Haynes v. Metropolitan Life Ins. Co.

• Citation: 166 N.J.Super. 308,399 A.2d 1010
• Parties: Bryan HAYNES and Lois Kelly, Plaintiffs-Appellants and Cross-Respondents, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant, and Evelyn Jenkins, Defendant-Respondent and Cross-Appellant.
• Decision Date: 01 March 1979
• Court: New Jersey Superior Court – Appellate Division

Page 308

166 N.J.Super. 308

399 A.2d 1010

Bryan HAYNES and Lois Kelly, Plaintiffs-Appellants and Cross-Respondents, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant and Evelyn Jenkins, Defendant-Respondent and Cross-Appellant.

Superior Court of New Jersey, Appellate Division.

Argued Oct. 23, 1978.

Decided March 1, 1979.

Oliver Lofton, Newark, for plaintiffs-appellants (Lofton, Lester & Smith, Newark, attorneys; Ernest R. Booker, Newark, on the brief).

Frank O'Neill, Newark, for respondent Evelyn Jenkins (Abraham Kinstlinger, Newark, attorney).

Before Judges ALLCORN, SEIDMAN and BOTTER.

The opinion of the court was delivered by

SEIDMAN, J. A. D.

This appeal raises the issues of whether an insured, now deceased, made an effective change of beneficiary on certain life insurance policies owned by him, and, if he did, whether the trial judge correctly determined that the former named beneficiary, the insured's purported wife, was nevertheless "equitably" entitled to one-half of the proceeds.

Between 1959 and 1975, Metropolitan Life Insurance Company issued three policies insuring the life of Hercules Jenkins. The named beneficiary in each was Evelyn Jenkins, whom Jenkins had married in 1957. The policies were in the respective amounts of $5,000, $25,000 and $3,000. It appears from affidavits and a deposition on file (the matter having been decided by the trial judge on a motion for summary judgment) that Evelyn Jenkins had previously been married and had not obtained a divorce when she married decedent.

In April 1976 they separated as the result of domestic problems, and Jenkins retained an attorney, who filed an annulment action in June of that year. He also sought the attorney's assistance in changing the beneficiaries named in the policies. On forms supplied by the insurance company Jenkins requested that the beneficiary on the $5,000 policy be changed to Bryan Haynes, his nephew, and, on the $25,000 policy, to his sister Lois Kelly. He apparently also requested a change of beneficiary in the third policy to his stepdaughter, Sandra Boyd. The latter policy is not directly involved in this appeal. The change of beneficiary forms were sent to the insurance company on June 23, 1976, together with "declaration of loss of policy" forms. The insured explained in the latter that the policies were not in Jenkins' possession because Mrs. Jenkins had "removed policy from my home without authorization," placed them in a bank vault and refused to return them despite "numerous telephone calls and personal requests," and duplicate policies were requested.

On July 8, 1976 the insurance company sent a letter to Mrs. Jenkins advising her of the insured's desire to "exercise his rights" under the policies, which he could not forward to the company because they were not available to him. She was further notified that, in view of the insured's request,

* * * (W)e must consider waiving presentation of the Policy to the Company. Therefore, unless within 30 days of the date of this letter we receive a claim of sufficient interest in this policy that would actually stand in the way of the insured's request, we must proceed in waiving presentation of this policy and grant the insured's request.

Admittedly, Mrs. Jenkins received the letter and did not return the policies. Decedent died on August 5, 1976. Thereafter, Mrs. Jenkins called the insurance company and told one of its employees that she had not responded "because I was going to bury my husband."

Bryan Haynes and Lois Kelly sued Metropolitan Life Insurance Company, demanding payment of the proceeds of the two policies. Mrs. Jenkins was joined as a party defendant. The insurance company filed a crossclaim and counterclaim seeking an order directing Bryan Haynes, Lois Kelly, Evelyn Jenkins and Sandra Boyd to interplead their respective claims to the proceeds of the policies, and authorizing it to pay the face amounts of the policies into court. Mrs. Jenkins filed a crossclaim, alleging therein that she had "made substantial payments of premiums * * * in consideration of the aforementioned policies," and that there had been no effective change of beneficiary prior to the insured's death. She sought payment of the proceeds or, in the alternative, the imposition of an equitable lien on the proceeds for premiums she had paid. Sandra Boyd did not enter an appearance in the proceedings below.

