COURT FILE AND PARTIES

COURT FILE NOS.: CV-12-451160 and CV-12-451726
DATE HEARD: November 15, 2012
ENDORSEMENT RELEASED: November 27, 2012

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: DEMITRY PAPASOTIRIOU-LANTEIGNE v. THE MANUFACTURER’S LIFE INSURANCE COMPANY

AND RE: DEMITRY PAPASOTIRIOU-LANTEIGNE v. THE GREAT-WEST LIFE INSURANCE COMPANY

BEFORE: Master R. Dash

COUNSEL:
Gordon McGuire, for the plaintiff

Elizabeth Bennett-Martin, for the defendant Manufacturer’s Life Insurance Co.

Jason Larsen, for the defendant Great-West Life Insurance Co.

Jane Martin, for the proposed intervenors, moving parties

REASONS FOR DECISION

[ 1 ] This a motion by family members of a deceased life insured to intervene under rule 13.01 as added parties in two actions brought by a named beneficiary against life insurers where the beneficiary has been charged with murdering the deceased. They also seek to have the two actions consolidated or tried together and to permit the insurers to pay the proceeds of the policies into court, thereupon extinguishing the liability of the insurers.

BACKGROUND

[ 2 ] The plaintiff Demitry Papasotiriou-Lanteigne (“Demitry”) claims in these two actions on life insurance policies on the life of his husband Allan Lanteigne (“Allan”) in which he is named as sole beneficiary. The policy with Manufacturer’s Life Insurance Co. (“Manulife”) was for $2 million and the policy with Great-West Life (“GWL”) was for just under $50,000. Allan was murdered on March 3, 2011. Although only a suspect at the time these actions were commenced against the insurers, Demitry was charged with Allan’s murder on November 2, 2012.

[ 3 ] The moving parties, Rosaline Lanteigne (“Rosaline”) and Jocelyne Sterritt (“Jocelyn”), respectively the mother and sister of Allan, seek leave to intervene as added parties in both actions pursuant to rule 13.01. In the alternative, Rosaline alone seeks to intervene.

INTERVENTION: DIRECT FINANCIAL INTEREST

[ 4 ] Rule 13.01 provides as follows:

Leave To Intervene As Added Party

13.01 (1) A person who is not a party to a proceeding may move for leave to intervene as an added party if the person claims,

(a) an interest in the subject matter of the proceeding;

(b) that the person may be adversely affected by a judgment in the proceeding; or

(c) that there exists between the person and one or more of the parties to the proceeding a question of law or fact in common with one or more of the questions in issue in the proceeding.

(2) On the motion, the court shall consider whether the intervention will unduly delay or prejudice the determination of the rights of the parties to the proceeding and the court may add the person as a party to the proceeding and may make such order as is just.

[ 5 ] The three subsections of rule 13.01(1) are to be read disjunctively rather than conjunctively. A party is only required to fit within one of them to satisfy the first part of the test and cross the threshold. The onus is on the proposed intervenors to satisfy the court that they fit within subsection (a), (b) or (c). [^1] The court must then consider the issue of delay and prejudice as mandated by rule 13.01(2).

[ 6 ] It is common ground among all parties that if Demitry is convicted of Allan’s murder he will be disqualified from receiving the proceeds of the life insurance policies or receiving any entitlement under Allan’s estate because as a rule of public policy the courts will not permit a criminal to profit from his own crime. [^2]

Interest of Estate as a Matter of Law

[ 7 ] Rosaline claims to have an “interest in the subject matter of the proceeding”, namely the insurance proceeds, within the meaning of rule 13.01(1)(a). Her rationale is as follows. Demitry, if he is convicted of murdering Allan, may be disqualified from receiving payment of the life insurance proceeds. As there is no other beneficiary designated in either policy, the proceeds fall into the estate of Allan. Allan died without a will and so the estate would be distributed pursuant to the laws of intestacy. The laws of intestacy provide that the estate would pass entirely to Allan’s spouse, Demitry, since Allan had no children. [^3] If Demitry is convicted of Allan’s murder, he may be disqualified from receiving any benefit from the estate. In that case Allan’s estate would pass to his mother, who is his only surviving parent. [^4] As a result Rosaline has a direct financial interest in the insurance policies which are the subject matter of the actions, and in the issues raised in the plaintiff’s claims.

[ 8 ] Similarly Rosaline claims that she “may be adversely affected by a judgment in the actions” within the meaning of rule 13.01(1)(b) since if the court agrees that Demitry ought to succeed on his claims under the policies, then her right to inherit under Allan’s intestacy will be extinguished and she will not have had a forum to advance her arguments as to the proper distribution of Allan’s estate.

