Petch v. Kuivila, 2012 ONSC 6131

Petch v. Kuivila

113 O.R. (3d) 145
2012 ONSC 6131

Ontario Superior Court of Justice,
E.M. Macdonald J.
November 2, 2012

Insurance -- Life insurance -- Deceased designating applicant as revocable beneficiary of his group life insurance policy -- Deceased subsequently making will designating respondent as beneficiary of life insurance policy -- Will revoked by operation of law when deceased later married respondent -- Declaration in will of respondent as beneficiary revoking previous designation of applicant -- Revocation of designation in will as result of revocation of will not reviving prior revoked designation of applicant -- Deceased's estate entitled to proceeds of life insurance policy.

In 2003, the deceased designated the applicant as the revocable beneficiary of his group life insurance policy. In 2004, he made a will in which he explicitly designated the respondent and his son as the beneficiaries of the life insurance policy. He married the respondent in 2008. The will was revoked by operation of law. The respondent did not file a spousal election within a year from the date of the deceased's death, which would have allowed her to take under the will pursuant to s. 16 of the Succession Law Reform Act, R.S.O. 1990, c. S.26 . The applicant brought an application for an order that she was the named beneficiary of the life insurance policy.

Held, the application should be dismissed.

The clause dealing with the life insurance policy in the will constituted a declaration, as defined by the Insurance Act, R.S.O. 1990, c. I.8 . That declaration had the effect of revoking the previous beneficiary designation of the applicant. The revocation of the designation in the will of the respondent and the deceased's son as the beneficiaries which resulted from the revocation of the will did not revive the prior revoked designation. The deceased's estate was entitled to the proceeds of the life insurance policy. [page146]

APPLICATION for an order that the applicant was the named beneficiary of a life insurance policy.

Cases referred to
Boutillier v. Boutillier, 1974 1248 (BC SC) , [1974] B.C.J. No. 567, [1974] I.L.R. 970, [1974] I.L.R. para. 1-621 at 970, 44 D.L.R. (3d) 154 (S.C.)

Statutes referred to
Insurance Act, R.S.O. 1990, c. I.8, ss. 171(1) , 190(1) , (2) , 192(2)
Succession Law Reform Act, R.S.O. 1990, c. S.26, ss. 15 , 16 [as am.]

Authorities referred to
Manulife Financial Tax and Estate Planning Group, Beneficiary Designations: Why, when and how?, online: Manulife Financial
Norwood, David, and John P. Weir, Norwood on Life Insurance Law in Canada, 3rd ed. (Toronto: Carswell, 2002)

Sandra L. McNeely, for applicant.
Michael Cupello, for respondent.

E.M. MACDONALD J.: -- Introduction

Introduction

1The applicant seeks an order regarding the proceeds of a life insurance policy, held with the Sun Life Assurance Company of Canada, of which the late Richard Charles Petch ("Richard") is the insured. The applicant's position is that she is the named beneficiary of this life insurance policy. The respondent's position is that the proceeds of Richard's policy on the facts of this case should be paid out to his estate. Factual Background

Factual Background

2The respondent, Heather Petch ("Heather"), is a surviving spouse of Richard. At the time of Richard's death on April 7, 2010, they were neither divorced or separated. Mary Louise Petch ("Mary Louise") is Richard's sister.

3On July 13, 2003, Richard designated Mary Louise as the revocable sole beneficiary of his group life insurance policy held through his employer, PTI Group Inc., with the Sun Life Assurance Company of Canada.

4On July 30, 2004, Richard made a will in which both Mary Louise and Heather were named as his estate trustees. In the will, Richard explicitly designated Heather and his son Dustin Doyle as the beneficiaries of the aforementioned life insurance policy.

5Richard married Heather on November 22, 2008. [page147]

6There was no declaration in his will that the will was being made in contemplation of marriage. By operation of law, the will was revoked on the date of marriage.

