Opinion ID: 1827692
Heading Depth: 1
Heading Rank: 7

Heading: Great Southern Life Insurance Policy

Text: Under Louisiana law, life insurance policies are treated as unique contracts governed by their own rules rather than by the Civil Code. Spaht & Hargrave, supra § 3.32, at 122; see generally, Comment, Insurance and the Community, 25 La. L.Rev. 492 (1965); Nabors, Civil Law Influences Upon the Law of Insurance in Louisiana, 6 Tul. L.Rev. 369 (1932). According to the rules of privity of contract, the contracting spouse is the sole manager of the contractual rights that are provided under the policy. Spaht & Hargrave, supra § 3.32, at 124 (referencing S. Mckenzie & H. Johnson, 15 Louisiana Civil Law Treatise, Insurance Law and Practice, § 263, n. 19 (West 1986)); Pollock v. Pollock, 164 La. 1077, 115 So. 275, 276 (1928). In principle, contracts produce effects as between the contracting parties only. La. Civ.Code art. 2346, cmt. (b) (2003). Upon termination of the community, a life insurance policy purchased with community funds during the community is a co-owned asset subject to partition by the co-owners. Spaht & Hargrave, supra § 3.32, at 125; La. Civ.Code art. 2336 (2003); see also, T.L. James & Co., Inc. v. Montgomery, 332 So.2d 834 (La.1975). Under the privity principle, the policy should be awarded to the owner of the policy, with the other spouse receiving property of an equal value. Spaht & Hargrave, supra § 3.32, at 125. To provide otherwise would interfere with the contractual relationship between the insurer and the owner of record. In this case, the parties do not dispute that the Great Southern Life Insurance policy is community property, nor is it disputed that Mr. Talbot is the owner of the policy. As community property upon termination, the life insurance policy became a co-owned asset subject to partition by the co-owners. In accordance with the privity principle, the community asset must be partitioned allowing Mr. Talbot to retain ownership of the policy, with Mrs. Talbot receiving property of an equal value. Based upon the economic situation of the parties and the division of other property at issue in the case, we find that the court of appeal correctly awarded Mrs. Talbot a share in the cash surrender value of the policy. Accordingly, we affirm the court of appeal's judgment reversing the trial court's award of the ownership of the Great Southern Life Insurance policy number 1822260 to Mr. Talbot and awarding a share in the cash surrender value of the Great Southern Life Insurance policy to Mrs. Talbot.