In the decision of Knowles v LeBlanc, 2021 BCSC 482, the Supreme Court of British Columbia was tasked with determining which party was entitled to insurance proceeds pursuant to the doctrine of unjust enrichment.
This case involved a life insurance policy held by the Deceased, Peter Knowles, with the CUMIS Life Insurance Company. The policy named the Deceased’s ex-wife, Ms. Knowles, as the sole beneficiary. On the date of Mr. Knowles’ death, the benefit payable under the policy was $100,000.
The Deceased designated Ms. Knowles as the sole beneficiary in 1987, shortly before the two separated. Their divorce was finalized in 1991, when they entered into a consent order, which provided that each party would retain their own property and chattels in their possession or control.
After his separation, the Deceased met Ms. LeBlanc in 1988. They lived in an exclusive common-law relationship until the time of his death in 2019. Throughout their relationship, they shared expenses and made joint decisions about their family property.
After Mr. Knowles passed, Ms. LeBlanc received the proceeds from every other life insurance policy that he held as well as all of his other assets by way of right of survivorship. When she did not receive the proceeds from the CUMIS policy, Ms. LeBlanc contacted the company, who advised her that she was not the named beneficiary of the policy. Ms. Leblanc and Ms. Knowles subsequently made competing claims over the proceeds of the insurance policy.
The Court discussed Mr. Knowles’ intentions, as well as whether he ever attempted to change his beneficiary designation in the life insurance policy. The Court found that Mr. Knowles maintained feelings of hostility toward Ms. Knowles after their divorce, and that he not only intended to change the designated beneficiary on his life insurance policy to Ms. LeBlanc, but that he verily believed that he had done so. As a result, the Court concludes that Mr. Knowles clearly intended to remove Ms. Knowles as a beneficiary from his CUMIS life insurance policy but forgot or neglected to do so.
The Court then considered whether the consent order that Mr. and Ms. Knowles entered into in 1991 precluded Ms. Knowles from recovering the life insurance proceeds. The Court ultimately found that the consent order did not prevent Ms. Knowles from claiming the proceeds of the life insurance policy for three reasons. First, the order did not explicitly refer to the life insurance policy. Second, the order did not specifically revoke Mr. Knowles’ designation of Ms. Knowles as a beneficiary of the life insurance policy. Third, the order did not refer to a “full and final” settlement, or a relinquishment of all claims
Finally, the Court considered whether Ms. LeBlanc had a claim in unjust enrichment giving rise to a constructive trust remedy. In doing so, the Court applied the test for unjust enrichment from Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 which requires:
- an enrichment of the defendant;
- a corresponding deprivation of the plaintiff; and
- an absence of juristic reason for the enrichment.
The Court easily found that the first two factors had been met. Ms. LeBlanc suffered a deprivation because the premiums of the life insurance policy were automatically deducted from her joint account with Mr. Knowles for many years. Moreover, because Ms. Knowles stood to benefit from receiving the proceeds of the life insurance policy, there was also a corresponding enrichment to Ms. Knowles at the expense of Ms. LeBlanc.
The third element of an unjust enrichment claim is twofold. First, the plaintiff must show that no juristic reason from an established category exists to deny recovery. Second, the defendant may rebut the plaintiff’s recovery by showing that there is another reason to deny recovery.
In their analysis, the Court concluded that the Insurance Act, RSBC 2021, c 1 does not preclude Ms. LeBlanc’s claim in unjust enrichment. In other words, it does not provide a juristic reason for Ms. Knowles to retain the proceeds against Ms. Leblanc’s corresponding deprivation. The Court also failed to find another juristic reason that would apply in the circumstances of the case.
Ms. Knowles was not able to show that there was a residual reason to deny Ms. LeBlanc’s recovery of the life insurance proceeds. The Court focused on the fact that Mr. Knowles was estranged from Ms. Knowles and their two children since their divorce. As a result, it was not reasonable for Ms. Knowles to expect that she would benefit from the insurance policy. The Court was also not able to find a basis in public policy to rebut Ms. LeBlanc’s recovery.
In determining the appropriate remedy, the Court acknowledged that a personal remedy against Ms. Knowles would not be appropriate, as CUMIS had not paid out the proceeds of the life insurance policy to her. Ultimately, the Court imposed a constructive trust to the full extent of the life insurance proceeds in Ms. LeBlanc’s favour.
Finally, the Court cautioned CUMIS to consider updating its records more frequently and to remind its long-standing policyholders of their designated beneficiaries to avoid similar disputes in the future.
This case was similar to Moore v. Sweet, 2018 SCC 52, where the Supreme Court of Canada held that a beneficiary designation was not a juristic reason to deprive the appellant of the insurance proceeds to which she was entitled under an oral agreement. As you may recall, Ian M. Hull, Suzana Popovic‑Montag and David M. Smith represented the appellant before the Supreme Court of Canada, and blogged about their experience here.
Thank you for reading!