Kane v. Union Mut. Life Ins. Co.

• Decision Date: 31 December 1981
• Citation: 445 N.Y.S.2d 549,84 A.D.2d 148
• Parties: Louise KANE, Respondent-Appellant, v. UNION MUTUAL LIFE INSURANCE COMPANY, Respondent; Daniel A. Kane et al., Appellants-Respondents.
• Court: New York Supreme Court — Appellate Division

Page 549

445 N.Y.S.2d 549

84 A.D.2d 148

Louise KANE, Respondent-Appellant, v. UNION MUTUAL LIFE INSURANCE COMPANY, Respondent Daniel A. Kane et al., Appellants-Respondents.

Supreme Court, Appellate Division Second Department.

Dec. 31, 1981.

Walsh & Levine, New York City (Paul Ambos, New York City, of counsel), for appellants-respondents.

McLaughlin, Stern, Ballen & Miller, New York City (Stephen S. Bernstein, Sol I. Sokolsky and Irving W. Ballen, New York City, of counsel), for respondent-appellant.

Before HOPKINS, J. P., and DAMIANI, LAZER and THOMPSON, JJ.

PER CURIAM.

In 1970 a group annuity contract plan was entered into by defendant Union Mutual Life Insurance Company (hereinafter Union Mutual) and Maimonides Medical Center as contractholder. On April 25, 1972 Union Mutual issued its certificate to Alan Kane, M.D., which named him as a participant in that group annuity plan and which contained the following designation of beneficiaries:

"Wife, Mrs. June W. Kane, In the event her death precedes mine equally to Eric P. Kane and Daniel A. Kane as beneficiaries".

The certificate had originally been issued on April 4, 1972 with the same designated beneficiaries, but the name "Kane" had been misspelled as "Kave". In a handwritten note signed Alan A. Kane, a request was made to correct the spelling and as a result Union Mutual issued the corrected certificate dated April 25, 1972, referred to supra.

The amended certificate also provided for a change in beneficiary as follows:

"BENEFICIARY. A Participant may change his designation of Beneficiary from time to time by filing with the Company, at its Home Office, written notice thereof in any form satisfactory to the Company. Such change of designation of Beneficiary shall take effect as of the date of execution of such notice thereof whether the Participant is living at the time of receipt of such notice or not but without prejudice to the Company on account of any payments made by it before receipt of such notice at its Home Office."

June W. Kane, who was Alan Kane's first wife and the mother of their two sons Eric and Daniel, died on August 23, 1973. Approximately one year after her death Dr. Kane remarried. His new wife was Louise Kane, the plaintiff in this action.

Alan Kane died in February, 1979 and his will, executed March 3, 1976, was admitted to probate in March, 1979. The seventh clause of the will provides:

"Any interest or rights I may have with respect to any Keogh Plan and/or Annuity which I shall have created with respect to my earned income, I give, devise and bequeath to my wife, LOUISE E. KANE, to be hers absolutely."

In May, 1979 Louise Kane sent a letter to defendant Union Mutual claiming that she was the beneficiary under the annuity plan and requesting payment under one of its options. Union Mutual replied to Mrs. Kane's request by letter, stating that upon receipt of the decree of probate and a certified copy of the will it would honor her request.

Thereafter counsel for the sons of Dr. Kane by his first wife notified Union Mutual that the sons were the living beneficiaries named in the certificate issued April 25, 1972 by it to Dr. Kane.

Union Mutual then declined to pay either the widow or the sons "because a payment to either * * * may prove to be improper," and it requested that the parties come to a mutual agreement as to how the proceeds should be paid.

Plaintiff commenced this action against Union Mutual and against Eric and Daniel Kane seeking a declaration, inter alia, that she was the sole beneficiary of the group annuity contract and had been so designated in her deceased husband's will.

Before serving an answer, the defendants Kane moved (1) to dismiss the complaint pursuant to CPLR 3211 (subd. pars. 1, 7) contending that a defense was founded upon documentary evidence and that the complaint failed to state a cause of action, and (2) for summary judgment in their favor pursuant to CPLR 3211 and 3212 and EPTL 13-3.2 adjudging that they, and not plaintiff, are the beneficiaries of the annuity in question. The plaintiff cross-moved pursuant to CPLR 3211 (subd. and 3212 for summary judgment in her favor.

Defendant Union Mutual moved pursuant to CPLR 1006 (subd. ) for an order permitting it to pay the proceeds of the annuity contract into court and thereupon discharging it from liability to any party in whole or part. The plaintiff then cross-moved pursuant to CPLR 2217 (subd. ) to "consolidate" all the pending motions and pursuant to CPLR 1006 (subd. ) for an order directing Union Mutual to retain the proceeds to the credit of the action, upon the ground that payment into court might impair option rights existing under the policy.

