Spoerr v. Manhattan Natl. Life Ins. Co., 2007 WL 128815 (S.D.Fla. Jan 12, 2007)

divorce-heart I’ve written previously about the probate-litigation issues lurking at the end of many divorces (see here).  Case in point: receipt of life insurance proceeds by ex-spouse.  That’s what the linked-to case is about: ex-husband was the named beneficiary of a life insurance policy on his ex-wife.  Ex-wife executed a durable power of attorney (“POA”) designating her son as her attorney-in-fact.  Son used the POA to change the beneficiary designation form on his mom’s life insurance policy.  When mom died, the insurance company paid son $250,445.80.  Dad found out and sued everyone in sight to get his hands on the insurance money.

Probate disputes involving conflicting claims to life insurance proceeds are common.  There are three aspects of this case that I find most interesting.

1.    Increased federal jurisdiction over probate disputes.

Although not technically a dispute involving the decedent’s probate administration, the litigation at issue in the linked-to case is part and parcel of the big picture involving who gets what after mom died.  The fact that this particular piece of the litigation ended up in court (diversity jurisdiction) may mean nothing, or could be another example of the increased “federalization” of trust-and-estates litigation predicted by those following the U.S. Supreme Court’s decision in Marshall v. Marshall, and written about recently in Marshall v. Marshall — Rashomon Revisited, Prob. & Prop., Jan./Feb. 2007.

2.   The scope of authority conveyed in a Durable Power of Attorney

Abuse and exploitation of the elderly by means of durable powers of attorney is an often-written about problem (see here).  In the linked-to case, the court ruled that son’s use of his mom’s POA to change the beneficiary designation on her life insurance policy was was void ab initio, based on the following rationale:

The construction of the durable power of attorney (“POA”) executed by Patricia in July of 2003 is a matter of law. See James v. James, 843 So.2d 304, 308 (Fla. 5th DCA 2003) (“Construction of a power of attorney, like contract law, is a matter of law.”). In construing a POA, “[t]he court must look to the language of the instrument, as with any other contract, in order to ascertain its object and purpose.” Johnson v. Fraccacreta, 348 So.2d 570, 572 (Fla. 4th DCA 1977). In addition, “ ‘powers of attorney are strictly construed.’ “ Alterra Healthcare Corp. v. Bryant, 937 So.2d 263, 269 (Fla. 4th DCA 2006) (quoting De Bueno v. Castro, 543 So.2d 393, 394 (Fla. 4th DCA 1989)). The POA at issue in this case contains a limitation on the authority granted to the attorney-in-fact.  Specifically, the POA states:

Limitation. Notwithstanding the powers contained in this Durable Power of Attorney, my attorney in fact may not perform duties under a contract that require the exercise of my personal services; make any affidavit as to my personal knowledge; vote in any public election on my behalf; execute or revoke any Will or Codicil on my behalf; create, amend, modify, or revoke any document or other disposition effective at my death or transfer of assets to an existing trust created by me unless expressly authorized by this Power of Attorney or said document; or exercise powers and authority granted to me as trustee or court appointed fiduciary unless otherwise expressly authorized by said instrument of the court.

(D.E. No. 33 Exh. B ¶ (q)) (emphasis added). See also Fla. Stat. § 709.08 (stating the same limitation on an attorney-in-fact).  Thus, this language specifically prohibits the attorney-in-fact from changing the beneficiary of a life insurance policy as was done in this case unless the POA specifically authorizes the attorney-in-fact to perform this action. Upon examination of the POA, there is no provision which expressly authorized Richard T. as Patricia’s attorney-in-fact to change the beneficiary on her insurance policy. Manhattan’s contention that paragraph (i) of the POA which provides that the attorney-in-fact could “execute and deliver applications for insurance ··· and to cancel and select the amounts therefor” authorized Richard T. to change the beneficiary on an existing policy is without merit. Applying for insurance is not the same as changing the beneficiary on an existing policy and paragraph (i) is in no way an “express” authorization for Richard T.’s actions as required by paragraph (q) of the POA. Therefore, the policy change request executed with Richard T.’s signature as Patricia’s attorney-in-fact is void ab initio. See, e .g., Campbell v. Metropolitan Life Ins. Co., 812 F.Supp. 1173 (E.D .Okla.1992) (finding where a change of beneficiary form for a Federal Employees Group Life Insurance policy was not witnessed as required by the applicable law the attempted change was “invalid and of no effect.”).

