Application for a determination of the validity of a Change of Beneficiary form for a $100,000 life insurance policy. The court found the Change of Beneficiary form was not a valid declaration pursuant to the Insurance Act and was not a valid testamentary instrument that was capable of affecting the distribution of the deceased's insurance proceeds.

[2015] O.J. No. 4390

2015 ONSC 5192

Ontario Superior Court of Justice

D.G. Price J.

August 21, 2015

The deceased had seven children. Two of the children, Rhinda and Randolph, were from his second marriage and were considerably younger than his other five children. When the deceased married his second wife, they each purchased a life insurance policy. The deceased designated his second wife as the revokable beneficiary of the $100,000 death benefit. Four years later, when Rhinda was 2 years old and Randolph was 1 year old, the deceased sent a Change of Beneficiary form to the insurer which changed the beneficiaries to Rhinda and Randolph, each in the amount of $50,000. The deceased advised his second wife that the death benefit was meant to finance their childrens' post secondary education.

Years later, the deceased's health deteriorated as a result of prostate cancer. The deceased completed his last will and testament and directed that his, now third wife, was to have a life interest in his property in Trinidad. He divided the remainder of his estate equally among his six living children. He named Lystra, his youngest child from his first marriage, as the executrix. The deceased later advised his second wife that he was in trouble with his other children because they had learned of the existence of his life insurance policy which was going to Rhinda and Randolph.

The deceased subsequently completed a Change of Beneficiary form which purported to change the beneficiaries to Lystra (75%), Rhinda (10%), Randolph (10%), and the deceased's third wife (5%). The Change of Beneficiary form initially directed that Lystra would receive 80% but the number 75 had been written over the number 80. The portion of the form calling for the names of contingent beneficiaries directed that the deceased's eldest son would receive 80% of the death benefit. No other contingent beneficiaries were named. The deceased had a long time friend witness his signature. The deceased signed on the left side of the form provided for witnesses. No one signed on the right side in the space provided for the insured's signature.

Following the deceased's death, Lystra submitted a claim for her share of the deceased's life insurance. The insurer denied the request because it concluded that the Change of Beneficiary form was invalid because the deceased had failed to provide for 100% distribution to contingent beneficiaries. Lystra did not advise the deceased's other children of her attempt to claim the deceased's life insurance and she proposed dividing the proceeds equally among all of the insured's children. The deceased's second wife contacted the insurer because Lystra's proposal did not correspond with her understanding of the arrangements that the deceased had made and learned of the Change of Beneficiary form and Lystra's attempt to submit a claim for her share of the deceased's life insurance.

Lystra commenced an application seeking a declaration that the Change of Beneficiary form was valid and effective with regard to the distribution of the insurance proceeds. The first issue the court considered was whether the Change of Beneficiary form was a valid declaration pursuant to theInsurance Act. Even though the deceased signed in the space provided for a witness and did not fully allocate the amount of the policy among contingent beneficiaries, the requirements of section 171 of the Insurance Act were met and the change of beneficiary form was capable of being a valid declaration. However, a Change of Beneficiary form is void if it is altered after it has been signed by the policy owner. Lystra had the burden of proving that the deceased signed the Change of Beneficiary form after the change was made. There was no evidence on the application that the alteration of the percentage assigned to Lystra, from 80% to 75%, was made before the deceased signed the Change of Beneficiary form and therefore the Change of Beneficiary form was not a valid declaration.

The second issue considered by the court was whether the Change of Beneficiary form was valid as a testamentary instrument. The propounder of a will has the legal burden with respect to the due execution of the will, knowledge and approval of contents, and testamentary capacity of the testator. Generally, there is a presumption that these are present; however, this presumption can be rebutted by the presence of "suspicious circumstances" so that the propounder of the will must prove knowledge, approval, and testamentary capacity on the balance of probabilities. The more suspicious the circumstances, the greater the scrutiny of the evidence must be.

The court found that there were suspicious circumstances regarding the Change of Beneficiary form that the deceased submitted to the insurer. The Change of Beneficiary form constituted a significant change from his previous Change of Beneficiary form, which had been in effect for 15 years. More importantly, the circumstances surrounding the execution of the Change of Beneficiary form were suspicious in the following respects: (1) the deceased informed his second wife that he was in trouble with his children because they had learned of the existence of his life insurance policy; (2) the deceased signed his name in the space provided for a witness on the Change of Beneficiary form even though he had worked in the insurance and financial industries all his life and sold insurance for the insurer and had previously filed a Change of Beneficiary form which was correctly completed; and (3) the deceased failed to fully allocate the amount of the policy among contingent beneficiaries.

The court concluded that Lystra had not proven knowledge, approval, and testamentary capacity and the change of beneficiary form was not a valid testamentary instrument.

As a result, Lystra's application was dismissed and the insurance proceeds were paid out to Rhinda and Randolph in equal amounts.