The breakdown of a marriage or common law relationship can raise a host of complex legal issues both for the living and the dead.  One issue that seems to crop up again and again is life insurance proceeds and who should benefit.  

In Chanowski v Bauer, the deceased died without a will (never a good start).  The deceased’s insurance policy listed his former common-law spouse as the beneficiary.  Not surprisingly, the deceased’s current common-law spouse claimed that she was the proper beneficiary.  The issue of who should receive the deceased’s life insurance proceeds was litigated. 

The deceased’s current spouse argued that documents completed by the deceased were intended to make her the beneficiary of his life insurance proceeds.  However, the judge hearing the application disagreed.  He found that the deceased had not changed the beneficiary of his policy in writing as he was required to do by the governing provisions of the Manitoba Insurance Act (similar provisions exist in Ontario).  As a result, the deceased’s former spouse, with whom he had no relationship for the last 13 years, was entitled to the policy insurance proceeds.  An appeal was launched.

While the Manitoba Court of Appeal (“CA”) expressed its sympathies for the current common-law spouse, it nevertheless dismissed her appeal.  The issue before the court was whether the applications judge made a palpable or overriding error when he held that, based on the evidence adduced, he could not find a clear intention on the part of the deceased to change the beneficiary of his life insurance policy.  The current spouse submitted that when reading the contract of insurance as a whole, the deceased’s intention to alter the designation of beneficiary to her could be discerned.  The onus was on the current spouse to convince the judge of this fact on the balance of probabilities. 

Unfortunately, the trial judge was not convinced nor was the CA.  While the CA was prepared to assume that the deceased probably intended that his present partner receive his life insurance proceeds, as opposed to his former partner, that was merely speculation.  “Speculation is not sufficient.  The law requires a fair degree of certainty in this area to avoid encouraging litigation.”  The documents presented as evidence of a change of beneficiary did not provide the necessary clear and express intention by the deceased to remove his former spouse as beneficiary. 

The CA also held that the doctrine of constructive trust was of no assistance to the current spouse.  Courts have long held that it did not matter whether the deceased intended to benefit the designated beneficiary.  Unless the beneficiary designation was revoked, it took effect upon death.  “General expressions or clauses in separation agreements (for example) ought not to be construed as depriving a beneficiary under an insurance policy.”

Generally, the courts have imposed remedial constructive trusts in factual circumstances where the deceased has breached an agreement regarding life insurance benefits.  Typically, the husband executed a separation agreement promising to retain his former wife as the beneficiary of his life insurance policy and, in contravention of that promise, before his death, the deceased changed the designation of his beneficiary to that of his present wife or other family members.  In those cases, the courts have imposed a constructive or resulting trust.  Sometimes life is not fair. 

Enjoy the weekend.

Justin