On certification to the Superior Court, Appellate Division.
The opinion of the Court was delivered by O'Hern, J. Chief Justice Wilentz and Justices Handler and Stein join in this opinion. Justice Pollock has filed a separate dissenting opinion in which Justice Garibaldi joins. Justice Clifford did not participate.
Over the past twenty years, one of the most consistent statistics in America has been the rising divorce rate. In turn, a sad, but familiar, scenario has arisen. Following a bitter divorce, a settlement agreement divides the marital property, with a life insurance policy being awarded to the insured. The policy, however, names the ex-spouse as beneficiary. The insured then remarries, but dies unexpectedly without completing the necessary procedures for changing beneficiaries. The insured's estate claims the policy proceeds. Despite the
change of conditions since initiation of the policy, the insurance proceeds are awarded to the ex-spouse. Many states' laws compel just such an inequitable result.
[Note, Life Insurance Beneficiaries and Divorce, 65 Tex. L. Rev. 635, 635 (1987) (footnote omitted).]
In this case, the scenario is somewhat different: the policy is a group policy; the insured never remarried; and the former spouses never made specific reference to the insurance policy in their property-settlement agreement, although they did waive generally all interest in each other's estate in the event of death. The issue, however, is essentially the same: whether New Jersey compels an inequitable result that the divorced decedent would have never intended. We think not, and therefore reverse the judgments below, which award the insurance proceeds to the former wife, and remand for a factual hearing on whether the plain meaning of the property-settlement agreement and the probable intent of the decedent are overcome by other evidence of the decedent's intent toward his former wife.
Because the case proceeds on summary judgment, we may accept the facts set forth in plaintiff's brief. Robert Vasconi married Leah (Vasconi) Wolf on September 9, 1982. Almost two years later, on August 24, 1984, Robert designated Leah as the beneficiary of his group life-insurance policy maintained by Oakland Auto Parts, Inc., a business of which he was the vice-president, according to the terms of the application. The Guardian Life Insurance Company of America (Guardian) issued the policy.
The record does not disclose the circumstances of that beneficiary designation, although at oral argument we were informed that the marriage was then already on troubled times. Robert's father, Edgardo, states in an affidavit that "during their short-lived marriage, [Robert] suffered and endured nothing but animosity, discord, friction and hostility." Despite that, Robert had designated Leah as the beneficiary of the group life-insurance policy. Less than a year later, their marriage
was over. The parties executed a property-settlement agreement on May 6, 1985, and obtained a judgment of divorce on the same date. The property-settlement agreement provided for a mutual waiver of alimony and a mutual waiver of all claims or obligations either may have had to the other arising out of the marital relationship. It provided, as well, for the relinquishment of all claims either may have had in the estate of the other party on the latter's death. According to the agreement, those claims were relinquished "whether by way of statutory allowance, distribution of intestacy, or election or take against the other party's will." A separate schedule attached to the agreement distributed certain personal property, specifically awarding to the husband "any personal possessions presently in his custody and control, pension or profit-sharing benefits, bank accounts, stocks, bonds, jewelry, furniture, cash and any other such property" (emphasis added). In addition, the schedule provided that "any and all other personal property not mentioned in this Agreement which is presently in the possession, ownership, or name of the respective parties as of the date hereof, will remain in their individual possession and ownership."
Robert died at age thirty-three on December 28, 1986. His father qualified as the administrator of his estate. As administrator he sought payment of the policy proceeds from Guardian, asserting that Leah had relinquished her interest in the proceeds of the policy as well as in all of Robert's assets. He further alleged that the degeneration of Robert's and Leah's relationship had induced alcoholism in Robert and that Robert had died of liver failure caused by his alcoholic condition. He sought to prove that Robert had intended to remove Leah as the beneficiary of the policy but had been unable to "perform the ministerial act" due to his severe alcoholic condition. He also asserted that Robert had believed that the terms of the property settlement effectively revoked Leah's status as beneficiary. He pointed to the fact that Leah had not filed a proof of claim for the life-insurance proceeds until February 1989, more
than two years after Robert's death, suggesting that Robert had never discussed the policy with her or informed her that she was the beneficiary.
The Law Division granted summary judgment to Leah on the basis that
there does exist in New Jersey an unbroken line of cases holding that the interest of a designated beneficiary of a life insurance policy is a vested property right payable in the event the beneficiary outlives the insured, subject to divestment only by the insured making a change of beneficiary in the manner provided by the policy contract. A demonstrated intention to change beneficiaries is insufficient if not executed in the manner prescribed in the policy for effecting such a change. Change in the marital relationship between insured and beneficiary has been held insufficient even when accompanied by a separation agreement executed by the first wife and named beneficiary in which she purported to release her husband, the insured, from any claim against him or his estate.
The Appellate Division granted Edgardo's motion for an emergency stay of the judgment, but subsequently affirmed the judgment of the Law Division in an unreported opinion. The court stated that "well established law dictates that unless the owner of the policy has changed the beneficiary in the manner provided by the policy, the insurer is obligated to pay the proceeds to the named beneficiary." Guardian did not participate in the appeal, having paid the proceeds into court.
We granted Edgardo's petition for certification. 122 N.J. 128 (1990).
For many couples, life insurance is, apart from their home, the largest single estate-planning device that they possess. "Because of a recognition of life insurance as a major estate planning device, in the last ten years investments in life insurance have increased from one and one-half trillion dollars to four and one-half trillion dollars." Note, Life Insurance Beneficiaries and Divorce, supra, 65 Tex. L. Rev. at 635 (footnotes omitted). To place that figure in perspective, we note simply that the proposed annual budget of the United States is nearly
one and one-half trillion dollars. Our national debt is now some three trillion dollars. The reasons for the popularity of life insurance are well known. Life insurance "shelters the insured from income taxes during his life, provides an immediate source of funds to meet taxes and expenses of the estate upon death, keeps the insurance proceeds out of the insured's estate, and avoids [some local] estate taxes in the process." Ibid. (footnote omitted). Life insurance rivals the will, then, as the principal modern means of transferring assets to the decedent's estate.
Hence, an examination of how the law of wills would have handled this situation had it been Robert's will that had transferred the proceeds to Leah will aid our analysis. Only gradually has the law of wills recognized that divorce should revoke a will. "At common law, two changes in circumstances revoked a testator's will by implication. For a female, marriage after the creation of a will * * * revoked the will. For a male, marriage and birth of issue after the creation of a will served to revoke the will." Note, Applying the Doctrine of Revocation by Divorce to Life Insurance Policies, 73 Cornell L. Rev. 653, 655 (1988) (footnotes omitted) (suggesting as well that doctrine of revocation by divorce should apply to beneficiary designated in life-insurance policy) (hereinafter Note, Revocation by Divorce). Originally the doctrine of revocation by implication was rebuttable, but courts later "transformed the doctrine into an irrebuttable rule of law by stressing the moral obligations that marriage and birth of issue imposed upon the testator." Id. at 655 n.11. Some courts, however, "refused to extend revocation by implication to divorce, limiting the doctrine to its common law applications." Id. at 658 (footnote omitted). That was the law in New Jersey until 1978 when the Legislature enacted N.J.S.A. 3A:2A-13 (current ...