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Petitioner Seeks Payment from Annuity Plan


In 1970 a group annuity contract plan was entered into by defendant Company and a hospital as contract holder. On April 25, 1972, the company issued its certificate to a doctor, which named him as a participant in that group annuity plan.

The certificate had originally been issued on April 4, 1972, with the same designated beneficiaries, but the name was misspelled. In a handwritten note, a request was made to correct the spelling and as a result, company issued the corrected certificate dated April 25, 1972, referred to supra.

The decedent, who was the first wife and the mother of their two sons, died on August 23, 1973. Approximately one year after her death the doctor remarried. His new wife was the plaintiff in this action. The doctor died in February 1979 and his will, executed March 3, 1976, was admitted to probate in March 1979.

In May 1979 the wife sent a letter to defendant Company claiming that she was the beneficiary under the annuity plan and requesting payment under one of its options. The company replied to the wife’s request by letter, stating that upon receipt of the decree of probate and a certified copy of the will it would honor her request.

Thereafter counsel for the sons by his first wife notified the company that the sons were the living beneficiaries named in the certificate issued April 25, 1972 by it to the doctor.

The company then declined to pay either the widow or the sons “because a payment to either * * * may prove to be improper,” and it requested that the parties come to a mutual agreement as to how the proceeds should be paid.

Plaintiff commenced this action against Company and against the sons seeking a declaration, inter alia, that she was the sole beneficiary of the group annuity contract and had been so designated in her deceased husband’s will.

Before serving an answer, the defendants moved (1) to dismiss the complaint pursuant to CPLR 3211 contending that a defense was founded upon documentary evidence and that the complaint failed to state a cause of action, and (2) for summary judgment in their favor pursuant to CPLR 3211 and 3212 and EPTL 13-3.2 adjudging that they, and not plaintiff, are the beneficiaries of the annuity in question. The plaintiff cross-moved pursuant to CPLR 3211 for summary judgment in her favor.

Defendant Company moved pursuant to CPLR 1006 for an order permitting it to pay the proceeds of the annuity contract into court and thereupon discharging it from liability to any party in whole or part. The plaintiff then cross-moved pursuant to CPLR 2217 (subd. ) to “consolidate” all the pending motions and pursuant to CPLR 1006 (subd. ) for an order directing Company to retain the proceeds to the credit of the action, upon the ground that payment into court might impair option rights existing under the policy.

Special Term determined the motions by granting the cross motion for consolidation, directing Company to act as a stakeholder of the proceeds and benefits of the annuity subject to the rights of the prevailing party in this action and by denying dismissal to plaintiff under CPLR 3211 and summary judgment to either party under CPLR 3211 and 3212. We modify by granting summary judgment to the sons.

The statute provides that the rights of such beneficiaries “shall not be impaired or defeated by any statute or rule of law governing the transfer of property by will, gift or intestacy”, provided that the designation is made in writing, is signed by the person making it, and is, so far as here relevant, made in accordance with the rules prescribed for the pension plan or is agreed to by the insurer. Thus, the statute relied upon by the sons merely provides that such designations of beneficiaries are not invalid if accomplished by a document not executed with the formalities required by the statute of wills, but it does not answer the question raised here, the converse of that proposition, namely, whether a provision in a will changing the beneficiaries of an insurance contract is valid.

The validity of a provision in a will purporting to change the designation of the beneficiary of an annuity depends upon whether such a mode of change is expressly or impliedly authorized by the policy. Although it has been stated that “the power to change the beneficiary cannot ordinarily be exercised by will” that statement means only that the provisions in an insurance contract regulating the manner in which a beneficiary may be changed are not “ordinarily” satisfied by a testamentary disposition. This is so because the relevant provisions of the insurance contract either expressly prohibit a change in beneficiary by testamentary disposition or impliedly prevent such mode of change by setting forth conditions to effect the change which cannot be met by a mere statement in a will.

It would appear, therefore, that the question now to be determined should be whether the change of beneficiary requirements of the contract have been met by the clause in the will. However, certain procedural aspects of this case have the effect of structuring the issue differently.

In at case, the Supreme Court of Arizona considered the rationale underlying the rule requiring compliance with the provisions of an insurance policy regarding change of beneficiaries and the rule to be applied where the insurer has waived such compliance, stating:”In a case, this court stated that if an insurance policy contract provides the method of changing the name of the beneficiary from one person to another, that particular method provided for in the policy contract is exclusive and must be followed strictly, or the attempted change is of no effect.

‘ “To hold that a change in beneficiary may be made by testamentary disposition alone would open up a serious question as to payment of life insurance policies. It is in the public interest that an insurance company may pay a loss to the beneficiary designated in the policy as promptly after the death of insured as may reasonably be done. If there is uncertainty as to the beneficiary upon the death of insured, in all cases where the right to change the beneficiary had been reserved there would always be a question as to whom the proceeds of the insurance should be paid. If paid to the beneficiary, a will might later be probated designating a different disposition of the fund, and it would be a risk that few companies would be willing to take, * * *.” ‘

“Other authorities, however, hold that when the power to make a change of the beneficiary is reserved to the insured by the policy, and the insurer does not demand full compliance with the procedure to effect the change as set out in the policy, the insured may change his beneficiary by a valid will.

‘We feel that the provisions of this policy setting up the method by which a beneficiary may be designated or changed are for the protection of the insurer, and we do not feel that the technical provisions are placed in the policy to protect the insured against a hasty or impetuous action. In the case now before this court, the insurer is no longer a party, and the battle is between possible beneficiaries. Since this is the case, there is no reason to invoke technical provisions designed to protect an insurer against the possibility of double payment. We feel that the clearly manifested intent of the insured should control.’.

“We believe that the latter rule is founded on the better reasoning. The provisions in a policy of insurance as to the procedure for making a change of beneficiary are for the benefit of the insurer.

When an insurer becomes a stakeholder, it waives its right to require compliance with the terms of the contract. The contest as to distribution remains solely between the interested claimants and “the court will exercise equity and seek to do what the insured apparently intended and award the fund to the claimant having the strongest claim under existing conditions”.

Under the rule enunciated in another case, the remaining issue in the case at bar is whether the will of the decedent “clearly manifested intent” to change the beneficiaries of the annuity policy in question. In our opinion, that test has not been met in this case.

In sum, the evidence leads to the conclusion that if the doctor had intended to change the beneficiaries of the instant annuity contract he would have done so in a written inter vivos communication to Company rather than in his will. He was scrupulously careful to change the beneficiaries of two other insurance policies when that was his intended purpose. No physical or other disability intervened between the writing of the will and the date of his death to prevent the doctor from complying with the policy provisions by sending a written notice of his intention to Company. His failure to do so must be read as a clear intention not to effectuate a change in the beneficiary of the instant policy.

Accordingly the order should be modified by granting the motion of the sons for summary judgment pursuant to CPLR 3211 and 3212 and declaring that they are entitled to the proceeds of the insurance in question as the surviving beneficiaries named in the certificate issued by defendant Company, and defendant Company should be directed to pay said proceeds to the sons subject to their option rights under the policy.

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