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.