Criminals cannot profit from their crimes – unless they are not criminally responsible.
In the recent decision of McNeil/Maidmen v. Forbes, 2020 NSSC 16, the Nova Scotia Supreme Court considered the effect of a finding of not criminally responsible upon a beneficiary’s ability to receive life insurance proceeds payable on the death of the insured who was killed by the beneficiary.
This is a tragic case that stems from the criminal trial against Richard Maidment/McNeil (“Richard”), in which Richard was found not criminally responsible for killing his common law spouse, Sarabeth Forbes, in April 2017. Richard was found to have been suffering from untreated schizophrenia at the time he took Sarabeth’s life.
In 2015, Sarabeth had designated Richard as the 100% beneficiary of her life insurance proceeds. She designated her son with Richard, Devon McNeil (“Devon”), as the contingent beneficiary (with Sarabeth’s mother as trustee) in the event Richard predeceased Sarabeth or was “otherwise disqualified from receiving the death benefit.”
Competing Claims to the Insurance Proceeds
The applicant, Richard’s mother and his attorney for property, sought an order declaring that Richard was the rightful beneficiary of 100% of the insurance proceeds. The applicant also asked the court to dismiss the application filed by Devon’s trustee seeking an order declaring that Devon’s trustee was the rightful 100% beneficiary of the life insurance proceeds. The insurance company admitted liability for the insurance money under the policy. Due to the competing claims, the insurance proceeds were paid into court.
The Court ruled in favour of the applicant, finding that Richard was the rightful beneficiary of the insurance proceeds. In addition to considering and dismissing a misnomer issue raised by the trustee for Devon (Richard’s legal surname was Maidment but he had assumed the name McNeil since childhood), the court considered the applicability of the public policy rule that criminals should not be permitted to benefit from their crimes, and found the rule inapplicable in this case.
In the criminal trial, Richard was found not criminally responsible for Sarabeth’s death on account of his mental disorder, which, according to the Supreme Court of Canada, was not a verdict of guilt or a finding of moral responsibility. Richard was not a criminal.
In addition, there is an exception to the public policy rule whereby a person who has killed another, but is found to be of unsound mind, is not disqualified from benefiting from the estate of the person he or she killed. This exception applies equally to that person’s right to receive the proceeds of life insurance.
The Court acknowledged the tragedy of Sarabeth’s death. Justice Edwards stated that “[t]ogether, Sarabeth, and Richard had been facing Richard’s schizophrenia since his diagnosis in 2012. While the particular circumstances leading to Sarabeth’s death are fortunately uncommon, the inherent unpredictability, illness and loss are squarely what life insureds seek to guard their loved ones against by purchasing a life insurance policy.”
The Court was also persuaded by the fact that Sarabeth had designated Richard as the beneficiary of the life insurance proceeds in 2015, three years after his diagnosis in 2012. She had not revoked this designation before her death.
Despite the Court’s clear application of the settled law in this case, a number of media outlets reported on this judgment and the perceived unfairness of the ruling as it relates to Devon, who lost his mother and could not benefit from her life insurance proceeds, which went to her killer. Some comments were made that this ruling was a failure of the justice system, and that the monies ought to be held in trust for Devon for his future.
Perhaps the parties may come to some agreement down the road that some or all of insurance proceeds may be held in trust for Devon’s future. Only time will tell. However, under the law, Richard is the rightful beneficiary.