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Challenging a Life Insurance Beneficiary Designation Based on Undue Influence

 

Under Tennessee law, a party can establish that a beneficiary of a will procured the making of the will by undue influence. If undue influence is proven, the will is invalidated and the beneficiary of the invalidated will receives nothing by virtue of the will. What holds true for beneficiaries of wills procured through undue influence also holds true for beneficiaries of life insurance policies whose beneficiary status was the result of undue influence.  A party can challenge a beneficiary’s right to recover under a life insurance policy by showing that the person who owned the policy (“Decedent”) changed the policy’s beneficiary designation because of undue influence.

Tennessee courts recognize that it is difficult for a party to establish undue influence through direct evidence.  As a result, in a life insurance policy case, a party seeking to set aside a beneficiary designation can do so by showing “suspicious circumstances.”  These suspicious circumstances usually involve the following: (1) a confidential relationship; (2) the Decedent’s physical or mental infirmity; and (3) the beneficiary’s active involvement in causing the designation of a beneficiary or beneficiaries under the life insurance policy.

Of the three circumstances above, establishing the existence of a confidential relationship is arguably the most important part of an undue influence case.  So what exactly is a confidential relationship? To start, any fiduciary relationship (attorney-client, guardian-ward, conservator and incompetent) is a confidential relationship.

Familial relationships may also be confidential relationships if one party had a relationship of dominion and control with respect to a weaker party.  An example of this might be a nephew taking care of an ailing uncle, who depends on the nephew for basic life care like meals and transportation to medical care providers.  If the uncle removed his children as the beneficiaries of his life insurance policy in place of the nephew, a court will likely presume that the change in beneficiary designation came about due to undue influence.

That presumption of undue influence can be a game-changer. In a life insurance policy case, a beneficiary seeking to rebut a presumption of undue influence must do so by “clear and convincing” evidence, which is the highest burden of proof in most kinds of civil litigation. Despite that high bar, parties can—and do—overcome the undue influence presumption by offering evidence showing that Decedents, despite their dependence on stronger parties, made independent decisions when changing beneficiaries of life insurance policies.

In an undue influence case, a court will look at the “totality of circumstances” in determining if the Decedent’s beneficiary decisions came about independently, or were the result of undue influence.  For example, in the case In re: Estate of Terry Paul Davis, which was decided by the Court of Appeals of Tennessee in 2016, a man diagnosed with pancreatic cancer (“Son”) changed the beneficiaries of his life insurance policies from his wife and children to his mother, while also executing a will naming his mother the beneficiary, rather than his wife and children.  Critically, while Son was making these decisions, his mother had supported him financially and served as his health care agent. Son had also granted her a durable power of attorney.

There were other facts, as well, that suggested that the mom was in a position to unduly influence her son.  For example, the mother drove Son to a lawyer’s office so that he could execute a new will in her favor, and then paid for his legal fees. The mother also tried to sign a change of beneficiary request form on his behalf for one of his life insurance policies, and benefitted from a beneficiary change for all three of his policies. Son was also dependent on the mother for medical care and for help paying bills.  He also lived with her.

In addition, Son’s decision to benefit his mom, at the expense of his wife and children, seemed suspicious.  Although he complained that his wife and two daughters did not visit him enough in the hospital when he was being initially treated for cancer, one of his daughters had a good excuse. She was suffering from kidney failure at the time and was undergoing a special kind of dialysis that left her in a weakened condition.  Son was planning on divorcing his wife, but even that decision seemed abrupt.  Multiple witnesses testified that Son and his wife appeared to have a normal marriage.

Nevertheless, the court held that, despite the existence of a confidential relationship between Son and his mom, the will and beneficiary changes were valid, and not the product of undue influence.  In arriving at its ruling, the court stressed that its analysis was not whether the Son’s decisions to benefit the mom at the expense of his wife and daughters were “fair”, but whether those decisions came about because of undue influence. Further, the court noted that evidence in the record showed that, rightly or not, he was angry with his wife and daughters and was “particular, specific, assertive, and firm” in expressing his wishes to exclude them from his will.  The court also cited evidence that Son was mentally competent, and that he chose to make an appointment with an attorney to draw up a new will.  To the court, this evidence was “clear and convincing” that there was no undue influence related to Son’s decisions to exclude his wife and children in favor of his mother.

If you believe that you may have been deprived of life insurance policy proceeds because of undue influence, or if your beneficiary rights are being challenged unfairly, you should consult with a law firm experienced in handling cases involving life insurance policy beneficiary designations.