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Substantial Compliance with Life Insurer

Substantial Compliance with Life Insurer's Requirements Sufficient to Change Beneficiary

ERISA and Life Insurance News
(June 6, 2013)

Caudell suffered from failing health and faced an impending judgment against him by First Georgia Banking Company. He executed a durable power of attorney, giving his son, Stephen Caudell, authority to act on his behalf as attorney-in-fact. Caudell asked Stephen to change the primary beneficiary of a life insurance policy issued by Transamerica Life Insurance Company from Caudell’s estate to his wife, Reba Caudell.

Stephen completed a beneficiary designation form to that effect, but failed to submit additional paperwork that Transamerica required when a beneficiary change was made by power of attorney. He also failed to designate contingent beneficiary percentages that equaled 100%.

Caudell died shortly thereafter, and Transamerica was unaware of his death when it asked Stephen to supplement the beneficiary designation with the additional documents. Stephen completed and submitted the requested paperwork as if Caudell were still alive, and Transamerica recorded the change of beneficiary to Reba.

Reba subsequently made a claim for the death benefits, and Transamerica paid them to her in the amount of $253,092. Two months later, the bank secured a judgment against Caudell’s estate. After another four months, it filed a garnishment action, naming Transamerica as garnishee. After the case was removed to federal court, all parties filed motions for summary judgment. The court framed the dispositive issue as “whether, under Georgia law, Elliot Caudell successfully designated his wife as the primary beneficiary of his life insurance policy.”

Because beneficiary change provisions are solely for the insurer’s benefit, the court held that “the original beneficiary generally has no right to object to the change based on noncompliance with such provisions.” Although Caudell’s attempt to change the beneficiary during his lifetime failed to satisfy all of Transamerica’s requirements, the court found that his substantial compliance was sufficient under Georgia law, especially since there was no dispute that Caudell intended the beneficiary to be changed to his wife. Thus, Reba was the rightful beneficiary of the insurance proceeds.

Click here to view the full June 2013 Edition of the ERISA and Life Insurance News.

H. Sanders Carter
T (404) 962-1015
F (404) 962-1220
Kenton J. Coppage
T (404) 962-1065
F (404) 962-1256
Dorothy H. Cornwell
T (404) 962-1096
F (404) 962-1246

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