Can a life insurer reject my claim as benefciairy due to my divorced from the insured?

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Can a life insurer reject my claim as benefciairy due to my divorced from the insured?

My understanding is that life insurance is non-probate asset and is also ERISA protected. I was divorced when my ex-spouse died our divorce decree stipulates we were to name each other as beneficiaries on policies so that the death benefits could be used for our minor children’s support. My ex-spouse named me on 2 policies to fulfill the minimum required coverage that our settlement stipulated, since he was the breadwinner for the family. Both life insurance companies are asking for copies of my settlement which I’ve sent and I am concerned they will both deny my claims, even though our settlement terms are clear about my fiduciary role to receive the benefit for the support of the children and our mutual obligation to retain each other post-decree as beneficiaries for the purpose of our children’s financial support/security. What do I do if they deny my claims? Do I have legal recourse? One company in particular is dragging their feet and it is worrying me, about the future for our family, which my ex and I thought we had planned for adequately.

Asked on September 28, 2018 under Insurance Law, Illinois

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Life insurance, like any insurance, is a contract: it is enforced according to its plain terms. That includes the naming of the beneficiary. So the language naming you as beneficiary is critical. For example, if you were named simply BY YOUR NAME--e.g. "Jane Doe"--they'd have to pay you, since it is clear that you are intended to benefit no matter what. You could certainly sue for breach of contract if they did not pay in this situation. 
If you were named only as "my wife," then they clearly do not have to pay you: once divorced, you are no longer "my wife."
If named by name and by relationship, such as "my wife, Jane Doe," it is up to debate: the issue is, was "my wife," just a way of further identifying you (like saying "Jane Doe, daughter of John and Jill Doe, mother of my son, James Doe," etc.), or was it a statement that he intended you to receive the policy benefits *because* you were his wife--which therefore means that once you are no longer his wife, you would not inherit.
Or take the term "trustee"--does it just represent the role you would have in the event of his death, as you think? Or does it require that there be a trust, since without a trust, you are not and cannot be a "trustee"? The position that there had to be a trust is not an unreasonable one. Since they have to enforce the agreement--the policy--as it was written, if they believe that it required you to actually be a trustee, then they could not pay you.
These are issues of contractual interpretation--what was meant? If you believe that the facts show that you were intended to get the money no matter what, if they don't pay, you could sue them for breach of contract and attempt to show in court that your interpretation, and not their interpretation, is correct. It would, if they will not agree with you and pay, take a lawsuit and a court judgment or determination to make them pay. That is your recourse: to sue and show in court that they should pay, and if you succeed, get a court order requiring payment.


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