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.