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 Life, Health & Disability Law
Life insurance companies must now take steps to protect themselves from claims from former spouses designated as beneficiaries under their policies. Accordingly, life insurance companies should consider updating beneficiary designations provisions on new policies to make clear that a divorce will be deemed to have revoked any designation in favor of a spouse. Similarly, for already issued policies, life insurance companies should consider outreach to agents and policyholders reminding them of the need to update beneficiary designations after divorce, as a post-divorce designation answers these questions definitively. Finally, when faced with a claim from a former spouse, life insurance companies should consider whether to interplead the death benefit before paying, or not paying, a former spouse.
Finally, it appears that help may be on the way, as legislatures are now aware of the problem and taking steps to provide clarity. For example, the Pennsylvania General Assembly passed a bill requiring all divorce include a provision that expressly states that a life insurance beneficiary designation in favor of either of the spouses must be updated if either intend to keep the other as a beneficiary of the policy. By including such a provision, there should be no question as to whether a life insurance owner intended to keep his or her former spouse as the beneficiary.
Statutes such as this will hopefully untie the knot created by the extension of revocation-upon-divorce statutes to life insurance policies. In the meantime, though, life insurance companies should proceed with caution. You can learn more about this issue in Lincoln Financial Group Senior Counsel Matt Creech’s and Bailey King’s article on the subject in For the Defense’s In-House Quarterly.
C. Bailey King, Jr. is a Partner at Bradley Arant Boult Cummings LLP in Charlotte, NC. Contact him at:

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