Misrepresentation on Life Insurance Modification Invalid

Posted on April 2, 2021 by Barry Zalma

Alleged Wife of Decedent has no Right to Life Benefits Because Decedent Wrongfully Claimed Common-Law Marriage

Florinda Lynch moved for Summary Judgment to which pro se Cross-Defendant Royal Martin, Jr. objected. In Metropolitan Life Insurance Company v. Florinda Lynch, et al., No. CV-19-08056-PCT-JJT, United States District Court For The District Of Arizona (March 23, 2021) the USDC was asked to determine who was entitled to interpleaded funds when the insurer could not determine who was entitled to the death benefits because of the need to apply the law of the Navajo Nation.

BACKGROUND

In this interpleader action, Lynch and Martin, Jr. both claim they are the rightful beneficiaries to a life insurance benefit from Interpleader Plaintiff Metropolitan Life Insurance Company (“MetLife”) in the amount of $135,869.86 arising from Royal Martin, Sr.’s death. Interpleader MetLife deposited the disputed funds with the Court.

Decedent was employed by the Navajo Nation and a participant in the Navajo Nation Benefit Plan issued by MetLife, which included a group life insurance policy. The plan allowed participants to designate beneficiaries, and on June 21, 1995, Decedent designated Martin, Jr., his son, as sole beneficiary to plan benefits by way of an Employee Enrollment Form. On May 4, 1999, Decedent completed an Application for Coverage Update designating Lynch as the sole beneficiary to plan benefits and identifying her as “spouse common law.” Upon his death in 2017, the New Mexico death certificate indicated that Decedent remained married to Naomi Platero; they married in 1983 and later separated but they never divorced.

After Decedent’s death, Lynch submitted a claim for the plan benefits and identified herself as Decedent’s “former spouse.” Upon inquiry, she informed MetLife that she and Decedent were married and had separated but, because it was a common law marriage, there was no divorce decree. Because Arizona law provides that a divorce ordinarily revokes a beneficiary designation to the former spouse, but neither a marriage certificate nor divorce decree exist to formalize the relationship of Decedent and Lynch, MetLife filed this interpleader action for resolution of the question whether Lynch or Martin, Jr. is entitled to the plan benefits.

ANALYSIS

This dispute turns on the validity of the designation of Lynch as plan beneficiary at the time of Decedent’s death. Decedent lived in Arizona at the time of plan enrollment and his death and Arizona law governs the plan. Both Decedent and Lynch explicitly held themselves out to be married under common law to MetLife, and Lynch has also so claimed to the Court.

The Navajo Nation, in which Decedent lived, allows common law marriages and Arizona generally recognizes and gives effect to Navajo Nation law.

Navajo Nation law permits contracts for marriage only between unmarried people, so if Decedent was still married to Platero, he could not have also been married to Lynch. But it is clear that Decedent and Lynch held themselves out to be married under Navajo Nation law. Decedent explicitly indicated as such on the Coverage Update. Decedent and Lynch sought the recognition and benefits of common law marriage under Navajo Nation law, which Arizona law recognizes, including in the forms associated with the MetLife plan benefits.

Under Arizona law a divorce revokes a life insurance beneficiary designation to the former spouse. Because Lynch averred that the common law marriage between her and Decedent ended MetLife questioned the validity of the designation of Lynch as beneficiary at the time of Decedent’s death.

At the time he entered into a common law marriage with Lynch and so indicated on the Coverage Update, if Decedent was not still legally married to Platero and the common law marriage was valid, then the Court must find that the end of the marriage to Lynch revoked the beneficiary designation to Lynch. The language of that statute indicates the clear intent that life insurance benefits to the spouse end with the end of the marriage. Lynch cannot now claim not to be divorced from Decedent simply to obtain the plan benefits.

If Decedent was still legally married to Platero at the time he submitted the Coverage Update, then identifying Lynch as his common law spouse was a material misrepresentation in violation of the terms of the Coverage Update itself, which require truthful information and warn that “inaccuracy or omission may result in a loss of coverage and unpaid claims.” Under any marital property regime, marital status is material with respect to the distribution of marital assets. Moreover, accepting a contention that a valid divorce of a prior marriage occurred when it did not would validate a subsequent bigamous marriage of a participant therein. In such an instance, the Court must, and did, conclude that the Coverage Update was invalid and unenforceable.

Because the beneficiary designation to Lynch is not enforceable in either scenario, the Court concluded it must give effect to the prior beneficiary designation at the time of Decedent’s death, namely, to Decedent’s son, Martin, Jr. and judgment was entered in favor of Royal Martin, Jr., who appears pro se in this matter and is, according to the record, and Royal Martin, Jr. is entitled to $135,869.86, representing the death benefits due under a life insurance policy on the life of Royal Martin, Sr., issued by Metropolitan Life Insurance Company and deposited with the Court on August 6, 2019 (Doc. 22), plus any accrued interest. The Clerk of Court shall forthwith dispense the interpleader funds identified above in the amount of $135,869.86 plus any accrued interest, to Royal Martin, Jr. pursuant to Judgment of the Court.

ZALMA OPINION

It is axiomatic that where there is a will, there are relatives. Similarly, where there is life insurance, there are relatives seeking the benefits. The USDC, in a Solomon-like decision, concluded that the common-law-marriages entered into by the decedent, even though allowed by the Navajo Nation and Arizona that supports Navajo law, were invalid and only the first named beneficiary could get the benefits because of the misrepresentation made by the decedent when he sought to change the beneficiary to his common-law spouse.

? 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at https://www.zalma.com and [email protected].

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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