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02 Dec 2018

Supreme Court of Canada Transfers Life Insurance Proceeds from Named Beneficiary to Insured’s Former

by Andrew Moss
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Moore v Sweet, 2018 SCC 52

Lawrence and Michelle Moore married and had three children together. In 1985, Lawrence purchased a term life insurance policy with $250,000.00 in coverage.  Lawrence designated Michelle as the revocable beneficiary and paid the premiums from the Moores’ joint bank account.  In 2000, the Moores separated.They agreed orally that Michelle would assume payment of the life insurance premiums and receive the proceeds upon Lawrence’s death.  Shortly thereafter, and without telling Michelle, Lawrence changed the named beneficiary on the policy to his new partner, Risa Sweet. Michelle continued paying the premiums until Lawrence’s death in 2013.

After Lawrence died, the insurer advised Michelle she was not the named beneficiary of the life insurance policy. Michelle applied to the Ontario Superior Court of Justice for direction as to her entitlement to the proceeds of the policy.  The Application Judge ruled Ms. Sweet had been unjustly enriched at Michelle’s expense, and impressed the proceeds of the policy with a constructive trust in Michelle’s favour.  Ms. Sweet appealed the decision and the Ontario Court of Appeal allowed the appeal. Michelle appealed to the Supreme Court of Canada.

The Supreme Court of Canada allowed Michelle’s appeal and awarded her the life insurance proceeds. Ms. Sweet was enriched in the amount of $250,000.00.  Michelle paid the premiums but was deprived of the proceeds.  Ms. Sweet’s enrichment came at Michelle’s expense.  Ms. Sweet became the designated beneficiary pursuant to the Insurance Act, but the Act does not entitle Ms. Sweet to keep the proceeds as against a plaintiff in an unjust enrichment action.  The Supreme Court of Canada impressed the entirety of the proceeds with a constructive trust in Michelle’s favour.

You can read Moore v. Sweet, 2018 SCC 52, in its entirety here.

At Foster & Company, we represent institutions and individuals looking for help understanding insurance coverages and responding to claims. Contact us by phone at 506-462-4000 or reach us online for advice.