Our Florida life insurance lawyers have seen a dramatic increase in life insurance disputes over the past few years involving former spouses making claims after divorce where they are still the named beneficiary under the policy. In 2012, Florida’s life insurance law changed which confused the issues and created uncertainty as to whether the former spouse has a right to the policy benefits even if they are still the named beneficiary.
Florida’s Life Insurance Law Changes
Florida Statute section 732.703 deals with the Effect of divorce, dissolution, or invalidity of marriage on disposition of certain assets at death. The statute says that a designation made by or on behalf of the decedent providing for the payment or transfer at death of an interest in an asset to or for the benefit of the decedent’s former spouse is void as of the time the decedent’s marriage was judicially dissolved or declared invalid by court order prior to the decedent’s death, if the designation was made prior to the dissolution or court order. The decedent’s interest in the asset shall pass as if the decedent’s former spouse predeceased the decedent. Florida’s new divorce and life insurance law says that it applies to all designations made by or on behalf of decedents dying on or after July 1, 2012, regardless of when the designation was made.
The confusion here is vast, and the law is not yet settled. The problem is that there are several exceptions under the statute, and parts of the law’s retroactive application that could arguably be unconstitutional either on its face or as applied to the facts of a particular case.
Pre-marital policy issues
Consider a case where a business associate enters into a deal with her friend where she gives the friend money to help with his business, and in exchange, the friend agrees to make the other the sole beneficiary on a paid-up life insurance policy. A paid-up life insurance policy is one where the premiums are all paid in advance and the policy continues to earn a cash value increasing over time. Let’s say that 5 years later, the friends decide to get married. Then, 5 years later they get divorced and remain friends and business associates. The policy in this case was not part of the marriage or settlement, and the statute as applied to the case appears to only impact spousal policies.
Unclear Provisions In Divorce Decrees
We’ve seen cases where two spouses agree to have life insurance continue post divorce, but the language is not specific enough to prevent the former spouse from changing the beneficiary. This creates a dispute for the insurance company because both the former spouse and new beneficiary make claims to the same policy.
Life Insurance Companies Do Not Like Controversy
In general, when two or more people make claims or could make claims to one policy, the life insurance company will try to interplead the funds or get the potential beneficiaries to work out a settlement. An interpleader is where the life insurance company agrees to pay the benefits, but doesn’t know who to pay. They deposit the funds in the court registry, like a bank account, who holds the funds until the parties agree or the court decides who gets the money.
Problems With The Statute
The statute has many issues with regard to those in place prior to enactment. Although it says it applies retroactively, many similar statutes have been found to be unconstitutional under certain circumstances. What happens if the parties divorced prior to the statute’s enactment and the two continued to intend on the life insurance to remain in place. Under the policy, there is nothing for them to do because the former spouse is still the listed beneficiary. If the law requires the policy owner to reinstate his or her intentions, that could be unconstitutional based on Florida law. It may be a case by case analysis applying the law to the facts of each case.
Exceptions To The Divorce Statute
Florida law says that the life insurance divorce provision does not apply:
(a) To the extent that controlling federal law provides otherwise;
(b) If the governing instrument is signed by the decedent, or on behalf of the decedent, after the order of dissolution or order declaring the marriage invalid and such governing instrument expressly provides that benefits will be payable to the decedent’s former spouse;
(c) To the extent a will or trust governs the disposition of the assets and s. 732.507(2) or s. 736.1105 applies;
(d) If the order of dissolution or order declaring the marriage invalid requires that the decedent acquire or maintain the asset for the benefit of a former spouse or children of the marriage, payable upon the death of the decedent either outright or in trust, only if other assets of the decedent fulfilling such a requirement for the benefit of the former spouse or children of the marriage do not exist upon the death of the decedent;
(e) If, under the terms of the order of dissolution or order declaring the marriage invalid, the decedent could not have unilaterally terminated or modified the ownership of the asset, or its disposition upon the death of the decedent;
(f) If the designation of the decedent’s former spouse as a beneficiary is irrevocable under applicable law;
(g) If the governing instrument is governed by the laws of a state other than this state;
(h) To an asset held in two or more names as to which the death of one coowner vests ownership of the asset in the surviving coowner or coowners;
(i) If the decedent remarries the person whose interest would otherwise have been revoked under this section and the decedent and that person are married to one another at the time of the decedent’s death; or
(j) To state-administered retirement plans under chapter 121.
The problem is that whenever more than one person makes a claim or can make a claim, the insurance company may refuse to make a decision and will force the claimant to file a lawsuit to force them to pay.
Life Insurance Claim Contingency Fee Lawyers
Our Florida life insurance attorneys handle life insurance claim disputes on a contingency fee basis, which means you don’t have to pay us anything out of pocket. We only get paid if you recover money. You don’t have to settle for what the insurance company or the other beneficiary offers you. We can evaluate the case and law to see what you may be entitled to.