A fundamental benefit a contract is supposed to confer is
certainty – if you sign a divorce agreement, its terms will
be honored, and if you buy life insurance, you'll receive the
promised death benefits.
But what happens if the provisions of two seemingly clear
contracts may be in conflict? The likely result is a trip to court,
as happened in a recent dispute that was addressed by the
California Court of Appeal (Randle v Farmers New World Life
Insurance Co.)
In 1992, Judy Randle and her then-husband, Alan McConnell, took
out a $250,000 life insurance policy on McConnell with Randle as
the sole beneficiary.
The couple divorced in 2004. The divorce agreement gave Randle a
25% "beneficial interest" in the policy. The agreement
required McConnell to maintain the policy for at least her 25%
interest but he was free to name any other beneficiaries for the
remaining 75%.
