Beneficiary Declarations and Suspicious Circumstances
We have extensively discussed the application of the doctrine of suspicious circumstances in the context of a challenge to a Will on this blog. Interestingly, in David v TransAmerica Life Canada, 2015 ONSC 5192, the Honourable Justice Price held that a beneficiary declaration for a life insurance policy was invalid due to the presence of suspicious circumstances surrounding the preparation of the declaration.
Hollis David (the “Deceased”) died in December 2012. Prior to his death, the Deceased held a life insurance policy worth $100,000 through TransAmerica Life Canada (the “Policy”). In 1996, the Deceased submitted a change of beneficiary form to the insurer that designated his children from his second marriage, Rhinda and Randolph (the “Respondents”), as the sole beneficiaries of the Policy.
In 2011, the Deceased informed his second wife that he was “in trouble” with the children from his first marriage, who had learned of the existence of the Policy. Shortly thereafter, the Deceased prepared a new change of beneficiary form for the Policy (the “2011 Form”). The 2011 Form initially provided that the Deceased’s daughter from his first marriage, Lystra David (the “Applicant”), would receive 80% of the proceeds of the Policy. The number “75” was later written over the 80% designation, although it was not clear if this alteration was made before or after the Deceased signed the form. The 2011 Form provided for the Respondents to each receive 10% of the proceeds and the Deceased’s third wife to receive the remaining 5% of the proceeds of the Policy.
Even though the Deceased had worked in the financial services industry and at TransAmerica, there were a number of deficiencies in the 2011 Form. TransAmerica did not process the 2011 Form because the Deceased had only designated a “contingent beneficiary” with respect to 80% of the Policy proceeds. Upon the Deceased’s death, TransAmerica notified the Applicant that the 2011 Form was not a valid declaration, and the Respondents were still the sole beneficiaries of the Policy in accordance with the 1996 declaration.
The Applicant commenced an application seeking a declaration that the 2011 Form was valid. In the alternative, the Applicant sought an order rectifying the form. The Respondents commenced a cross-application and argued that the 2011 Form was null and void due to the presence of suspicious circumstances.
The Deceased had signed in the space provided for the witness on the form and only designated a “contingent beneficiary” with respect to 80% of the proceeds. However, the Court held that the 2011 Form would still meet the formal requirements for a declaration under section 171 of the Insurance Act if it could be shown that the form was signed after the alteration to the percentages was made. The Court held that the Applicant had not shown, on a balance of probabilities, that the form was signed after the alteration was made. As a result, the Court concluded that the 2011 Form had not been signed by the Deceased, as required by section 171 of the Insurance Act.
Justice Price then went on to consider the issue of suspicious circumstances. In the context of a Will challenge, the propounder of the Will is generally assisted by a rebuttable presumption that the testator had knowledge and approval of the contents of the Will and the necessary testamentary capacity to make the Will. However, this presumption is rebutted when suspicious circumstances are present, and the propounder of the Will has the burden of proving knowledge, approval and capacity.
Starting at paragraph 108 of his judgment, Justice Price highlighted a number of suspicious circumstances in the present case. For example, the Deceased made numerous errors in completing the form, despite his background in the financial services industry and his familiarity with TransAmerica’s practices. The form contained the social insurance number for the Applicant but not the Respondents, suggesting that the Applicant may have had input in the preparation of the 2011 Form. The Court also noted that the Deceased had told his second wife that he was “in trouble” with his children after they learned of the Policy.
Given the existence of suspicious circumstances, Justice Price held that the Applicant was required to show, on a balance of probabilities, that the Deceased had knowledge and approval of the contents of the 2011 Form and an understanding of its effects. Justice Price concluded that the Applicant’s evidence was not credible and she had not satisfied the burden of proof.
In the result, the Applicant’s application was dismissed and the proceeds of the Policy were paid out to the Respondents in equal amounts in accordance with the prior beneficiary declaration.
Thank you for reading.
Umair Abdul Qadir