What happens in life insurance policy litigation when an insured intended to change the beneficiary of his or her policy from an ex-spouse to a current spouse, but did not correctly fill out and/or submit all the necessary paperwork before his or her death? Can the current spouse make a successful claim to the life insurance policy proceeds? Or, can the ex-spouse prevail by arguing that the insured cannot change his or her beneficiary without following all of the life insurance policy’s procedures?
In the Sixth Circuit (the circuit which includes Tennessee), courts will usually recognize a change in beneficiary even when the insured did not “strictly comply” with all of the life insurance policy’s rules on how to designate a new beneficiary. Still, courts will not award proceeds to a current spouse if he or she can do no more than show that the insured merely intended to designate a new beneficiary. The general rule in the Sixth Circuit, and in Tennessee state courts, is that the insured must be in “substantial compliance” with the terms of the life insurance policy for the beneficiary change to be effective.
The courts in the Sixth Circuit have admitted that there is no easy definition for the term “substantial compliance.” Making matters even more confusing, courts in the Sixth Circuit usually, but not always, apply the substantial compliance test in examining an insured’s flawed beneficiary designation for life insurance policies governed by ERISA. That complexity aside, this much is clear: If the intended beneficiary seeks to collect policy proceeds, he or she will have to establish that the insured completed several critical steps in designating a new beneficiary.