A woman who was nearly cheated out of a $250,000 life insurance benefit she had paid into illustrates why you should always sign financial contracts with your partner (or in this case, ex-partner).
Michelle Moore was awarded a $250,000 life insurance policy Nov. 23 after the Supreme Court of Canada ruled that she — and not her ex-husband’s new wife — was rightly entitled to the insurance payout that was up for grabs after he died.
The decision comes after a five-year legal battle with her ex-husband’s second wife, Risa Sweet, through all levels of court. Michelle initially won with her application, but lost on appeal before the case was presented to the Supreme Court.
For 12 years after Michelle and her ex-husband, Larry, separated in 1999, Michelle had been paying more than $500 a year in premiums towards the policy because she believed that she was listed as the policy’s beneficiary. The couple wed in 1979 and have three children, all of whom are now adults. Larry bought the life insurance policy in 1985 and had initially appointed Michelle as beneficiary to guarantee her and their children a payout in the event that he died. When the couple separated, they made an informal agreement to keep Michelle as a beneficiary on the policy so long as she continued to pay for it.
Agreements between couples are not always legally binding — especially if they’re not in writing, according to legal associate Vince DeMarco when we spoke to him back in February. And even when they are in writing, they often need to meet other requirements in order to be valid: with cohabitation and marriage contracts, for instance, each party needs to have their own lawyer review the terms. Each party also needs to sign the contract voluntarily.
For 12 years after Michelle and her ex-husband, Larry, separated in 1999, Michelle had been paying more than $500 a year in premiums towards the policy because she believed that she was listed as the policy’s beneficiary
As it turns out, Michelle’s decision was a bad idea.
In 2000, shortly after their divorce, Larry changed the beneficiary on the policy to Risa, whom he moved in with that year and whom he would remain common-law spouses with until his death in 2013. The policy change was made with the help of Larry’s broker — the husband of Michelle’s sister.
They never told Michelle. So she continued paying his premiums.
Risa, who is disabled and has several chronic illnesses, told the court that she is unable to take public transit, and faces trouble paying rent and buying food. She argued that she was entitled to Larry’s life insurance payout since she has long been listed as his beneficiary.
“Mr. Moore did not want me to worry about how I was going to pay the rent or buy my medications in the unlikely event he passed away before me,” Risa said in court records. “He wanted to make sure I was able to live my remaining years in the building where I have resided for the past 40 years. And he wanted me to live worry and debt free.”
The court’s decision was split, with Justices Clément Gascon and Malcolm Rowe dissenting. But it was ultimately Michelle who won the case.
“Risa was enriched, Michelle was correspondingly deprived, and both the enrichment and the deprivation occurred in the absence of a juristic reason,” Justice Suzanne Côté wrote in the Supreme Court ruling.