3.   No immunity for insurance company under F.S. 627.423

The last thing insurance companies want is to get sucked into probate litigation.  The purposes of F.S. 627.423 is to make sure they don’t.  This statute basically says that insurance companies can’t be sued for paying out insurance proceeds in accordance with a policy’s beneficiary designation form.  The trial court said the statute didn’t apply, and thus the insurance company could be sued by dad to recover the insurance proceeds wrongfully paid to son, based on the following rationale:

First, the court ruled that because the beneficiary designation was void ab initio the statute did NOT apply.

[A]s payment was made to Richard T. and not Richard E. and as the change of beneficiary was void ab initio, the payment was not made “in accordance with the terms of the policy” to the “person then designated.”

Second, the court ruled that the insurer essentially had constructive knowledge of the fact that it was paying the insurance proceeds to the wrong person, thus for this reason as well the statute did NOT apply.

Furthermore, an insurer is only immune from liability where payment to the beneficiary was done in good faith without knowledge.

Here, it is undisputed that the policy only gave the power to change the beneficiary to the owner of the policy, who in this case was Patricia. (D.E. No. 1, Exh. A at 4,8). It is also undisputed that Manhattan received the POA and relied upon it in approving the change of beneficiary request signed by Richard T. (D.E. No. 32, Exh. 2 at 2). As the POA did not allow Richard T. as attorney-in-fact to execute the change of beneficiary form, a fact that is clear from the face of the POA, Manhattan was on notice that this change of beneficiary form was invalid and that Richard E. remained the beneficiary of the policy. See, e.g., Stavros v. Western & Southern Life Insurance Company, Inc., 486 S.W.2d 712 (Ky.1972) (where the Court found an insurance company was not immune from liability under a similar statute because insurer should have known that the change of beneficiary was unauthorized as the form changing the beneficiary was not executed by the insured, an eleven-year-old-boy or his parent or guardian as required by the policy). Thus, section 627.423 does not preclude Manhattan from liability.

  • Jeff Goethe

    Thanks for bringing the case to everyone’s attention. This past summer, I attended a lunch for the Stetson Law Review and participated as a panelist for a law student preparing a law review article. Her article will point out that we have a statute the treats a divorced spouse as predeceased for purposes of wills, and another for trusts, but we should have yet another statute for life insurance. That would have cut off the ex-husband’s argument. Look for the Stetson article, and, hopefully, some legislation.

    As a planner, I ask clients to review their beneficiary designations, even if they think they know what they are. Our firm also has specific language in our durable power of attorney form that allows the attorney-in-fact to change beneficiary deisgnations. Of course, this should be used very carefully. Also, given the fiduciary duty of the attorney-in-fact, such authority should specifically allow the attorney-in-fact to make themselves the beneficiary, if that is the principal’s intent.

  • Jeff –

    Thanks for the kind words. I’ll keep my eyes open for the Stetson Law Review article, but if you’ve kept in touch with the student author, I’d like to contact him or her directly as well.

    Regards. Juan.

  • “Thus, [the POA’s] language specifically prohibits the attorney-in-fact from changing the beneficiary of a life insurance policy as was done in this case unless the POA specifically authorizes the attorney-in-fact to perform this action.”

    “It specifically prohibits the act unless it specifically authorizes it.”

  • Sean –

    I agree, the POA’s language isn’t exactly crystal clear, but it does track the language of the controlling Florida statute. I’ve revised the blog post to include a link to the Florida statute governing POAs.

    Regards. Juan.

  • M. Sean Fosmire

    I think I’ve got it. The statute denies the power to change a beneficiary unless the POA specifically authorizes it.

  • Cheryl A. Spoerr

    Mr. Antunez

    First, as an attorney, you must get your facts correct before blurting out case information that you know nothing about. My name is Cheryl Spoerr, wife of Richard T. Spoerr the son.

    There are a quite a lot of key points you failed to note and the case is NOT that cut and dry. Father is attempting to defraud the insurance company of the insurance policy proceeds. He could not take it into Probate as Father is barred from suing the estate. Father, has attempted the same type of proceedings against the son as PR for THREE OTHER LIFE INSURANCE POLICIES.

