On June 5, 2014 the NB Court of Queen’s Bench decided the gift an NB man left to the US-based National Alliance (NA) in his will is void because both the information the NA disseminates and the NA’s purpose are against public policy.

The decision makes it clear that there are limits to both what a person can leave her money for and to whom she leaves it. But the decision does not expressly answer the next obvious question: would it make any difference if she left it some other way – for example, by naming the beneficiary in her life insurance policy?

TESTAMENTARY BEQUEST AND PUBLIC POLICY

Mr. McCorkill left all of his estate to the NA in his will. After Mr. McCorkill died, his sister asked the Court to void the bequest on the basis it was illegal and/or against public policy because the NA and its activities breach Canadian law. The NA denied this and argued that regardless, the Court could not void the gift based on the beneficiary’s identity, only the specific purposes attached to the bequest – and there were none.

In strongly worded and unequivocal reasons, the NB Court of Queen’s Bench decided the bequest to the NA is invalid. No other Canadian Court is required to follow the decision, but could choose to do so because it is based on Canadian laws (the Criminal Code of Canada, the Canadian Charter of Rights and Freedoms, international conventions to which Canada is a party, and Provincial human rights laws generally) that apply across Canada:

  • Hate Propoganda. McCorkill’s sister submitted extensive evidence about the NA’s purposes and activities – and based on it, the Court decided the information the NA disseminates is “hate propaganda”.
  • Not in Canada. Dissemination of the NA’s writings might be legal in the US – but it is illegal in Canada: public incitement of hatred is a criminal offence here.
  • Against Public Policy. Activity that is illegal – and also contrary to the values of the Canadian Charter of Rights, Provincial human rights laws and international conventions promoting equality and dignity of the person and prohibiting discrimination on the basis of race and ethnic origin – is against Canadian and NB public policy.    
  • The Character of the Beneficiary. The evidence proved that the NA’s identity was indistinguishable from the purpose for which Mr. McCorkill intended the bequest to be used: the only thing the NA would or could do with the bequest was be to further its illegal purposes.    

Read the NB Court of Queen’s Bench’s decision in McCorkill v. Streed, Executor of the Estate of Harry Robert McCorkill (aka McCorkell), Deceased, 2014 NBQB 148 (PDF) here.

LIFE INSURANCE AND PUBLIC POLICY

The obvious next question – at least for insurers – which the Court did not expressly answer is whether it makes a difference how you leave your money:

  • What if Mr. McCorkill had left a life insurance policy in which the NA (or a similar group) was the named beneficiary? 
  • Would the insurer have any obligation to determine whether the bequest is against public policy before paying the policy out? 

We aren’t aware of any Canadian court decision considering these specific questions. But there are some general rules and legislative provisions that provide insurers with some guidance for how to handle the public policy issue of a hate group (or the like) beneficiary in a life insurance policy – albeit do not give a cut and dry answer for most insurers:

Common Law. Courts do apply public policy considerations in respect of life insurance policies.  For instance, there is a public policy rule that a person cannot benefit from a crime. Therefore, a husband who intentionally kills his wife cannot obtain her life insurance proceeds (Oldfield v. Transamerica Life Insurance Co. of Canada, 2002 SCC 22). The rule does not apply if the person is not criminally responsible (Dhingra v Dhingra’s Estate, 2012 ONCA 261).

Legislation. The Insurance Acts of BC and Alberta explicitly provide that an insurer may pay life insurance proceeds into court if the designated beneficiary would be disentitled on public policy or other grounds; similar provisions will soon be in place in Ontario as well (Insurance Act, R.S.B.C. 2012, c. 1, s. 82(1)(e); Insurance Act, R.S.A. 2000, c. I-3, s. 684(1)(e); Insurance Act, R.S.O. 1990, c I.8, s. 214). Other Provinces may adopt similar provisions in the future – but in the meantime insurers will need to seek guidance elsewhere in the applicable Insurance Acts:

  • Sufficient Evidence for Payment. Normally, an insurer is only concerned with satisfying itself that the requirements under the relevant Insurance Act for making payment are satisfied.  Where an insurer receives sufficient evidence of certain conditions it shall, within 30 days, pay the insurance money to the person entitled thereto. One of these conditions is the “the right of the claimant to receive payment.”  This condition may afford a life insurer concerned about a hate group’s entitlement to receive payment with an opportunity to have a court determine whether the bequest could be void for public policy reasons: most Insurance Acts provide that where an insurer admits the validity of the life insurance, but does not admit the sufficiency of the evidence required for payment, the insurer may apply to the court for a declaration regarding the sufficiency of the evidence furnished.
  • Death by Accident. Most Insurance Acts provide that in the case of death by accident the insurer may set up any defence it could have set up against the insured or his personal representative.  Does this mean, in the case of a bequest to a hate group, that the insurer can set up a defence that the beneficiary is not entitled to receive payment on public policy grounds? There appears to be some protection to an insurer which makes payment in the case of an accident by death policy. The Insurance Act of Nova Scotia, for instance, protects an insurer which makes payment before receiving an order of the court affecting the rights of the individual to receive insurance money.  This provision, however, does not appear in the case of a life insurance policy without accidental death provisions.
  • Adverse Claimaints. It is perhaps easier for an insurer if there are adverse claimants who raise the public policy consideration and dispute the entitlement of a hate group to receive the insurance monies, such as the heirs in McCorkill Estate.  Most Insurance Acts allow the insurer to apply for an ex parte order to pay the money into court if there are adverse claimants.