Nunn v. Equitable Life Assur. Soc. of U.S.

• Decision Date: 28 November 1978
• Docket Number: No. 9494,9494
• Citation: 272 N.W.2d 780
• Parties: Bonnie J. NUNN, Individually and as Personal Representative of the Estate of Jay W. Nunn, Deceased, Plaintiff and Appellant, v. EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, NCR Corporation, a Foreign Corporation; and Carol Wink Schaeffer, formerly Carol Wink Nunn, Defendants and Appellees. Civ.
• Court: North Dakota Supreme Court

Page 780

272 N.W.2d 780

Bonnie J. NUNN, Individually and as Personal Representative of the Estate of Jay W. Nunn, Deceased, Plaintiff and Appellant, v. EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, NCR Corporation, a Foreign Corporation; and Carol Wink Schaeffer, formerly Carol Wink Nunn Defendants and Appellees.

Civ. No. 9494.

Supreme Court of North Dakota.

Nov. 28, 1978.

Rehearing Denied Jan. 10, 1979.

E. J. Rose, Bismarck, for plaintiff and appellant.

McGee, Hankla, Backes & Wheeler, Minot, for defendant and appellee, Carol Wink Schaeffer, argued by Richard H. McGee II, Minot.

Fleck, Mather, Strutz & Mayer, Bismarck, for defendants and appellees, Equitable Life Assurance Society of the United States and NCR Corporation; no appearance.

ERICKSTAD, Chief Justice.

This appeal involves a contest over the proceeds of a group life insurance policy issued by Equitable Life Assurance Society on the life of Jay W. Nunn. Bonnie J. Nunn, surviving spouse and personal representative of the estate of Jay W. Nunn, appeals from a summary judgment in favor of Carol Wink Schaeffer, divorced wife of Jay Nunn, granted on the grounds that Carol is the named beneficiary of the policy. We affirm.

Jay W. Nunn married Carol Wink on October 3, 1969, and began work at the National Cash Register Corporation (NCR) in the summer of 1970. During his employment at NCR, Jay participated in a group insurance plan provided by the Equitable Life Assurance Society of the United States. Jay had life insurance through two policies: Policy No. 4031 provided straight life insurance, and Policy No. 4031D provided, among other things, double indemnity recovery for accidental death. On July 11, 1970, Jay entered Carol Wink Nunn's name on the enrollment record as his beneficiary under the life insurance policies.

Jay and Carol Nunn were divorced on September 10, 1974, and both parties remarried. Although the judgment and decree of divorce included a property settlement, the insurance policies were not specifically mentioned. Jay did not change the beneficiary of his life insurance policies, and on November 10, 1976, he died from a gunshot wound.

On November 15, 1977, Bonnie Nunn brought a declaratory judgment action against Carol Wink Schaeffer, Equitable Life Assurance, and NCR, to have herself or the estate declared the beneficiary of the insurance policies. Carol counterclaimed on the grounds that she is the rightful beneficiary, and cross-claimed against Equitable and NCR for the life insurance proceeds. Equitable Life Assurance and NCR admit liability and stand willing to pay on Policy No. 4031, but deny liability under Policy No. 4031D, the double indemnity policy.

Carol moved for summary judgment on the grounds that she was entitled to the insurance proceeds because she was the named beneficiary, and the district court granted the motion. The issue of double indemnity has not yet been litigated.

Bonnie appeals from the district court's judgment to this court.

Bonnie argues that the decedent did not take any action to change beneficiaries on the policy because he was under the mistaken impression that no change was necessary. The district court assumed, for purposes of the summary judgment motion, that "the plaintiff could establish at a trial that the decedent mistakenly believed his widow was entitled to the proceeds of the policy and that this was in accordance with his intentions." The district court, nevertheless, granted Carol's motion for summary judgment:

"The plaintiff is in this case arguing that in effect the person entitled to the proceeds of the policy is Whoever the decedent intended it to be, even if not the named beneficiary. It requires little imagination to envision the mischief that would be caused by the adoption of such a rule. Disputes among friends, relatives, and heirs of the decedent would be a regular occurrence. Insurance companies presumably invariably deposit the proceeds in court because they could not rely on their records. The adoption of such a rule, in the long run, would be detrimental to the administration of justice, just as it would be if permitted in the case of wills or land transfers.

