INTERPLEADER PRESENTS ISSUE OF “EX-SPOUSE” NOTATION ON BENEFICIARY FORM SUBJECT TO STATUTORY RE-DESIGNATION REQUIREMENT FOR FORMER SPOUSE

February 14, 2012

In an opinion issued last Thursday, the Fifth Circuit considered an interpleader action in which life insurance proceeds were in dispute. In Provident Life and Acc. Ins. Co. v. Cleveland, 2012 WL 407094 (C.A.5 (Tex.), Gerald and Shona married in 1993 and had one child together. The couple separated in 1998, and Gerald filed for divorce in March 2001. Gerald obtained a life insurance policy in November 2001  naming  as  the  beneficiary  “Shona  Cleveland  Ex–Spouse.”  He  did  not  name  an  alternate  or secondary beneficiary. The couple was not divorced until June 2002 when a final divorce decree was entered. By its terms the decree divested Shona of any interest in any life insurance policies held by Gerald. Following the divorce, Gerald married Jill and had one child with her. Gerald subsequently died intestate as a result of a motorcycle accident in March 2009.

The Fifth Circuit applied section 9.301 of the Texas Family Code that provides that a divorce negates the designation of a prior spouse as the beneficiary of a life insurance policy.  The court rejected Shona’s argument that Gerald intended to avoid that result by listing her as his “ex-spouse.”  The court upheld the decision to award the policy proceeds to Jill, the current wife at the time of his death.