    So before you attempt to state this is a simple case,….it is not.! There a quite a few details neither yourself nor anyone else has knowledge of. Not to mention, in Father’s Divorce Decree it states that he gives up all rights to inheritance, that 1 hour after a global settlement between Father and Son was signed and approved in Probate, Father rushed to court to file suit against Manhattan. Let alone, the attorney representing Son, has now received charges lodged against him for failing to protect the PR, not filing a countersuit, not filing Summary Judgment.

    The reason the Judge granted Summary Judgment to the Father was due to the ineptness of the Son’s attorney. In addition, Manhattan informed Patricia A. Spoerr, deceased, in 12 documented letters that the actual beneficiary was the Corporation Spoerr Enterprises. Which by the way, is under the guidelines of the Spoerr Enterprises Shareholders Agreement which states, “All Life Insurance Policies Paid for by the Corporation will bhe given to the estate of the deceased shareholder in exchange for the deceased shares of the corporation.” That being said, Manhattan acknowledged for 15 years that Spoerr Enterprises was the beneficiary prior to the change. The ONE document brought in by Father is NOT EVEN SIGNED BY FATHER AS A CORPORATE REPRESENTATIVE and according to manhattan’s guidelines a corporate officer MUST sign the change and NO representative signature was on the 1988 change of beneficiary document Father has brought into court.

    There is much more, but before you drop the hammer on my husband you should get your facts straight!!!!

    What’s even more funny is that you do NOT know that when Son was ASKED by his Mother to change the beneficiary, she requested it to be changed from her previous Revocable Trust dated 2002 to the Revocable Trust of 2003. At NO TIME was the benficiary ever my husband personally.

    Let alone, Father did not attempt to sue nor contest the validity of the Manhattan policy until AFTER a Global settlement was signed and approved by the Probate court. Father waited an entire 2 and a half years before suing Manhattan.

    I will post. I am appalled that you would comment or make comments that would slander my husband when you yourself do NOT have the facts of this case. In addition the case is STILL ongoing in Federal Court.

    One more thing, Patricia Spoerr, was alive when the beneficiary via POA was done and reviewed the paperwork. Manhattan had a full 2 months to review the change and never batted an eye. The request in writing through the POA was to change the date of the Trust/beneficiary from 2002 to 2003. There was never a request to change it to the Son. Also, Manhattan paid the proceeds to the Revocable trust one month after Pat’s death. An entire 2 and a half years passed before Manhattan countersued my husband.

    Again, you need to get facts straight before shooting at someone personally. We have been through hell and back especially since we just found out that our current attorney filed NO PAPERWORK in the Federal Case and thus Summary Judgement was awarded and none of the documents we had was ever produced as evidence!

    Cheryl Spoerr

  • Dear Mrs. Spoerr –

    Thank you for taking the time to comment on this blog post.

    If you feel the court’s published opinion in this case was unfair to your husband or that it left out important facts, your quarrel is with the court, not me.

    This blog is intended to be an educational forum for lawyers, I don’t take sides in cases I write about. My blog post simply commented on the facts and legal issues of this case as framed by the court in its published opinion. If the court framed the issues in a way you think is biased against your husband, again, your quarrel is with the court, not me.

    Sincerely. Juan Antunez.

  • Cheryl Spoerr

    Juan Antunez

    The court did not make an opinion, the court RULED that the change was not a valid change. However, the court never ruled on who the actual beneficiary was. There was never a trial based on the evidence and beneficiary.

    You made comments that the SON changed the ebenficiary and I clearly took insult to that comment and wanted to point out that SON never changed the beneficiary to himself and that there are other significant things attributed to this case.

    Secondly, the funds were NEVER paid to Son, they were paid directly to the Estate.

    Moreover, because the issue of the correct beneficiary was never decided, there was another change of beneficiary effectuated on April 1997 that was never introduced as evidence into court.

    I just really took offense to the words used with regard to my husband. Again, the court made rulings, that’s it, your opinions are different. I understand some of the comments you have laid out, but you must step into our shoes to truly understand this case and also understand that it is directly LINKED to the Probate Court which is also still open.

    Cheryl Spoerr

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