Special Term determined the motions by granting the cross motion for consolidation, directing Union Mutual to act as a stakeholder of the proceeds and benefits of the annuity subject to the rights of the prevailing party in this action and by denying dismissal to plaintiff under CPLR 3211 and summary judgment to either party under CPLR 3211 and 3212. We modify by granting summary judgment to Eric and Daniel Kane.

The first issue in this case is whether a change in the beneficiary of the annuity contract could be accomplished by Dr. Kane's will. His two sons cite EPTL 13-3.2 for the proposition that "insurance contracts cannot be amended or otherwise affected by testamentary dispositions". The cited statute does not support that claim however. Generally stated, the law of this State is that the designation of a beneficiary to a pension, retirement annuity or other insurance contract is not a testamentary act which must comply with the statute of wills (see Study: Braucher, Unification of the Rules Governing Payment of Funds by Institutional Debtors on Death of the Person Entitled and Designations of Beneficiaries to Receive Payment of Such Funds, 1951 Law Revision Commission Reports, pp. 609, 618). Former section 24-a of the Personal Property Law, the predecessor of EPTL 13-3.2, was recommended by the Law Revision Commission simply to remove "any doubt as to the validity and effectiveness of beneficiary designations" of pension, annuity and insurance contracts and to indicate that such designations were not required to be executed with the formality required by the statute of wills (see 1952 Law Revision Commission Reports, p. 177). Accordingly, the statute provides that the rights of such beneficiaries "shall not be impaired or defeated by any statute or rule of law governing the transfer of property by will, gift or intestacy" (EPTL 13-3.2, subd. ), provided that the designation is made in writing, is signed by the person making it, and is, so far as here relevant, made in accordance with the rules prescribed for the pension plan or is agreed to by the insurer (EPTL 13-3.2, subd. pars. Thus, the statute relied upon by the Kane sons merely provides that such designations of beneficiaries are not invalid if accomplished by a document not executed with the formalities required by the statute of wills, but it does not answer the question raised here, the converse of that proposition, namely, whether a provision in a will changing the beneficiaries of an insurance contract is valid.

The validity of a provision in a will purporting to change the designation of the beneficiary of an annuity depends upon whether such a mode of change is expressly or impliedly authorized by the policy. Although it has been stated that "the power to change the beneficiary cannot ordinarily be exercised by will" (1951 Law Revision Commission Reports, p. 620) that statement means only that the provisions in an insurance contract regulating the manner in which a beneficiary may be changed are not "ordinarily" satisfied by a testamentary disposition (see Pruchnowski v. Prudential Ins. Co., 242 App.Div. 899, 276 N.Y.S. 84, affd. 270 N.Y. 530, 200 N.E. 303; Fink v. Fink, 171 N.Y. 616, 625, 64 N.E. 506; Hellenberg v. Dist. No. 1 of I.O.B.B., 94 N.Y. 580, 586; cf. Martinelli v. Cometti, 133 Misc. 810, 234 N.Y.S. 389). This is so because the relevant provisions of the insurance contract either expressly prohibit a change in beneficiary by testamentary disposition or impliedly prevent such mode of change by setting forth conditions to effect the change which cannot be met by a mere statement in a will.

It would appear, therefore, that the question now to be determined should be whether the change of beneficiary requirements of the contract have been met by the clause in Dr. Kane's will. However, certain procedural aspects of this case have the effect of structuring the issue differently.

In the case of Doss v. Kalas, 94 Ariz. 247, 250-251, 383 P.2d 169, 171-172 the Supreme Court of Arizona considered the rationale underlying the rule requiring compliance with the provisions of an insurance policy regarding change of beneficiaries and the rule to be applied where the insurer has waived such compliance, stating:

"In McLennan v. McLennan, 29 Ariz. 191, 240 P. 339 (1925) this court stated that if an insurance policy contract provides the method of changing the name of the beneficiary from one person to another, that particular method provided for in the policy contract is exclusive and must be followed strictly, or the attempted change is of no effect. See Cook v. Cook, 17 Cal.2d 639, 111 P.2d 322 (1941). The rationale generally used for such holding is amply illustrated in Stone v. Stephens, 155 Ohio St. 595, 99 N.E.2d 766, 25 A.L.R.2d 992, (1951) quoting from Wannamaker v. Stroman, 167 S.C. 484, 166 S.E. 621, 623 (1932):

' "To hold that a change in beneficiary may be made by testamentary disposition alone would open up a serious question as to payment of life insurance policies. It is in the public interest that an insurance company may pay a loss to the beneficiary designated in the policy as promptly after the death of insured as may reasonably be done. If there is uncertainty as to the beneficiary upon the...