Thereafter, following a hearing on plaintiffs' motion for summary judgment and on an order directing the contestants to show cause why the face amount of the $3,000 policy should not be paid to Sandra Boyd if Bryan Haynes and Lois Kelly prevailed on their policies, the trial judge entered a judgment that, in pertinent part, divided the proceeds of each policy equally between Mrs. Jenkins and the respective newly designed beneficiary. Plaintiffs appealed and Mrs. Jenkins cross-appealed.

We consider, first, the question of whether decedent made an effective change of beneficiary. On this issue, in a letter opinion, the trial judge rejected Mrs. Jenkins' contention that the attempted change of beneficiary was not completed because the policies were never surrendered to and endorsed by the insurance company. The judge ruled that the latter, by its letter to Mrs. Jenkins, chose to waive the policy presentation requirement under the policies, and when Mrs. Jenkins failed to respond, the waiver was "thereby effectuat(ed)," and the change of beneficiary was deemed completed. The judge found further, in substance, that decedent had made every reasonable effort to comply with the policy conditions relating to a change of beneficiary.

It has long been the law that, generally, an insured may not change the beneficiary under a policy of life insurance, assuming a reservation therein of the right to make such change, except by substantial compliance with the method prescribed in the insurance contract. N.Y. Life Ins. Co. v. Hunt's Estate, 150 N.J.Super. 271, 275, 375 A.2d 672 (App.Div.1977), certif. den. 75 N.J. 28, 379 A.2d 259 (1977); Prudential Ins. Co. of America v. Swanson, 111 N.J.Eq. 477, 481-482, 162 A. 597 (E. & A. 1932); Sullivan v. Maroney, 76 N.J.Eq. 104, 110, 73 A. 842 (Ch. 1909), aff'd 77 N.J.Eq. 565, 78 A. 150 (E. & A. 1910). It has been said that a beneficiary has a vested right in the insurance proceeds, subject to divestment by a change of beneficiary in accordance with the procedure prescribed in the insurance policy for making such change. Strohsahl v. Equitable Life Assur. Soc. of U.S., 71 N.J.Super. 300, 304, 176 A.2d 814 (Ch.Div.1962); Prudential Ins. Co. v. Mantz, 128 N.J.Eq. 480, 486, 17 A.2d 279 (Ch. 1941), aff'd 130 N.J.Eq. 385, 22 A.2d 241 (E. & A. 1941). A corollary rule, equally well-established, is 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. Prudential Ins. Co. v. Mantz, Supra at 486, 17 A.2d 279.

The thrust of Mrs. Jenkins' argument derives from her ostensible assumption that a surrender of the policies for endorsement was a prerequisite to an effective change of beneficiary. She contends that apart from the "ambiguous" letter she had received from the insurance company, neither decedent nor anyone else on his behalf had requested her to surrender the policies. She maintains that the record does not establish that decedent had done everything he reasonably could to effect a change of beneficiary in the prescribed manner. Plaintiffs, on the other hand, argue that, as a result of Mrs. Jenkins' failure to reply to the letter from the insurance company, "The requirement in the policies that the same be presented to the company for endorsement, along with the change of beneficiary forms prior to decedent's death, was waived as a bar to an effective change of beneficiary by the insured."

Whether an effective change of beneficiaries was accomplished prior to the insured's death necessarily entails an examination of the relevant provisions of the policies affecting plaintiffs herein. ¹ Both policies (referred to hereafter for identification purposes as the Haynes policy and the Kelly policy) permit a change of beneficiary if made during the lifetime of the insured. Any such change in the Haynes policy "shall be effective only if written notice thereof is received by the Company at its Home Office and if such designation Is accepted by the Company" (emphasis supplied). But the Kelly policy does not require the insurer's acceptance of the notice. The provision there is simply that a change of beneficiary "will not be binding upon the Company unless made in writing and filed at the Home Office."

A significant provision in the Kelly policy is that upon the filing of the written request for a beneficiary change, "such designation or change will then be effective as of the date it was signed." The Haynes policy contains a similar provision respecting the effective date of the change, but it applies only upon Receipt and acceptance of the designation.

As for submission of the policy for endorsement, the two policies have differently worded clauses. The provision in the Haynes policy is that the policy must be presented to the company at its home office for endorsement, "except that the Company may, in its discretion, waive this requirement." In the other one, however, the clause reads, "If required by the Company, the policy must be presented for endorsement of any such designation or change." ²

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