Oklahoma court awards proceeds to children of first marriage

A federal court in Oklahoma recently issued a decision in a life insurance beneficiary dispute involving several issues we commonly see. First, the designation of a former spouse as the beneficiary. Second, the doctrine of substantial compliance in a dispute regarding whether the insured changed the beneficiaries of his life insurance policy.

The insured bought a policy while he was married to his first wife. They had had three children. He designated his wife as the primary beneficiary. As contingent beneficiaries, he simply listed "their children" as a general description.

Then he divorced and remarried and with his second wife had two additional children. After he remarried, he notified the insurance company that he wanted to take his first wife off of the policy. And he also apparently indicated to an agent that he wanted to list the new children as additional beneficiaries of the policy. But he never filled out the appropriate forms.

After he passed away, the life insurance company filed an interpleader to resolve competing claims to the proceeds. Everybody agreed that the ex-wife was not eligible to receive the proceeds. Oklahoma, like many states, has a statute for life insurance policies that a divorce will invalidate a designation of the former spouse. The spouse is essentially treated as if they pre-deceased the insured. But the issue in this case was did the children of the first marriage get the policy proceeds or did the children of the second marriage?

The second spouse argued that the children of the first marriage could not receive the policy proceeds because they were not specifically identified in the original designation. Instead, they were simply identified as a group. The argument was if the first spouse is disqualified, then her children should be disqualified. Another argument was that they had effectively been removed when the insured notified the insurance company that he wanted to remove the former spouse and then apparently told the agent that he wanted the children from the second marriage to receive the policy proceeds.

The federal judge decided that the children of the first marriage should receive the policy proceeds. The judge did not have a problem with the fact that they were not specifically listed as contingent beneficiaries, and instead were listed as a class. The judge found that any statements to the agent were not sufficient to designate the later children. Instead, the insured needed to take more positive action: fill out the form or send something more specific into the insurance company.

Life insurance beneficiary interpleaders can involve complex issues of state and federal law. If you have a beneficiary dispute, it is very important that you call a lawyer who is experienced in handling these cases.