Opinion ID: 1124423
Heading Depth: 1
Heading Rank: 5

Heading: Change of Beneficiary in a Pending Divorce Action

Text: William argues that the district court's error was in holding as a matter of law that it had no equitable power to consider who was entitled to the proceeds once Arilla had died, when the beneficiary change was attempted in a pending divorce. William relies primarily on Willoughby v. Willoughby, 758 F. Supp. 646 (D. Kan. 1990), and Pierce v. Pierce, 12 Kan. App.2d 810, 758 P.2d 252 (1988), aff'd 244 Kan. 246, 767 P.2d 292 (1989). Both cases are distinguishable. In Willoughby, at the time Edna, the wife, filed for divorce, her husband, Martin, was the insured under a life insurance policy. Edna was the beneficiary. She obtained a standard form restraining order at the time the petition was filed. The order prohibited the parties from withdrawing, selling, encumbering, or disposing of their money, property, or assets not needed for dayto-day living expenses. After Martin had been served a copy of the restraining order, he changed the beneficiary to his son, Terry, with his father, Felton, as secondary beneficiary. Terry was killed a few days later. Martin committed suicide. Edna sued Felton and the insurance company in federal district court, claiming that she was the rightful beneficiary and relying on the restraining order. Felton argued that the restraining order did not restrain Martin from changing beneficiaries on the insurance policy, because a beneficiary's right to receive benefits is a mere expectancy, not property subject to the order. Although the restraining order did not specifically mention the insurance policy, the court held that the policy was property within the terms of the restraining order and that Martin was restrained from changing beneficiaries. 758 F. Supp. at 649. Willoughby has been cited in two cases involving similar fact situations: Pope v. Cauffman, 885 F. Supp. 1451 (D. Kan. 1995), and Graham v. Graham, 195 W.Va. 343, 465 S.E.2d 614 (1995). For examples of restraining orders containing express provisions concerning life insurance policies (unlike the general terms of the restraining order in Willoughby), see Travelers Ins. Co. v. Daniels, 667 F.2d 572 (7th Cir. 1981); Candler v. Donaldson, 272 F.2d 374 (6th Cir. 1959); Standard Insurance v. Schwalbe, 110 Wash.2d 520, 755 P.2d 802 (1988). The better practice is to specifically reference a prohibition against a beneficiary change in a marital property restraining order. The Mizells distinguish Willoughby on the basis that in Willoughby a temporary restraining order was entered before the beneficiary change. William argues here that the result in Willoughby would have been the same, even without a restraining order. However, that proposition seems doubtful. The heart of the Willoughby decision is the finding that the beneficiary change violated the restraining order. All of the cases from other jurisdictions relied upon in Willoughby involved beneficiary changes that violated restraining orders or decrees. There are no reported Kansas cases with Willoughby -type facts, i.e., a standard form restraining order followed by a beneficiary change. However, this factual situation has arisen in other jurisdictions, with varying results. See Annot., Divorce and Separation: Effect of Court Order Prohibiting Sale or Transfer of Property on Party's Right to Change Beneficiary of Insurance Policy, 68 A.L.R.4th 929, § 3. See also 4 Couch on Insurance 3d § 64:20 (1996): A temporary restraining order or injunction obtained in order to prevent an insured spouse from transferring property during pendency of divorce proceedings may also preclude the insured from changing beneficiary during pendency of suit, notwithstanding that no precise reference was made to life insurance policies. Any such temporary order is effective only as to actions taken after the order is made, and cannot invalidate the insured's prior change of beneficiary in accordance with the rights and procedures under the policy terms. Counsel has not cited, nor have we found, any cases from other jurisdictions in which a beneficiary designation made during a pending divorce action was held void without there having been a restraining order in effect. The cases which have voided beneficiary changes in pending divorce actions appear to rely, at least in part, on the fact that the attempted change violated an existing order prohibiting such a change. When the change of beneficiary is made before a temporary restraining order in a divorce action went into effect, the change has been upheld. See Edinburg v. Massachusetts Mut. Life Ins. Co., 22 Mass. App. 923, 925, 492 N.E.2d 1182 (1986) (When [husband] executed the change of beneficiary form, he acted pursuant to the terms of the policies. He was not violating any court order when he did so because no order prohibiting a change had been entered.). In Pierce, the husband's change of beneficiary designation occurred years after the divorce decree had been entered. The attempted change was held void because it violated an express provision in the decree. The decree required the husband to name and keep the minor children of the first marriage as beneficiaries on the policy. The insurance proceeds belonged to them.