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Changing Insurance Policy Beneficiaries In Violation Of Marital Dissolution Agreements: What Tennessee Courts Have To Say

Frequently, as part of a divorce, a spouse is required to maintain life insurance for the benefit of the other spouse or for children. In our practice, we have been involved in several cases where, in spite of a requirement in a divorce decree or marital dissolution agreement, a spouse has either changed the designated beneficiary of a life insurance policy, or let the life insurance policy lapse. Under Tennessee law, a former spouse or child who has been wronged by such conduct has the law on his or her side, as evidenced by the Tennessee cases discussed in this blog.

In Dossett v. Dossett, a decision of the Supreme Court of Tennessee, the plaintiffs were children of an insured (the father) who was divorced from the children’s mother prior to his (the insured father’s) death. The divorce decree between the father of the children and their mother required the father to maintain a policy of life insurance upon his life with the children designated as beneficiaries. Specifically, the marital dissolution agreement in that case stated:
“That the Defendant [the father] is required to maintain a $20,000.00 life insurance policy upon his life and with the minor children of the marriage designated as the beneficiaries of said policy.”

In the Dossett case, there was no evidence that the father had ever designated the children as beneficiaries of the policy at issue in that case. At the time of the divorce of the father and mother in the Dossett case, the father had only one known life insurance policy. After the divorce between the father and the mother in the Dossett case, the father changed the beneficiary of the life insurance policy at issue to his new wife. After the father died, the second wife in the Dossett case claimed that she was entitled to the policy benefits because she was designated as the beneficiary of the policy benefits by the deceased father.

The Supreme Court of Tennessee, in Dossett, held that the father’s designation of his second wife as the beneficiary of the policy benefits was ineffective. The Dossett court said: “The subsequent attempt of the insured [the father], ex parte, and without court approval, to change the beneficiary to his second wife was ineffectual.”

In a decision after Dossett, the Supreme Court of Tennessee, in the case of Holt v. Holt, iterated the importance of enforcing the terms of divorce decrees by preventing insured parents from divesting children of life insurance policy benefits.

In Holt, the parents of a child divorced. The marital dissolution agreement between the parents required the husband (and father of the child) to maintain a life insurance policy with benefits of $100,000.00, and required that the child of the father was to be named as the beneficiary of the policy. The father did not procure a $100,000.00 life insurance policy for the benefit of the child. Instead, after the divorce decree was entered, the father obtained a $40,000.00 life insurance policy for the benefit of the child and a $50,000.00 life insurance policy for the benefit of his (the father’s) mother.

The question before the court in Holt was whether the child was entitled to the proceeds of the $50,000.00 life insurance policy. The court held that the child was.

If you, or your child, were entitled to life insurance benefits, IRA, pension, or retirement benefits from a former spouse pursuant to divorce decree or a martial dissolution agreement, but have been informed that you, or your child, are not the designated beneficiary, you should consult with an experienced breach of contract lawyer to determine if you have the legal right to recover money. Even if your former spouse has passed away, you may still be able to recover the money directly from an insurance company, from a designated beneficiary, from your former spouse’s estate, or from a relative of your former spouse.