Rectification of Life Insurance Beneficiary Designations and the Importance of Solicitors’ Notes
The equitable doctrine of rectification provides the Court with a discretionary power to correct contracts based on the common mistake of the parties in recording the contract; that is, not a mistake in the making of the contract. In a number of cases it has been held to be available to correct a mistaken beneficiary designation in a contract of life insurance, most recently in The Manufacturers Life Insurance Company v Sorozan Estate, 2016 ONSC 2914 (Ont. S.C.J.).
One might recall the case of Richardson Estate v. Mew (2008), 93 O.R. (3d) 537; 2008 CanLII 63218 (Ont. S.C.J.); affirmed, 2009 ONCA 403 (Ont. C.A.). In that case, a man died leaving an ex-wife (and their children) and a second wife (and their children). He died in a long-term care facility as he developed Alzheimer’s Disease and required institutional care in his final years. The second wife managed his affairs using a Power of Attorney provided for that purpose. A question arose in respect of a life insurance policy payable to the first wife. It had been taken out originally when the deceased was married to his first wife and then made subject of a condition in the separation agreement between them that the first wife remain as beneficiary for a year (the end of his child care obligations). He told his second wife that he would designate her as the beneficiary at the end of the commitment under the separation agreement but never did so. Some few years later, the deceased became incapable of managing his affairs due to Alzheimer’s Disease. The costs of his care exhausted his retirement savings and the second wife assumed the costs of his care including paying the premiums due on the life insurance policy. It wasn’t entirely clear in the report of the judgement whether it was established as a matter of fact that the second wife did actually pay premiums with her own money and the suggestion was that if she did, the sum was relatively modest. The case was mainly about unjust enrichment, but Strathy J. (as he then was) noted:
 … There is no doubt that a court can rectify a policy of insurance where there is clear evidence that it does not reflect the intention of the insurer and the insured. This can extend to the rectification of the designation of a beneficiary: see Cockell v. Cockell and Mutual Life Assurance Co., 1944 CanLII 184 (SK CA), S.J. No. 62,  4 D.L.R. 373 (C.A.) and Cornwall v. Halifax Banking Co. (1902), 1902 CanLII 66 (SCC), 32 S.C.R. 442,  S.C.J. No. 39. Those cases were referred to by Madam Justice Chapnick in Sharom v. Sharom Estate,  O.J. No. 285, 8 C.C.L.I. (2d) 14 (Gen. Div.).
Ultimately the evidence was insufficient to allow for recitification.
In The Manufacturers Life Insurance Company v Sorozan Estate, 2016 ONSC 2914 (Ont. S.C.J.), there were competing claims to the proceeds of a group policy on the life of the deceased by his widow and child of a previous marriage. The evidence was in the form of a beneficiary designation form naming the widow and child (with a stroke through the child’s name) and a Group Life Certificate sent to the deceased advising that the beneficiary was the widow. Justice S.F. Dunphy held for the widow as follows:
 Both parties have acted in perfect good faith in this case. The credibility of neither is at issue nor is either at fault. It is unfortunate that a settlement could not be worked out. However, absent a settlement, it is incumbent upon me to make the reasonable inferences that I can based on the evidence I have before me.
 I find that it is likely on the balance of probabilities that Mr. Sorazan Sr. signed and delivered to Allstate a designation of beneficiary form after 1986 and prior to August 1, 1996 naming Ms. Partanen as the sole beneficiary of his group life insurance policy benefit but that the form has been misplaced or lost. In my view, this is the only reasonable inference that can be drawn based on the following:
The fact that the 1986 designation of beneficiary form has been manually struck with a vertical slash, apparently on Mr. Partanen’s retirement day in 1991, suggests that the document had been superceded and was no longer considered current or valid;
- The Record dated August 1, 1996 unequivocally certifies that Ms. Partanen is the sole beneficiary of the life insurance benefit and the cover letter that accompanied it describes the Record as a “Certificate” that Mr. Sorozan was urged to (and did) keep in his records;
- Ms. Partanen’s affidavit evidence supports this inference in that Mr. Sorozan Sr. confirmed to his lawyer at the time he made his will in 2014 that he knew Ms. Partanen to be the beneficiary in circumstances where it would have been very simple for the lawyer to change the beneficiary by will had there been any doubt.
 It is simply not reasonable to assume that Allstate made a mistake in sending the 1996 letter attaching the Record to its retired employee. Ms. Boulay’s suggestion that Allstate might have confused this with an annuity makes no sense given that the annuity in question was entirely different and contained joint contingent beneficiaries. I conclude that Allstate had in hand at that time a designation of beneficiary form from Mr. Sorozan Sr. (dated after the 1986 form) naming Ms. Partanen as sole beneficiary and that it has since misplaced that form.
 Mr. Sorozan Sr.’s handwritten instructions to his lawyer in regards to the will corroborates his general intention to make Ms. Partanen his universal beneficiary and corroborates in part Ms, Partanen’s affidavit evidence that Mr. Sorozan Sr. felt that he had sufficiently provided for his son with cash payments over the years. I accept that Mr. Sorozan Sr. would have effected a change of beneficiary by will but for the confirmation the Record provided him with confirmation that this was simply not necessary.
 Ms. Partanen was in fact the designated beneficiary. The fact that a written document cannot be located does not lead to the conclusion that it has no effect if its existence and content can be inferred from other evidence. The 1996 Record provides that evidence. There is no doubt as to Mr. Sorozan Sr.’s intentions – he had the letter from Allstate from 1996 in his possession at all material times including when he approached his lawyer to give instructions to draft his will. Had the Record not conformed to his intentions, there were steps that he could have taken when he met his lawyer.
This is another case that makes clear the importance of solicitor’s notes. A doctrine like rectification calls on the Court to wield a discretionary power but does not allow a remaking of the contract based on fairness or finding the intentions of the deceased in naming a beneficiary. Rather, it is a limited correction jurisdiction and the evidence of independent third parties will often be decisive.
Have a nice long weekend,