McCarthy v. Aetna Life Ins. Co.

• Decision Date: 20 November 1998
• Citation: 92 N.Y.2d 436,681 N.Y.S.2d 790,704 N.E.2d 557
• Parties: , 704 N.E.2d 557, 1998 N.Y. Slip Op. 10,239 Christine B. McCARTHY, Formerly Known as Christine Kapcar, Appellant, v. AETNA LIFE INSURANCE COMPANY, Defendant and Interpleader Plaintiff. Emil S. Kapcar, Interpleaded Defendant-Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 790

681 N.Y.S.2d 790

92 N.Y.2d 436, 704 N.E.2d 557, 1998

N.Y. Slip Op. 10,239

Christine B. McCARTHY, Formerly Known as Christine Kapcar, Appellant, v. AETNA LIFE INSURANCE COMPANY, Defendant and Interpleader Plaintiff.

Emil S. Kapcar, Interpleaded Defendant-Respondent.

Court of Appeals of New York.

Nov. 20, 1998.

Richard C. Reiner and Michael M. Eisenberg, New Rochelle, for appellant.

Harvey, Pennington, Herting & Renneisen, LLC, New York City (Victor R. Moritz, David L. Pennington and Carolyn B. Stevens of counsel), for respondent.

OPINION OF THE COURT

SMITH, Judge.

The question raised by this appeal is whether a decedent insured may effect a change of the designation of beneficiary on a life insurance policy by means of a testamentary disposition when the policy sets out another procedure for changing beneficiaries. We hold that under the circumstances of this case, he may not.

The relevant facts are not in dispute. Plaintiff Christine McCarthy and Stephen Kapcar, the decedent, married in November 1972. At the time of their marriage, Kapcar was employed by J.C. Penney in New York and, as part of a benefit package, received a group life insurance policy issued by Aetna Life Insurance Co. Kapcar designated the plaintiff beneficiary of that Aetna policy. The policy provided that

"The amount payable by reason of the death of an employee shall be paid to the beneficiary designated by the employee. An employee, whether or not employment shall have terminated, may designate a beneficiary or change his designation of beneficiary from time to time by written request filed at the headquarters of the Policyholder or at the Home Office of the Insurance Company."

Within a year of the marriage, Kapcar was diagnosed with multiple sclerosis. He developed severe tremors, underwent brain surgery to alleviate the tremors, and became legally blind in 1974. After the couple separated in 1977, Kapcar left the marital home and took up residence with his father, Emil Kapcar, in Pennsylvania. Plaintiff and Kapcar divorced in 1978 on the ground that they had lived apart for over one year. A separation and property settlement agreement was incorporated into the divorce decree. Though neither the divorce decree nor the property settlement mentions the Aetna policy, the settlement document provided that

"the WIFE forever relinquishes and releases all right, title, and interest which now has or ever may have in and to the real, personal and mixed property of the HUSBAND; all right of dower; all right title and interest which she has or ever may have in and to the property or estate of the HUSBAND at his death and all right and interest to take against his will or under the intestate laws; and each and every other right, title, and interest she has or ever may have against the HUSBAND, his heirs, executors, administrators, and assigns excepting only such rights as she may have under this Agreement."

Stephen Kapcar died in 1984, having spent the last seven years of his life--unemployed--with his father in Pittsburgh. At the time of his death, he was a quadriplegic. According to the terms of a holographic will written in 1977 and entered into probate in the Commonwealth of Pennsylvania, Kapcar stated that "I will all my personal belongings, stock certificates, bank accounts, insurance benefits, and any other earthly belongings to my father. * * * This will voids my previous will bequeathing my belongings to Christine B. Kapcar." At no time did the decedent alter the named beneficiary (his ex-wife) on the Aetna policy.

After Kapcar's death his former wife Christine McCarthy commenced this action against defendant Aetna to claim the proceeds of the life insurance policy, an amount totaling approximately $16,000. Aetna interpleaded Emil Kapcar, administrator of decedent's estate, who claimed proceeds of the Aetna policy under decedent's holographic will. By court order, Aetna paid the proceeds of the policy into court and was discharged as a party in the action. The funds remain on deposit pending disposition of this appeal.

The trial court held that plaintiff was entitled to the proceeds because the decedent failed to comply with the terms of the policy delineating the manner in which the beneficiary designation could be modified. Appellate Term affirmed, one Justice dissenting, on substantially the same grounds. The Appellate Division reversed, two Justices dissenting, and awarded the insurance proceeds to decedent's father. The Court held that, under the circumstances of this case, decedent's will was a sufficient manifestation of his intent to change the beneficiary designation on the insurance policy and deny his ex-wife the proceeds of the policy. We now reverse.

Defendant asserts that the laws of Delaware should apply because the insurance contract provided that the policy was to be construed in accordance with laws of that State. Plaintiff argues that since the holographic will was probated in Pennsylvania, that State's laws apply. Because the result would be the same whether the law of Pennsylvania or Delaware is applied, we need not decide that question.

As a general rule, under Pennsylvania, Delaware and New York law, the method prescribed by the insurance contract must be followed in order to effect a change of beneficiary (Equitable Life Assur. Socy. v. Stitzel, 299 Pa.Super. 199, 203, 445 A.2d 523, 525; Riley v. Wirth, 313 Pa. 362, 169 A. 139; Metropolitan Life Ins. Co. v. O'Donnell, 11 Del.Ch. 404, 102 A. 163, 165; see also, Kane v. Union Mut. Life Ins. Co., 84 A.D.2d 148, 445 N.Y.S.2d 549, appeal dismissed 57 N.Y.2d 956; Matter of Jaccoma, 142 A.D.2d 875, 877, 530 N.Y.S.2d 909; NY EPTL 13-3.2[e][1], [2] ). Such a rule serves the paramount goals of ensuring that life insurance proceeds are disbursed consistently with an insured's stated intent and of preventing the courts and parties from engaging in rank speculation regarding the wishes of the deceased.

Strict compliance with the rule is not always required. Instead, "There must be an act or acts designed for the purpose of making the change, though they may fall short of accomplishing it" (Aetna Life Ins. Co. v. Sterling, 15 A.D.2d 334, 335, 224 N.Y.S.2d 146, affd. 11 N.Y.2d 959, 229 N.Y.S.2d 9, 183 N.E.2d 325; see also, Kane v. Union Mut. Life Ins. Co., 84 A.D.2d 148, 445 N.Y.S.2d 549, ...