1250 Broadway, 27th Floor New York, NY 10001


Wills and life insurance policies happen to be two methods of disposing property upon death. Every now and then the terms of a will directly contradict provisions of a life insurance policy. That begs the question as to which document controls. More specifically, if a life insurance policy sets forth a procedure for changing beneficiaries and does not authorize such modifications by will, what impact will a will have? The Appellate Division, First Department, answered those questions in Lincoln Life and Annuity Company of New York v. Caswell.

In the Lincoln Life case, more than 15 years after filing the beneficiary designation with her insurance company, Martha L. Hubbard executed a last will and testament, which changed the amount of money that the policy's beneficiary was to receive from $200,000 to only $25,000. The will purported to devise the remaining $175,000 to various individuals and charities. When it came time to distribute the policy's proceeds, a dispute arose as to the amount that should be allocated.
The policy provided that in order to effect a change, a signed request had to be sent to the insurance company, and the change only became effective when the company provided written notification of acceptance. The general rule, as espoused by the state's highest court, has been that policy provisions control. As the New York State Court of Appeals observed in McCarthy v. Aetna Life Insurance Company:

[T]he method prescribed by the insurance contract must be followed in order to effect a change of a beneficiary. As a corollary of this rule, it has long been recognized that, unless an insurance policy permits the beneficiary to be designated or changed by will, even a specific testamentary bequest of the policy proceeds generally will not override a prior beneficiary designation made in accordance with the terms of the policy.
While New York courts have adhered to that rule, over the years there has been some relaxation of that standard. Recent decisions have established that if a decedent "substantially complied" with the policy terms, then a change made in a will may be honored. Thus, the ultimate decision in this case rested upon whether Ms. Hubbard "substantially complied" with the governing change requirements.
In the 15 years that her insurance policy had been in effect, Ms. Hubbard did nothing to notify Lincoln Life of her intentions. Additionally, absent evidence that Ms. Hubbard was physically or mentally incapable of attempting to comply with the policy's terms, the court refused to excuse her noncompliance.
"A house divided against itself will not stand...." Lincoln Life demonstrates that neither will a conflicting testamentary disposition, unless the policy's change procedures have been substantially satisfied.
For a copy of the Appellate Division's decision in Lincoln Life and Annuity Company of New York v. Caswell, please click on the following link: http://www.courts.state.ny.us/reporter/3dseries/2006/2006_02658.htm