Vancouver Estate Lawyers Discuss Competing Claims to Insurance Proceeds

In some cases, the deceased’s estate has no significant assets and the real contest centres on entitlement to insurance proceeds. In a recent post, our Vancouver estate lawyers discussed the difference between a revocable and an irrevocable beneficiary designation in a life insurance policy. As alluded to in that post, an irrevocable beneficiary designation is afforded a high level of protection – but it does not always rule the day. In Moore v. Sweet, 2018 SCC 52, an irrevocably designated beneficiary lost out due to the application of the doctrine of unjust enrichment. This post will examine how the first two elements of the test for unjust enrichment applied to achieve fairness in this disappointed beneficiary claim.

Vancouver estate lawyers discuss facts in Moore v. Sweet

Details of the facts in Moore v. Sweet were set out in a recent post by our Vancouver estate lawyers. In a nutshell, Lawrence Moore purchased a life insurance policy in 1985, naming his then-wife Michelle as revocable beneficiary. The annual policy premium was paid out of the couple’s joint bank account until 2000, just after Michelle and Lawrence separated. Following their separation, Michelle and Lawrence entered into an oral agreement that Michelle would pay the premiums and be entitled to the proceeds of the policy on Lawrence’s death. Michelle paid all premiums on the policy until Lawrence’s death in 2013. By then, about $7,000 had been paid by Michelle since 2000. Michelle did not discover until after Lawrence’s death that he had changed the beneficiary designation on the policy in 2000, naming his new common-law wife Risa as the irrevocable beneficiary. As such, when Lawrence passed away, the proceeds were payable to Risa, not to Michelle.

Unjust enrichment applied to achieve justice and fairness  

Michelle commenced an application to determine her entitlement to the proceeds of the policy, relying on the doctrine of unjust enrichment. The law of unjust enrichment has developed in a flexible way that allows courts to identify circumstances where justice and fairness require one party to restore a benefit to another. Broadly speaking, the doctrine of unjust enrichment applies when a defendant receives a benefit from a plaintiff in circumstances where there is no juristic reason for him or her to retain that benefit. Where this is found to be the case, the defendant will be obliged to restore that benefit to the plaintiff. A plaintiff will succeed on the cause of action in unjust enrichment if he or she can show:

1. that the defendant was enriched;
2. that the plaintiff suffered a corresponding deprivation; and
3. that the defendant’s enrichment and the plaintiff’s corresponding deprivation occurred in the absence of a juristic reason.

In Moore v. Sweet the Supreme Court of Canada was satisfied that Risa was enriched, Michelle was correspondingly deprived, and both the enrichment and the deprivation occurred in the absence of a juristic reason. The Court in Moore v. Sweet ordered that the proceeds of the policy be imposed with a remedial constructive trust for Michelle’s benefit.

Enrichment and corresponding deprivation

To establish that the defendant was enriched and the plaintiff correspondingly deprived, the plaintiff must show that something of value — a “tangible benefit” — passed from the latter to the former. The plaintiff must also establish a connection in that the loss he or she incurred corresponds to the defendant’s gain, in the sense that there is some causal connection between the two, such that the defendant can be said to have been enriched at the plaintiff’s expense. The parties in Moore v. Sweet did not dispute the fact that Risa was enriched to the full extent of the $250,000 by virtue of her right to receive the insurance proceeds as the designated irrevocable beneficiary. The more difficult determination was whether Michelle suffered a corresponding deprivation.

Determining the extent of the deprivation

On the first level of appeal, the court held that Michelle’s deprivation was limited to her out-of-pocket expenses and ordered that the $7,000 Michelle had paid in premiums between 2000 and 2013 be paid out of the insurance proceeds, with the balance of $250,000 going to Risa. The majority of the Supreme Court of Canada disagreed, finding that Michelle stood deprived of the right to receive the full value of the policy proceeds (for a value of $250,000) and that the necessary correspondence existed between that deprivation and Risa’s gain. Pursuant to her contractual obligation, Michelle made the policy payments over the course of 13 years in exchange for the right to receive the policy proceeds upon Lawrence’s death. Had Lawrence held up his end of the bargain with Michelle, rather than designating Risa irrevocably, the right to payment of the policy proceeds would have accrued to Michelle. At the end of the day, therefore, what Michelle lost is not only the $7,000 she paid in premiums. She stood deprived of the very thing for which she paid — that is, the right to claim the $250,000 in proceeds. 

Crucial connection between the defendant’s gain and the plaintiff’s loss

It was equally clear to the majority of the Court that Risa’s enrichment came at Michelle’s expense. It was not only that Michelle’s payment of the premiums made Risa’s enrichment possible (i.e., that Risa’s receipt of the proceeds of the policy would not have been possible but for Michelle’s performance of her obligations under the agreement”). More significant, in the Court’s view, was that Risa’s designation gave her the statutory right to receive the insurance proceeds, the necessary implication being that Michelle would have no such right despite the fact that she had a contractual entitlement, by virtue of the agreement with Lawrence, to remain named as beneficiary. What Risa gained is the precise benefit that Michelle lost: the right to receive the proceeds of Lawrence’s life insurance policy. Because Risa received the benefit that otherwise would have accrued to Michelle, the requisite correspondence existed: the former was enriched at the expense of the latter.

The bottom line on competing insurance policy claims under Vancouver estate law

In cases where the plaintiff has some general belief that the insured ought to have named him or her as the designated beneficiary, but otherwise has no legal or equitable right to be treated as the proper recipient of the insurance money, it will likely be impossible to find either that the right to receive that insurance money was ever held by the plaintiff or that it would have accrued to him or her. In such cases, the properly designated beneficiary is not enriched at the expense of a plaintiff who had no claim to the insurance money in the first place — the result being that the plaintiff will not have suffered a corresponding deprivation to the full extent of the insurance proceeds. That being said, when faced with a claim rooted in unjust enrichment, the court will take a robust approach to the corresponding deprivation element that focuses on what the plaintiff actually lost — that is, property that was in his or her possession or that would have accrued for his or her benefit — and on whether that loss corresponds to the defendant’s enrichment, such that it can be said that the latter was enriched at the expense of the former.