Opinion ID: 1242354
Heading Depth: 3
Heading Rank: 7

Heading: The Superior Court Erred in Requiring Jim to Purchase Life Insurance.

Text: The superior court ordered Jim to maintain sufficient life insurance to pay the marital debt naming [Robin] as beneficiary to the extent of any marital debt for which she remains liable. Jim asserts that [t]his order is an abuse of the trial court's discretion, to the extent that it requires Jim to purchase life insurance to cover all marital debts, including those that already have sufficient security to protect Robin from any actual financial exposure in the event of Jim's death. Jim's arguments focus on the mortgage on the marital residence, a $180,000 debt owed to Key Bank, and debt owed by Falcon Properties, a partnership owned in part by the Dodsons. The mortgage was to be paid out of the proceeds of the sale of the house, and Jim argues that there is more than sufficient equity to protect the Dodsons from any personal liability. Jim also contends that the Key Bank debt, which was allocated entirely to him, is adequately secured by the Widgeon aircraft. As for Falcon Properties, the superior court did not mention any specific Falcon Properties debt. However, the court equally divided the Dodsons' partnership interest so that Robin and Jim each would retain a twenty-five percent interest. These partnership interests may have made Robin and Jim each liable for twenty-five percent of Falcon Properties' debts. Jim contends that the partnership's debts are adequately secured. We conclude that the superior court erred in requiring Jim to purchase insurance for the entire amount of the Key Bank debt. Trial courts have discretion to require a party to provide security for a marital debt, whether by insurance or otherwise, to ensure that the party actually pays the marital debts allocated to him. See Brett R. Turner, Equitable Distribution of Property § 6.29, at 464-65 (2d ed. 1994). Because the court cannot affect the rights of creditors, id. at 464, its allocation of the Key Bank debt to Jim is effective only if Jim has sufficient assets to hold Robin harmless from any liability imposed by Key Bank. The Widgeon aircraft, which secures the Key Bank debt, will not necessarily be adequate to insulate Robin from all personal liability. Nevertheless, it provides adequate security for at least a portion of the Key Bank debt. On remand, the superior court may require Jim to purchase insurance to the extent that it finds that the Widgeon aircraft would not be reasonably likely to provide adequate security. Similarly, we conclude that the superior court erred in requiring Jim to purchase insurance for the entire amount of the mortgage debt. Although the proceeds from the sale of the house might well exceed the amount of the mortgage debt, those proceeds might be inadequate should, for example, the house have to be sold after foreclosure. On remand, the superior court may require Jim to purchase insurance to the extent that it finds that the proceeds from the sale of the house would not be reasonably likely to satisfy the mortgage debt. Finally, as for Falcon Properties, we conclude that the superior court erred to the extent that it evenly divided the debt, yet required Jim to purchase insurance to cover the Dodsons' entire share of the debt. The superior court does not have discretion to order Jim to purchase insurance to cover portions of the marital debt allocated to Robin.