Recently, a New Jersey court heard a life insurance case arising out of a beneficiary dispute.

In Fox v. Lincoln Financial Group, et al.,[1] the insured bought a life insurance policy when he was married and designated his then wife as the primary beneficiary. The insured later divorced and changed the beneficiary by making his sister the primary recipient of the proceeds. Several years later, he married his second wife.

He did not, however, change the beneficiary designation on his life insurance policy.

After the insured’s death, his second wife filed a claim for the life insurance benefits. Her claim was denied, because she was not listed as the beneficiary on the policy.

She filed declaratory judgment action and asked the court to rule that marriage presumptively revokes all prior life insurance beneficiary designations, and leaves the current spouse as sole beneficiary.

The court rejected her argument.

Under the New Jersey law, the owner of a life insurance policy must comply (or substantially comply) with the policy’s rules if he wishes to change a beneficiary.

It means that the policy provisions about changing a beneficiary must be followed strictly (or at least substantially) in order for an effective change to take place. Substantial compliance means that an insured did everything he could to change the beneficiary designation in accordance with the policy provisions.

The Fox court noted that simply expressing one’s intent to change beneficiaries is not considered “substantial compliance.” Further, the court rejected an argument that marriage automatically creates a new life insurance beneficiary designation and revokes all prior designations.

A life insurance claim can be denied for many reasons, including beneficiary disputes. A life insurance lawyer experienced in handling beneficiary disputes can help you sort out the issues in getting your case ready for litigation and ultimately get your claim paid.