7Heather did not file a spousal election within a year from the date of the death of Richard, which would have allowed her to take under the will pursuant to s. 16 of the Succession Law Reform Act, R.S.O. 1990, c. S.26 . The Law

The Law

8It was submitted that the clause dealing with Richard's PTI International Inc. life insurance in his will constituted a declaration, as defined by the Insurance Act, R.S.O. 1990, c. I.8, s. 171(1) (the " Insurance Act "). See s. 171(1), reproduced below:

171(1) In this Part, @7 . . . . .

"declaration" means an instrument signed by the insured, (a) With respect to which an endorsement is made on the policy, (b) That identifies the contract, or (c) That describes the insurance or insurance fund or a part thereof,

In which the insured designates, or alters or revokes the designation of, the insured's personal representative or a beneficiary as one to whom or for whose benefit insurance money is to be payable; @7 . . . . .

"instrument" includes a will[.]

9The Insurance Act permits an insured, by way of a contract or declaration, to designate his personal representative or beneficiary to receive insurance money. The insured may from time to time revoke a designation by way of a declaration. See the Insurance Act, ss. 190(1) and 190(2) .

10Heather submits that in Richard's July 30, 2004 will, he made a declaration that, pursuant to the Insurance Act , had the effect of changing his beneficiary to Heather and Richard's son, Dustin Doyle.

11Despite the Succession Law Reform Act, s. 15 , a designation in a will is of no effect against a designation made later than the making of the will. See the Insurance Act, s. 192(2) , as reproduced below:

192(2) Despite the Succession Law Reform Act , a designation in a will is of no effect against a designation made later than the making of the will.

12Heather submits that s. 192(2) of the Insurance Act indicates that a designation in a will is effective from the date [page148] the will is signed. The designation is effective immediately. It, however, is revoked should a later designation be made. The court was referred to Norwood on Life Insurance Law in Canada, 3rd ed. (Toronto: Carswell, 2002), at p. 302, which reads as follows:

Although a will, as a will, "speaks from the date of death", the beneficiary declaration within it is considered as a separate declaration, so that the date of execution of the will and not the date of the insured's death will be taken as the effective date of this separate declaration. Accordingly, a beneficiary declaration made subsequent to the date of execution of the will will take priority over it.

13In an April 2012 tax topic regarding life insurance, Manulife Financial's Tax and Estate Planning Group stated that "there was some confusion regarding a declaration in a will. Many believe that a beneficiary designation made in a will is effective as of the date of death. However, a designation made by declaration in a will is effective from the date the will is signed by the testator." See Manulife Financial Tax and Estate Planning Group, Beneficiary Designations: Why, when and how?, online: Manulife Financial , at p. 11.

14Mr. Cupello on behalf of Heather submitted that on July 30, 2004, Richard, by declaration in his will, designated Heather and Dustin Doyle as beneficiaries of his life insurance policy, and that said designation was effective, and in force, as of that date. Dustin Doyle is Richard's son.

15It is also submitted that because Richard designated Heather and Dustin Doyle as beneficiaries of his life insurance policy, the prior designation of Mary Louise on July 13, 2003 was effectively revoked.

16On November 22, 2008, Richard married Heather. As a result, Richard's July 30, 2004 will was revoked by operation of the law. See Succession Law Reform Act, s. 15:

15. A will or part of a will is revoked only by, (a) marriage, subject to section 16; (b) another will made in accordance with the provisions of this Part; (c) a writing, (i) declaring an intention to revoke, and (ii) made in accordance with the provisions of this Part governing making of a will; or (d) burning, tearing or otherwise destroying it by the testator or by some person in his or her presence and by his or her direction with the intention of revoking it. [page149]

17In this case, the revocation of the will will also have the effect of revoking the beneficiary designation that Richard made on July 30, 2004.

