DeCeglia v. Estate of Colletti

• Decision Date: 08 June 1993
• Citation: 265 N.J.Super. 128,625 A.2d 590
• Parties: Sarah E. DeCEGLIA, Plaintiff-Respondent, v. ESTATE OF Gary Douglas COLLETTI; Audrey Colletti, Administratrix of the Estate of Gary Douglas Colletti; Audrey Colletti, individually; and Lori Ann Colletti, Defendants-Appellants, and Larrin Colletti; The Prudential Insurance Company of America; State of New Jersey, Department of the Treasury, Division of Pensions, Public Employees' Retirement System; General Motors Acceptance Corporation; John Does 1-20, ABC Corporations 1-20 and ABC Partnerships 1-20 (the last 60 names being fictitious, representing natural persons, corporations, partnerships or other entities); and Medical Examiner, Morris County, New Jersey, Defendants.
• Court: New Jersey Superior Court — Appellate Division

Page 128

265 N.J.Super. 128

625 A.2d 590

Sarah E. DeCEGLIA, Plaintiff-Respondent, v. ESTATE OF Gary Douglas COLLETTI; Audrey Colletti Administratrix of the Estate of Gary Douglas Colletti; Audrey Colletti individually; and Lori Ann Colletti Defendants-Appellants and Larrin Colletti; The Prudential Insurance Company of America; State of New Jersey, Department of the Treasury, Division of Pensions, Public Employees' Retirement System; General Motors Acceptance Corporation; John Does 1-20, ABC Corporations 1-20 and ABC Partnerships 1-20 (the last 60 names being fictitious, representing natural persons, corporations, partnerships or other entities); and Medical Examiner, Morris County, New Jersey, Defendants.

Superior Court of New Jersey, Appellate Division.

Submitted March 23, 1993.

Decided June 8, 1993.

Charles J. Mysak, Wayne, for defendants-appellants.

Nolan & Ehler, Hackensack, for plaintiff-respondent (Edward J. Nolan, on the brief).

Before Judges DREIER, SKILLMAN and VILLANUEVA.

The opinion of the court was delivered by

SKILLMAN, J.A.D.

This appeal involves competing claims to three life insurance policies. The decedent, Gary Colletti, owned a whole life policy with a face value of $25,000 and two group policies provided through his employment with an aggregate value slightly in excess of $50,000. In June 1981 the decedent designated his mother, defendant Audrey Colletti, as the beneficiary of the whole life policy, and in March 1987 he designated his mother and sister, defendant Lori Ann Colletti, as joint beneficiaries of the group policies.

Subsequent to these designations, decedent began a serious romantic relationship with the plaintiff Sarah DeCeglia. In May 1990 plaintiff and decedent began living together and shortly thereafter plaintiff became pregnant. Decedent recognized the expected child as his own and planned to marry plaintiff in June 1991. However, on December 13, 1990, decedent suddenly and unexpectedly died. The only substantial assets owned by decedent at the time of his death were the three insurance policies. ¹ Less than a month after decedent's death, plaintiff gave birth to the child decedent had fathered.

Shortly before his own death, one of decedent's close friends died in a hunting accident. As a result, decedent became concerned about providing for plaintiff and his soon-to-be-born child if something were to happen to him. Consequently, he communicated with a law firm about the preparation of a will under which plaintiff would be the beneficiary. He also spoke to the insurance agent who sold him the whole life policy about designating plaintiff as the beneficiary and purchasing additional coverage. However, the decedent's unexpected death occurred before a will could be drafted and before he was able to meet with his insurance agent to effectuate a change in his beneficiary designation.

Plaintiff filed this suit in the Chancery Division against Audrey and Lori Ann Colletti, as the designated beneficiaries under the insurance policies, the Prudential Insurance Company, as issuer of the policies, ² the decedent's estate, and various other parties who are not involved at this stage of the proceeding. The complaint asserted among other things that plaintiff was entitled to the proceeds of the life insurance policies or, alternatively, that the decedent's estate was liable for the support of his child.

The trial court conducted a one-day trial in which plaintiff, decedent's insurance agent, his attorney and a paralegal employed by the attorney, all testified to decedent's expressions of intent to make plaintiff the beneficiary of his insurance policies. The trial court found based on this evidence that the decedent intended to make plaintiff the beneficiary under all three policies. In addition, the court concluded that, under Vasconi v. Guardian Life Ins. Co. of Am., 124 N.J. 338, 590 A.2d 1161 (1991), it was appropriate to effectuate decedent's intent even though it had not been formalized by the execution of a change of beneficiary form or other writing.

The decedent's estate and his mother and sister, as the named beneficiaries under the insurance policies, appeal from the judgment in plaintiff's favor, arguing that since decedent took no action during his lifetime to change the beneficiary designations, the named beneficiaries enjoy a vested right to the insurance proceeds. Plaintiff argues that the trial court properly effectuated the decedent's intent to change his beneficiary designations by awarding her the insurance proceeds. In the alternative, plaintiff argues that she is entitled to the insurance proceeds to satisfy decedent's child support obligations imposed under the New Jersey Parentage Act, N.J.S.A. 9:17-38 to -59.

