Life Insurance – Divorced ex-wife sues new wife for husband’s life insurance

Posted by: Jun 21, 2022By Brian Stutheit

Scott v. Scott. (February 2018)

Roseann’s marriage to Melvin Scott was dissolved. Their separation agreement provided that Melvin’s life insurance policies payable to Roseann were to be maintained until Roseann remarried. If Roseann remarried, Melvin could change the beneficiary to whomever he wished.  A Prudential life insurance policy at issue in this case. After the divorce from Roseann, Melvin married Donna and remained married to her until his death. Roseann never remarried.  Before Melvin died and decades after his divorce from Roseann, Melvin changed the named beneficiary on his life insurance policies to Donna. Melvin died and Donna received the proceeds from his life insurance policies.

Roseann sued Donna in Mesa County District Court, alleging Donna committed civil theft, conversion, and unjust enrichment.  Donna moved to dismiss Roseann’s claims before trial. The district court granted the motion to dismiss.

On appeal, the Court of Appeals examined whether Donna could be liable to Roseann for conversion. Conversion is a claim that one person  intentionally interferes with possession or ownership of property belonging to another person. A claim of conversion, unlike theft, does not require that the convertor act with the specific intent to permanently deprive the owner of her property. Even a good faith recipient of funds who receives them without knowledge that they belonged to another person can be held liable for conversion. Here, Roseann adequately alleged that Donna’s control over the Prudential policy proceeds was unauthorized because of the separation agreement language and Donna’s refusal to return the converted funds to Roseann.

Similarly, the Court concluded it was error to dismiss Roseann’s claim for unjust enrichment. In general, a person who is unjustly enriched at the expense of another is subject to liability to make restitution. Here, Roseann alleged that Donna received a benefit that was promised to Roseann in the separation agreement and it would be inequitable for Donna to retain the funds.

The Court held that Melvin’s estate was not a necessary party which Roseann had to sue, because Donna had possession of the life insurance proceeds at issue, and thus complete relief can be accorded between Roseann and Donna, without a lawsuit against Melvin’s estate. In addition, the life insurance proceeds were never a part of Melvin’s estate assets and therefore the estate has no interest in those proceeds.