When It’s Too late to Change Beneficiaries
March 14, 2018 § Leave a comment
Annie Patterson owned an Alfa life insurance policy in the amount of $50,000 on the life of her nephew and ward, Christopher Nance. Annie was also the beneficiary. She named Christopher’s mother, Angela Nance, as contingent beneficiary. The policy included a provision that, “upon death of the owner, ownership and control of the policy … shall pass to the estate of the deceased owner.”
Annie died in April, 2013, and her father, C.D. Pulliam, attempted to make himself owner and beneficiary, along with his siblings. They submitted an affidavit to Alfa claiming to be Annie’s sole heirs. One of C.D.’s siblings also completed a “Change of Ownership” form that purported to make C.D. owner and primary beneficiary of the policy. C.D. claimed that Alfa produced the form and directed that it be signed. He also claimed that he paid all premiums on the policy after Annie’s death.
No estate was ever opened for Annie.
After Christopher died in November, 2014, Alfa issued a letter to Annie stating that her recent policy change request had been “closed as incomplete” due to irregularities in the form submitted.
Alfa interpled the policy proceeds per MRCP 22 in January, 2015, naming C.D. and his siblings as defendants, since they claimed to be beneficiaries. C.D. filed a counterclaim against Alfa. The chancellor ruled that Alfa had properly interpled the funds and dismissed C.D.’s counterclaim as moot. The chancellor also ruled that C.D. had no legal right or authority to change ownership or beneficiaries of the policy. C.D. appealed.
In Pulliam v. Alfa Ins. Co. and Nance, handed down January 30, 2018, the COA affirmed on the issue of C.D.’s power and authority to change ownership and beneficiaries. Judge Wilson wrote for a unanimous court:
¶23. “Generally, a policy of life insurance is a stand-alone contract whose purpose is to provide a sum of money to the named beneficiary upon the death of the listed insured.” Barber v. Balboa Life Ins., 747 So. 2d 863, 866 (¶11) (Miss. Ct. App. 1999). The policy owner may select any individual as the policy’s beneficiary. Van Zandt v. Morris, 196 Miss. 374, 380, 17 So. 2d 435, 436 (1944). However, “[t]he policy owner’s rights largely end at the death of the insured. The policy beneficiary then has a right to the proceeds, which until death is only an expectancy. At the insured’s death the right to change the beneficiary no longer exists; the rights of the beneficiary have vested.” Evans v. Moore, 853 So. 2d 850, 855 (¶22) (Miss. Ct. App. 2003) (citations omitted).
¶24. As discussed above, the policy was issued to Annie as the owner and primary beneficiary, with Angela designated as the contingent beneficiary. The policy provides that “upon the death of the owner, ownership and control of the policy . . . shall pass to the estate of the deceased owner.” “The language and provisions of insurance policies are viewed as contracts and are subject to the same rules of interpretation as other contracts.” Hayne v. The Doctors Co., 145 So. 3d 1175, 1180 (¶12) (Miss. 2014). “Because insurance policies are creatures of contract, if the language is clear and unambiguous, then the language of the policy must be interpreted as written.” Id. Therefore, when Annie died ownership and control of the policy passed to her estate.
¶25. The chancellor concluded, and we agree, that C.D. and Otis had no authority to change the ownership of the policy or designate new beneficiaries. No estate was ever opened for Annie, nor was there ever any determination of her heirs. The only purported authority for C.D.’s and Otis’s action is an affidavit they provided to Alfa identifying themselves (and Willie Mae) as Annie’s heirs. This was insufficient to give them authority to change the ownership of a policy that, by its clear and unambiguous terms, was the property of Annie’s estate. Cf. Long v. McKinney, 897 So. 2d 160, 174 (¶60) (Miss. 2004) (holding that an “estate must, of course, be opened and administered through the chancery court” before claims may be pursued on its behalf); Delta Health Group Inc. v. Estate of Pope ex rel. Payne, 995 So. 2d 123, 125-26 (¶12) (Miss. 2008) (holding that when “no estate had been opened,” a party could not act as “the administrator of a non-existent estate”).
¶26. While there does not appear to be a Mississippi case addressing this precise issue, courts in other states have reached the logical conclusion that parties such as C.D. and Otis lack authority to make changes to the ownership or beneficiaries of a life insurance policy owned by a deceased relative. In Prudential Insurance Co. v. Stephens, 498 F. Supp. 155, 157 (E.D. Va. 1980), the court held that when the policy owner died,
title to the policy passed to her administrator whenever he may qualify as such, not to her husband . . . in his capacity as the sole heir of her estate. Although her husband was preferred by statute for appointment as administrator of her estate, he had to apply to qualify as administrator. Because he never qualified, title to the policy never passed to him, and any act of dominion he exercised over the policy, other than those acts specifically permitted by statute, had no legal effect. A change of the beneficiary of a life insurance policy does not fall within the . . . narrow categories of permitted acts.
Id. at 157. [Fn 1] (Emphasis supplied) (internal citation omitted).
[Fn 1] Like Virginia, Mississippi has certain statutes that permit a decedent’s heirs at law to take possession of certain categories of the decedent’s assets without opening and administering an estate. See, e.g., Miss. Code Ann. § 91-7-322 (Rev. 2013); see generally Robert A. Weems, Wills and Administration of Estates in Mississippi § 2.52 (3d ed. 2003). It is not apparent that any of these statutes would apply to the facts of this case or that C.D. complied with the necessary statutory requirements. Nor has C.D. argued that any of these statutes apply or authorized him to change the ownership and beneficiaries of the policy. Therefore, this opinion does not address the applicability of any such statutes.
¶27. Similarly, in [Ky. Cent. Life Ins.] v. Vollenweider, supra, the Missouri Court of Appeals held that the deceased policy owner’s husband lacked authority make changes to the policy, although he was the insured and was named as her executor in her will. See Vollenweider, 844 S.W.2d  at 462 [(Mo. Ct. App. 1992)]. The court held that the husband “never became the personal representative of [his deceased wife’s] estate because her estate was not opened until after [his] death,” and the husband lacked authority to make himself “the owner of the policy merely because he was named as personal representative under [her] will.” Id.
¶28. The result is the same in this case. Neither C.D. nor Otis opened an estate or took any other steps to obtain the authority necessary to act on behalf of Annie’s estate. Therefore, C.D. and Otis lacked the authority to make changes to the ownership or beneficiary designations of the subject life insurance policy, which became the property of Annie’s estate upon her death. Accordingly, Annie’s designation of Angela as the policy’s contingent beneficiary remained in effect at the time of Christopher’s death. And the chancery court correctly concluded that there was no genuine issue of material fact and that Angela was entitled to the proceeds of the policy.
The court reversed and remanded on the issue of dismissal of C.D.’s counterclaim. That’s an issue for another post.
As for that footnote, it’s worth your time to dig through the statutes to discover the various ways that heirs (usually called “successors” in the statutes) can transfer ownership of a decedent without going through probate. Bank and securities accounts and car titles are susceptible to such procedures. I have not researched whether life insurance may be changed via a similar statute. My uninformed guess is that the reason no such statute was pled or argued on appeal in this case is that there is none.
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