We conclude that decedent's verbal expressions of intent to change the beneficiary designations under his life insurance policies did not change those designations. However, we also conclude that decedent's obligation to support his child is enforceable against his estate and that the proceeds of his insurance policies are available to satisfy this obligation. Therefore, we reverse the part of the judgment which awards the proceeds of the insurance policies to plaintiff, but remand to the trial court to allow plaintiff to pursue claims for child support from the proceeds of the policies.

I

The traditional rule regarding change of beneficiary designations under a life insurance policy is that "... the interest of the designated beneficiary ... is a vested property right, payable if he survives the insured, which can be divested only by a change of beneficiary in the mode and manner prescribed by the [policy]." Metropolitan Life Ins. Co. v. Woolf, 138 N.J.Eq. 450, 454-55, 47 A.2d 340 (E. & A. 1946); accord Prudential Ins. Co. of Am. v. Swanson, 111 N.J.Eq. 477, 482, 162 A. 597 (E. & A. 1932); New York Life Ins. Co. v. Estate of Hunt, 150 N.J.Super. 271, 274, 375 A.2d 672 (App.Div.), certif. denied, 75 N.J. 28, 379 A.2d 259 (1977). Thus, ordinarily "[a] demonstrated intention to change beneficiaries is insufficient if not executed in the manner prescribed in the policy for effecting such a change." Id. at 275, 375 A.2d 672; accord Prudential Ins. Co. of Am. v. Swanson, supra, 111 N.J.Eq. at 482, 162 A. 597; Gerhard v. The Travelers Ins. Co., 107 N.J.Super. 414, 422, 258 A.2d 724 (Ch.Div.1969). However, in Haynes v. Metropolitan Life Ins. Co., 166 N.J.Super. 308, 313, 399 A.2d 1010 (App.Div.1979), we held that a change of beneficiary designation may be effected by "substantial compliance" with the method prescribed in the policy. Consequently, we concluded that a written request of an insured to change his beneficiary designations from his estranged wife to other relatives was effective, even though not accompanied by the policies themselves as required by the contracts of insurance, because the estranged wife had control of the policies and refused to relinquish them. In reaching this conclusion, we stated that "an insured will be released from a strict observance of the terms of the policy if the court can be convinced that the insured made every reasonable effort to effect a change of beneficiary." Ibid.; see also Prudential Ins. Co. of Am. v. Mantz, 128 N.J.Eq. 480, 484, 17 A.2d 279 (Ch.), aff'd o.b., 130 N.J.Eq. 385, 22 A.2d 241 (E. & A.1941); Prudential Ins. Co. of Am. v. Swanson, supra, 111 N.J.Eq. at 481, 162 A. 597. The "substantial compliance" rule has been described in substantially similar terms by leading treatises in the field of insurance, 5 Couch on Insurance, §§ 28.65, 28.66 (Rhodes rev. 1984); 2A John Alan Appleman and Jean Appleman, Insurance Law and Practice, §§ 1008, 1021 (Appleman rev. 1966), and by courts of other jurisdictions. See, e.g., IDS Life Ins. Co. v. Estate of Groshong, 112 Idaho 847, 736 P.2d 1301 (1987); Capital Life Ins. Co. v. Porter, 719 S.W.2d 908 (Mo.App.1986).

In addition, in Vasconi v. Guardian Life Ins. Co., supra, 124 N.J. at 346, 590 A.2d 1161, the Court held that when divorcing parties enter into a property settlement agreement which purports to settle "all questions pertaining to their respective interests in distribution of the marital assets," the agreement "should be regarded as presumptively revoking" the designation of the former spouse as the beneficiary of any life insurance policies. The Court stated that in this context "[a] beneficiary designation must yield to the provisions of a separation agreement expressing an intent contrary to the policy provision." Id. at 347, 590 A.2d 1161; see also Conforti v. Guliadis, 128 N.J. 318, 324-25, 608 A.2d 225 (1992).

The trial court read Vasconi broadly to change prior New Jersey law requiring "substantial compliance" with the beneficiary designation of an insurance policy and instead to establish "the proposition that the real polestar should be the intent of the insured owner." Moreover, the trial court indicated that the intent to change a beneficiary designation can be established solely from a decedent's verbal expressions of intent without formalization in any kind of writing.

We believe that the trial court's reading of Vasconi was overly broad. Vasconi involved the interpretation of a formally executed agreement between the policyholder and beneficiary which purported to settle "all questions pertaining to their respective interests in distribution of the marital assets," which presumably included the insurance policy. The present case does not involve any comparable written agreement between the policyholder and beneficiaries, or any form of written communication from the policyholder to the insurer expressly requesting a change in his beneficiary designations. Instead, decedent simply expressed an intent to change his beneficiary designations, which he was told would require the execution of insurance company forms to effectuate. Such a verbal expression of intent does not constitute substantial compliance with the...