18Mr. Cupello submitted that her designation of herself and that of Dustin Doyle does not revive the designation of Mary Louise which had been previously revoked. See Boutillier v. Boutillier, 1974 1248 (BC SC) , [1974] B.C.J. No. 567, [1974] I.L.R. para. 1-621 (S.C.) ("Boutillier"). In Boutillier, the insured had designated his wife under two life insurance policies that he owned. Later, he wrote a will designating his two daughters as the beneficiaries. He then wrote a second will, which revoke the first will and did not make reference to the life insurance policies. Madam Justice Meredith stated [at para. 11]:

Counsel for the petitioner urged that the designation made in the 1965 will was in fact revoked by the 1971 will and the previous designation of the wife was thereby revived. I dissent from this submission because I think it clear that the alteration in favour of the daughters effectively extinguishes the previous designation in favour of the wife.

19The summary of Heather's position is that (a) on July 30, 2001, Richard, by declaration, designated Heather and Dustin Doyle as beneficiaries of his life insurance policy; (b) the effect of that designation was to revoke his previous beneficiary designation of Mary Louise; (c) when Richard and Heather were married, the will was revoked by operation of law, which resulted in the revocation of the designation of Heather and Dustin Doyle; (d) the revocation of that designation does not revive the prior revoked designation; (e) the proceeds should be paid out to Richard's estate.

20It was submitted to me that this very possibility is contemplated by Manulife Financial in the aforementioned tax topic. In that document, Manulife Financial Tax and Estate Planning Group writes:

A beneficiary designation created by declaration in a will is always revocable regardless of whether the testator indicates otherwise. Therefore if a will is revoked then the insurance designation contained within the will is also revoked. A new designation in either the insurance contract or by declaration must be made immediately after the revocation if the testator intends to designate a new beneficiary. Otherwise, the proceeds will be paid to the owner or the owner's estate (if the owner is the life insured). Beneficiary Designations: Why, when and How?, at p. 2 [page150]

21It is on the basis of all of the above that Heather asks this court that it make an order (1) declaring that the estate of Richard Charles Petch is entitled to the proceeds of the life insurance policy with Sun Life Assurance Company of Canada, Group Insurance Policy No. 56124-G, Certificate No. C222689606; (2) directing that the life insurance proceeds, in the amount of $98,007.18, now paid into court as of December 13, 2011 be paid out to the estate of Richard along with any interest that has accrued; (3) that Heather be paid her costs of this application on a substantial indemnity basis; (4) for such further and other relief as this honourable court deems just.

22I was directed to the article "Tax Topics" from Manulife Financial Tax and Estate Planning Group. At p. 2, the following paragraph appears:

A will must be revocable in its entirety. A beneficiary designation created by declaration in a will is always revocable regardless of whether the testator indicates otherwise. Therefore if a will is revoked then the insurance declaration contained within the will is also revoked. A new designation in either the insurance contract or by declaration must be made immediately after the revocation if the testator intends to designate a new beneficiary. Otherwise, the proceeds will be paid to the owner or the owner's estate (if the owner is the life insured). @7 . . . . .

c) Revocation

A revocation in writing by the policy owner can revoke a beneficiary designation unless the designation is irrevocable and requires the written consent of the beneficiary. The policy owner may revoke the designation by way of a change of beneficiary designation form completed with the carrier or by revocation through a written instrument such as a will. A subsequent designation will revoke the original beneficiary designation regardless of where it is made. There is some confusion regarding a declaration in a will. Many believe that a beneficiary designation made in a will is effective as of the date of death. However, a designation made by declaration in a will is effective from the date the will is signed by the testator. It is for these reasons that it is extremely important from a planning perspective to review existing designations with the individual to ensure that they still reflect his or her wishes. Disposition

Disposition

23On the basis of all of the above, this court declares that the estate of Richard Charles Petch is entitled to the proceeds of [page151] the life insurance policy in question. This court also directs that the life insurance proceeds in the amount of $98,007.18 now paid into court as of December 13, 2011 be paid out to the estate of Richard along with any interest that has accrued thereon.

24On the matter of costs of this application, I invite counsel to make written submissions. The applicant's submission shall be made within seven days of the release of these reasons. The respondent shall have seven days to respond to the applicant's position. The applicant may make any reply within a further seven days. After consideration of the same, the court will release a written endorsement in respect of costs.