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When people get divorced or separated, it is common for one party to take out a life insurance policy in order to fulfill any child or spousal support obligations they may be unable to make in the event of their death. In a recent case heard before the Ontario Superior Court of Justice, the court was asked whether a former spouse is entitled to receive the entire insurance payout stemming from her former husband’s death, or whether she was only entitled to an amount equal to what she would have received through spousal support.

The facts

The husband passed away after a brief illness on August 8, 2017. He was 61 years old at the time and was married to his second wife, who he began living with in 2002. They were married in December 2009. Prior to this marriage, the husband had been married to another woman (the “first wife”). They were married on February 6, 1987, and separated on July 29, 2002.

In the separation agreement between the husband and the first wife, there was a requirement for the husband to take out a life insurance policy in the amount of $500,000. The first wife was to be named as the irrevocable beneficiary of this policy. However, the husband failed to secure the policy.  Upon his death, the first wife brought an action requesting $500,000 from the estate, which she was now asking the court to award her via summary judgment.

The second wife, who was also acting as the trustee of the estate, opposed the application, claiming the insurance policy was simply intended to secure spousal support.

The separation agreement

The paragraph in the separation agreement relating to the insurance policy read

“The Husband undertakes and agrees to obtain a life insurance policy on his life in the face amount of $500,000.00.  The Husband will designate the Wife as the irrevocable beneficiary under the terms of the aforementioned life insurance policy; with the beneficiary designation to continue for so long as the Husband is required to pay spousal support to the Wife.  Upon the execution of the Separation Agreement by both Parties, the Husband will forthwith provide documentation to the Wife confirming the details of the life insurance coverage, confirmation of the face amount of the policy, and confirmation that the Wife is designated as beneficiary under the terms of the said policy.  In addition, the Husband shall provide a direction and authorization to the Wife addressed to the life insurer allowing the Wife to obtain any and all information that she may require directly from the life insurance company with regard to the details of the life insurance designation outlined herein.”

Stand-alone clause vs security for spousal support

The first wife claimed the insurance policy was meant to act as a stand-alone clause, meaning it was not strictly intended to provide her with spousal support in the event of the husband’s death. Her reasons were that it lacked express language indicating its sole purpose was to secure support. She also argued that the separation agreement was intended to be a final settlement of all of their issues, not just support. Finally, the paragraph did not contain a “draw down” clause which would allow the husband to reduce the amount of insurance in a way that corresponded with his declining support obligations.

The court agreed with the first wife’s interpretation of the separation agreement and awarded her the full $500,000 paid out by the policy.

At Gelman & Associates, our team of experienced, knowledgeable, family lawyers provide our clients with the information and support they need to make educated decisions about matters relating to spousal support. We aggressively litigate on behalf of our clients in order to provide them with the best possible outcome for their case. Please contact us online or by phone at 1-888-769-0737 to see how we can help you today.

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