBANDS DEATH WIFE TOLD THE,M ABOUT THE DIVORCE, THEY NEVER READ IT AND PAID HER ANYWAY. WHY IS BIG ISURANCE LET OFF THE HOOK AGAIN?
Defendant paid them to her, even though she disclosed the divorce on the claim form and the death certificate she submitted to defendant also indicated that Gaylord was divorced.
STEP SON IN A LOVING THOUGHTFUL MANNER SUES HIS EX STEP MOTHER
When Gaylord’s son discovered that she had improperly collected the policy proceeds, he brought this action against her and against the insurance company.
ST.CLAIR COUNTY PROBATE COURT SAYS STEP MOM GIVE IT UP!
The trial court ordered the ex-wife to turn over to plaintiff what remained of the
proceeds. The court then held defendant liable for the remainder.
THE MICHGIAN COURT OF APPEALS ALSO SAID STEP MOM KEEP THE MONEY!
The Court of Appeals affirmed this action in a published split opinion.2 It found that the ex-wife qualified
As “any other person having interest in the policy” under MCL 552.101(2).
SHE TOLD THE INSURANCE COMPANY THERE WAS A DIVORCE, WHY NOT KEEP THE MONEY?
Because she Had given defendant written notice of the divorce, the court found that defendant had received
notice according to the statute and was therefore responsible for wrongfully disbursing
1
ST.CLAIR COUNTY, MICHIGAN, DIVORCE AND INSURANCE
MCL 552.101(2) states, in its entirety:
Each judgment of divorce or judgment of separate maintenance shall
determine all rights of the wife in and to the proceeds of any policy or
contract of life insurance, endowment, or annuity upon the life of the
husband in which the wife was named or designated as beneficiary, or to
which the wife became entitled by assignment or change of beneficiary
during the marriage or in anticipation of marriage. If the judgment of
divorce or judgment of separate maintenance does not determine the rights
of the wife in and to a policy of life insurance, endowment, or annuity, the
policy shall be payable to the estate of the husband or to the named
beneficiary if the husband so designates. However, the company issuing
the policy shall be discharged of all liability on the policy by payment of its
proceeds in accordance with the terms of the policy unless before the
payment the company receives written notice, by or on behalf of the insured
or the estate of the insured, 1 of the heirs of the insured, or any other
person having an interest in the policy, of a claim under the policy and the
divorce. [Emphasis added.]
2 In re Genaw Estate, 285 Mich App 660 (2009).
3
the funds.3 The dissenting judge would have held that a named beneficiary cannot
qualify as an “other person having interest in the policy.”4
WHAT IS THE CORRECT INTERPRETATION? WHAT IT SAYS OR WHAT IT MEANS J
The Supreme Court should resolve the correct interpretation of MCL 552.101(2).
THE COURT OF APPEALS WAS IN A SLOPPY HURRY?
The majority has hastily accepted the dissenting opinion as correct without the benefit of
full briefing or oral argument.
ONE SUPREME COURT JUSTICE IS TROUBLED!
I find this troublesome because, under the language of the statute, petitioner’s ex-wife, a named beneficiary of the policy, appears to be a “person having interest in the policy.”
JUST WHAT KIND OF NOTICE IS ADEQUATE
Nowhere does the statute contain a requirement that notice be given by someone other than the named beneficiary or that the insurer be advised of a competing claim to the insurance benefits.
THEY NEED PERMISSION OF LEAVE TO APPEAL, IT WAS GIVEN.
Accordingly, I would grant leave to appeal to resolve the differing interpretations
of the statute.
3 Under the factual circumstances of this case, it is undisputed that Unum received a
claim from Genaw that specifically acknowledged both her status as the ex-wife of the
decedent and the existence of a divorce. Consequently, this information, submitted in
conjunction with her claim, was sufficient to meet the notice requirement imposed by the
existing statutory language, and the insurance company was not absolved of its liability
for payment of the proceeds to the designated beneficiary. [Id. at 669.]
PLAIN LANGUAGE
4 [T]he plain language of the statute absolves an insurer of liability for paying its
proceeds in accordance with the terms of the policy unless before the payment it receives
written notice of a claim and of the divorce from one of the persons identified in the
statute.
SPECIFIED PERSONS
These specified persons—(1) the insured or the estate of the insured, (2) the heirs
of the insured, or (3) any other person having an interest in the policy—are plainly ones
who could have an interest in the policy if the beneficiary designated in the policy no
longer had a right to the benefits of the policy.
CLAIM MAKING
A claim by such a person would clearly
give the insurer notice of the extinguishment of the former wife/beneficiary’s interest in
the policy and of the existence of a claim by one other than the beneficiary designated in
the policy. Thus, “other person” logically means a person other than the claimant
(beneficiary) already known to the insurer.
WRITTEN NOTICE NEEDED
Absent written notice of a claim under the
policy by one of the persons identified in the statute before making payment on its policy,
the insurer is discharged of all liability on the policy for payment of its proceeds in
accordance with the terms of the policy.
MOST IMPORTANT TO LET THE INSURANCE COMPANY OFF THE HOOK
This interpretation advances the clear purpose
of the statutory language at issue, which is to protect an insurer that pays its policy
proceeds in accordance with the terms of the policy absent the requisite notice of a claim
by someone other than the beneficiary designated in the policy. In my view, the plain
language of the statute mandates this conclusion. [Id. at 675-676; emphasis in original
(FITZGERALD, J., dissenting).]
HATHAWAY, J., would grant leave to appeal.
Posted 06/15/2010 here by
Terry R. Bankert
A Flint Michigan Divorce Lawyer
http://attorneybankert.com
Or
http://dumpmyspouse.com
Sunday, September 28, 2008
St Clair County
StClair
http://www.stclaircounty.org/Main/Default.aspx
201 McMorran BlvdPort Huron, MI 48060(810) 985-2001
Area: 724 smEst: 1820Pop: 164,235Pop/sm: 226.7Seat: Port Huron
http://www.stclaircounty.org/Main/Default.aspx
201 McMorran BlvdPort Huron, MI 48060(810) 985-2001
Area: 724 smEst: 1820Pop: 164,235Pop/sm: 226.7Seat: Port Huron
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