"It should also be observed that we are not dealing here with a situation in which the decedent did anything within his power to effectuate his intention. The problem was caused by the decedent's own carelessness. It would have been a simple matter for him to determine who was, in fact, the beneficiary of the policy. The result may be unfortunate, but that condition alone no more furnishes justification for the Court to intervene than it would in the case of errors of judgment or frustrated expectations in the case of contracts generally."

Although Bonnie acknowledges the general rule that the named beneficiary is controlling, she argues that the insurance policy in this case is unique because it is a group policy. Bonnie argues that there was no insurance policy or certificate of coverage issued to decedent, no premium payment, and no vested interest or property interest of any kind. Thus, Bonnie submits that the decedent's mistaken belief arose from "the failure of the employer and/or insurance company to advise the decedent in anyway as to his rights under the policy."

Although we have recognized that a decedent's intent may be important in determining who is entitled to the proceeds of a policy, See Rasmussen v. Mutual Life Ins. Co. of New York, 70 N.D. 295, 293 N.W. 805 (1940); Taylor v. Grand Lodge A.O.U.W., 45 N.D. 468, 178 N.W. 130 (1920), intent alone will not effectuate a change of beneficiary.

We agree with the district court that the decedent's failure to change beneficiaries due to a mistaken impression, is insufficient to change a beneficiary. We do not think that a group insurance policy changes this result, nor do we believe that the insurance company can be faulted for failing, if it did, to notify Nunn that he could or should change his beneficiary after his divorce.

Bonnie also argues that the divorce and property settlement divested Carol of her interest in Jay's life insurance policy despite his failure to change or attempt to change beneficiary. Carol argues that the divorce Per se did not affect her rights as beneficiary, and especially because the property distribution by the district court did not mention insurance, she is entitled to the proceeds. The district court agreed with Carol:

"There are cases which hold that a beneficiary's interest in an insurance policy can be effectively terminated in a divorce proceeding. The transcript of the divorce proceeding and the judgment entered therein are part of the record in this case. The subject of insurance was not covered at all. The Court divided items of personal property, giving some to the decedent, and then provided that Carol Wink Schaeffer would have the remainder of the personal property. This is not sufficient to divest the beneficiary of her interest in the property."

Bonnie agrees that there was no formal property settlement prior to the divorce hearing due to the animosity of the parties. She submits, however, that the district court intended to equitably distribute all of the property at the divorce hearing and even though the insurance policies were not specifically mentioned, they were included in the property disposition.

Absent an insurance policy provision to the contrary (rights of beneficiary are conditioned upon the continuance of the marriage), or the regulation of the matter by statute, the general rule is that the rights of a beneficiary are not affected by a divorce between the beneficiary and the insured. 4 Couch on Insurance 2d, Section 27:111; See also, Annot., 70 A.L.R.3d 348 (1976).

This rule is premised on the theory that the wife's right to recover is not dependent upon the existence of a marital relationship but upon principles of contract law. Although a divorce Per se does not affect a beneficiary's right to insurance proceeds, a beneficiary may contract away her interest in the policy through a separation or property settlement agreement even if the beneficiary is not formally changed. Couch, Supra Section 27:114.

It is generally accepted that a specific award of an insurance policy to the husband in a property settlement agreement or final divorce decree terminates the wife's interest in the proceeds, notwithstanding the husband's failure to change his designation of beneficiary. Annot., 70 A.L.R.3d 348 (1976).

The result is less clear, however, if the insurance policy is not specifically mentioned. Some cases refuse to "rewrite" a property settlement agreement or final divorce decree to include insurance if it is not specifically mentioned. In Mullenax v. National Reserve Life Ins. Co., 29 Colo.App. 418, 485 P.2d 137 (1971), a Colorado Court of Appeals interpreted a separation agreement that did not specifically mention insurance and found that general language was not sufficient to terminate the beneficiary's rights:

"The terms of the separation agreement required plaintiff (divorced wife) to convey all of her 'right, title and interest in and to any and all property' held by the husband. The clear meaning of this clause is that plaintiff was conveying unto the decedent any interest in the property to which she might have had a legitimate claim or interest. She had no present interest in this policy, only a mere expectancy. (citation omitted) Plaintiff might have renounced or disclaimed her expectancy in the policy by this or any other agreement, but this is sharply distinguishable from the wording of the agreement itself, which speaks of conveying any interest she might have in the decedent's property.

"The agreement does not contain a renunciation of her expectancy in the policy and, absent such a specific disclaimer, we will not construe the agreement so as to include a renunciation of her right to take as beneficiary under the policy. It is not the duty of the court to...