Opinion ID: 1750963
Heading Depth: 1
Heading Rank: 4

Heading: Effect of Assignment of Policy

Text: Metro Bank points out that in the cases on which Pamela relies the divorced policyholders designated as beneficiaries of life insurance policies people other than those who had acquired vested interests in those policies. Metro Bank points out that, in the instant case, in contrast to those cases, Bret did name Stephen as a beneficiary of the Protective Life policy. Metro Bank contends that Bret's assignment of the policy, as opposed to his naming of a beneficiary other than his son, distinguishes the instant case from those relied on by Pamela. Metro Bank, citing Rountree v. Frazee, 282 Ala. 142, 209 So.2d 424 (1968), contends that, unlike the cases on which Pamela relies, Bret's assignment of the policy did not divest Stephen of his vested interest in that policy. In Rountree, a husband had a life insurance policy naming his wife as beneficiary. The husband assigned his policy to a creditor as collateral for a loan. When the husband died, part of the loan balance was satisfied with the proceeds of the policy, leaving no proceeds for the wife. The trial court upheld the wife's claim against the husband's estate for the policy proceeds. On appeal, the husband's estate argued that the assignment of the policy to the [creditor] had the effect of changing the beneficiary thereby divesting [the wife] of any interest in the policy, citing a case decided by the Supreme Court of Georgia. This Court, affirming the judgment of the trial court, disagreed with that argument, stating: We are not in accord with the holding that the assignment constituted a change of beneficiary. 282 Ala. at 146, 209 So.2d at 426. However, while the assignment in Rountree may not have constituted a literal change in the beneficiary of the insurance policy, it did have the effect of subordinating the beneficiary's interest in the policy proceeds to that of the creditor. In accordance with the rule that a beneficiary of an ordinary life insurance policy that does not authorize a change of beneficiary acquires a vested and absolute interest, which cannot be divested without the beneficiary's consent, and because an absolute assignment has the effect of divesting the named beneficiary of any interest in the policy, the insured cannot assign such a policy without the beneficiary's consent. . . .  44 Am.Jur.2d Insurance § 793 (2003) (footnotes omitted; emphasis added). Accordingly, we hold that, in the instant case, the fact that Bret assigned the policy to someone other than Stephen, instead of naming someone other than Stephen as beneficiary, is a distinction without a difference.