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

Posted by: Apr 10, 2018By 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 were to be
maintained until Roseann remarried. If Roseann remarried, Melvin could change the beneficiary to whomever he wished.  A Prudential life insurance policy was the policy at issue in this case. After the divorce, 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, arguing that Roseann’s claims failed to state a legal claim upon which relief could be granted and that Roseann had failed to join Melvin’s estate, a necessary party. The district court granted the motion to dismiss.

On appeal, the Court of Appeals examined whether Roseann had stated facts sufficient to withstand the motion to dismiss the claim for civil theft. To state a claim for civil theft, a plaintiff must allege the elements of criminal theft, which requires the specific intent of the defendant to permanently deprive the owner of the benefit of his or her property. Roseann made a single, conclusory allegation, repeating the language in the criminal theft statute, that Donna acted with the intent to commit civil theft. The Court concluded that, without more specific facts being alleged in the complaint, the allegation which simply parroted the law was not entitled to the assumption of truth, and the district court did not err in dismissing the civil theft claim.

Conversion is a claim that another person  intentionally interferes with possession or ownership of property belonging to another person. A claim of conversion, unlike civil 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 can be held liable for conversion. Here, Roseann adequately alleged that Donna’s control over the Prudential policy proceeds were unauthorized because of the separation agreement language and Donna’s refusal to return the allegedly converted funds.

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 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.