In a recent unpublished decision, the New Jersey Appellate Division has again stressed the importance of complying with the beneficiary designation requirements contained in life insurance policies. See Fox v. Lincoln Financial Group, et al., A-3189-13T4 (2015).
In Fox, the decedent purchased a life insurance policy in 1992, at which time he designated his first wife as the primary beneficiary. Following their divorce, he executed a form making his sister the beneficiary of his life insurance. Years later, the decedent married the plaintiff and subsequently died without transferring the policy benefit to her. The plaintiff subsequently filed a declaratory judgment action and requested the court to create a “bright-line” rule holding that marriage presumptively revokes all prior life insurance beneficiary designations, leaving the spouse as sole beneficiary. The trial court declined to adopt that approach, and the Appellate Division affirmed.
On appeal, the court noted the general rule that the owner of a life insurance policy must comply—at least substantially—with the policy’s provisions to effect a change in beneficiary designation. “Substantial compliance” requires an insured to make every reasonable effort to change his or her beneficiary designation in accordance with the policy provisions. The court indicated that mere oral expressions of a desire to change a beneficiary designation are ineffective. See DeCeglia v. Estate of Colletti, 265 N.J. Super. 128 (App. Div. 1993). While noting that a different rule applies in the context of divorcing spouses, the court concluded that rule did not apply in a situation where a marriage is claimed to have resulted in a change of beneficiary. See Vasconi v. Guardian Life Ins. Co. of Am., 124 N.J. 338 (1991) (ex-spouse denied life insurance proceeds because all rights were waived to the insurance proceeds under the terms of a property settlement agreement); N.J.S.A. 3B:1-1 and 3B:3-14 (statutory provisions that revoke an ex-spouse’s right to receive, among other things, proceeds from life insurance policies owned by the other former spouse).
The court ultimately declined the invitation to create a new rule whereby marriage, in and of itself, operates to alter life insurance beneficiary designations. Accordingly, it denied plaintiff’s claim on the basis that the decedent failed to substantially comply with the insurance company’s “change of designation” policies.
This case once again illustrates the importance of keeping beneficiary designations up to date and complying with all policy requirements.