Section 3.45 Beneficiary Designations

• Library: Insurance Practice 2015

Under policies of life insurance, the owner, usually an insured, has the right to name a third party as the person to receive the proceeds of the policy upon its maturity by death. Usually, a contingent beneficiary is also named to take the proceeds if the primary beneficiary should predecease the insured. Most life insurance policies contain a beneficiary provision that covers changes in the beneficiary designations and takes care of the situation in which the beneficiary predeceases the insured and no new beneficiary is designated. A review of a number of these provisions indicates that it is an almost universal practice when the beneficiary predeceases the insured for the proceeds to be paid to the insured’s estate unless the insured, before his or her death, designates another entity as the beneficiary. Most policies now have, for example, “beneficiary,” “first contingent beneficiary,” and “second contingent beneficiary” designations.

Formerly, beneficiary designation changes were not valid unless endorsed on the policy itself. In more recent years, nearly all companies have discontinued the practice of endorsing the changes on the policy, and now they merely change their records and send out a change of beneficiary endorsement to be attached to the policy.

The courts have almost universally held that, once the owner has done everything he or she can do to effect the change of beneficiary, the change will be deemed to have been made even if the company takes no action through inadvertence or other reason. Persons v. Prudential Ins. Co. of Am., 233 S.W.2d 729 (Mo. 1950). One company has recognized this in its policy provision regarding beneficiaries by stating that it takes effect as of the date the owner signs a written request for the change—thus recognizing what has come to be the general rule as established by the courts. Companies will generally honor any written request for a change of beneficiary signed by the owner.

In Missouri, there is a “substantial compliance doctrine,” which is an equitable doctrine utilized in determining the validity of beneficiary changes. Anglen v. Heimburger, 803 S.W.2d 109, 112 (Mo. App. W.D. 1990). In Metropolitan Life Insurance Co. v. Barnes, 770 F. Supp. 1393, 1397 (E.D. Mo. 1991), the court set forth the test to be used to determine “substantial compliance,” which requires a finding of (1) intent to change the beneficiary established beyond question, and (2) evidence that the insured has done everything possible to effect this change under the circumstances. Id. at 1397. The second factor is subject to a more relaxed analysis if there is clear evidence of the insured’s intention to change the beneficiary under the plan. Id. The Metropolitan Life court analyzed the “substantial compliance” doctrine as set forth in two prior decisions, Anglen and Capitol Life Insurance Co. v. Porter, 719 S.W.2d 908 (Mo. App. E.D. 1986). Both cases involved a marital separation, express intent to change the...