[ 9 ] Rosaline also asserts that there exists a common question of fact and law within the meaning of rule 13.01(1)(c) as between her claims against the insurers for distribution of the insurance proceeds to the estate (and ultimately to her) and Demitry’s claims in the actions for distribution of the insurance proceeds to him. The common issue is whether Demitry is entitled to the proceeds, and if not to whom should they be paid. Both claims involve the application of the same public policy concerns.

[ 10 ] Demitry opposes the motion. He submits in his factum that the sole issue on the motion is “whether the family members have, as a matter of law, any entitlement to the proceeds if the plaintiff’s claim is barred. If they do, they should be granted leave to intervene. If they do not, their motion should be dismissed.” He makes one submission, that “as a matter of law, the proposed intervenors are not entitled to the insurance proceeds regardless of whether or not he was involved in the murder.” As such he argues they have no interest in the subject matter of the case and cannot be adversely affected by any judgment.

[ 11 ] Demitry argues that if he is convicted of Allan’s murder, and thus disqualified as a matter of public policy from taking under the policies, this does not give rise to any interest, financial or otherwise to Rosaline, since the proceeds would never be paid to anyone, including Allan’s estate. As a result the insurers would simply keep the money. Demitry relies on the Supreme Court of Canada’s decision in Brissette v. Westbury Life and the Ontario Court of Appeal decision in Demeter v. Dominion Life quoted in Brissette. In Demeter “the assured took out an insurance policy on his wife’s life naming himself as beneficiary. He then arranged for her murder.” Although the claim for the proceeds of insurance was made by the daughter of the deceased wife, the court denied recovery to the deceased wife’s estate because “the life insured had no interest in the policy...which vested in her estate”. The court determined that since a person should not profit from his own criminal act, “it is equally consistent with this policy that a person should not be allowed to insure against his or her own criminal act irrespective of the ultimate payee of the proceeds” and “denial of recovery... to either the daughter or the wife’s estate would have been consistent with public policy.”

[ 12 ] Similarly in Brissette the killer wife and her husband held a joint insurance policy where the proceeds were payable to the survivor. The court held that the contract of insurance could not be construed to require payment to the estate as it “was never the intentions of the parties” to pay to the estate of the first of them to die. The contract was to pay the proceeds to the survivor, but public policy prevents payment to the survivor who killed the other party and the policy “terms cannot simply be rewritten under the guise of interpretation.” Following Demeter, the court in Brissette reasoned that paying the proceeds to a beneficiary not designated in the contract “would allow the insured to insure against his own criminal act.”

[ 13 ] The court in Brissette contrasted the situation therein and in Demeter from that in Cleaver v. Mutual Reserve Fund where “the insured took out an insurance policy on his own life with his wife as beneficiary. The wife-beneficiary who murdered the insured-husband was not a party to the contract of insurance...Public policy stepped in to deny payment to the wife-beneficiary leaving the insurance money to the estate”. The court specifically determined that the joint policy in Brissette could not be viewed as “two separate contacts with each...insuring their own lives with the other as beneficiary so as to resemble the policy in Cleaver.”

[ 14 ] My reading of Brissette and the other cases leads me to conclude that where the killer takes out the policy on the deceased’s life naming himself as beneficiary, no proceeds will be payable to the estate, but if the deceased takes out the policy on his own life and names the killer as beneficiary, then if public policy disqualifies the killer from taking the proceeds, the proceeds will be payable to the estate of the deceased.

[ 15 ] This is the interpretation suggested by Norwood on Life Insurance in Canada. Norwood states that the court considers whether the contract of insurance is a third party policy or a first party policy to determine whether, if the killer-beneficiary is disqualified from receiving the proceeds of insurance, the proceeds are payable to the deceased’s estate or remain unpaid by the insurer.

[ 16 ] Norwood describes a third party policy and the consequences of the beneficiary murdering the life assured as follows:

In third-party insurance, A owns on the life of B in A’s favour...and, if the insured murders the life insured, A and persons claiming through A are disqualified. Consequently, the insurer is free of liability all together, since it has been held that to benefit A would be rewarding the wrongdoer and allow A to insure his own crime. It has been held, similarly, that no benefit can flow to the heirs of the life insured, B, who was the victim. There is no constructive trust for B’s heirs, and of course, B was never a party to the contract.

Norwood references Demeter and Brissette as authorities for this proposition.

[ 17 ] In contrast, Norwood describes a first party policy and the consequences of the beneficiary murdering the life assured as follows:

Where A has contracted to insure his/her own life in favour of B, the beneficiary, and B murders A, the long established precedent is that B and B’s estate is disqualified as beneficiary as is B’s legatee or as an heir. The benefit, however, reverts to A’s estate: A was not guilty of any wrongdoing and did not bring about the event insured against...The insured contracts with the insurer on his/her own life for the benefit of the insured’s own estate (although the insured may chose to designate a beneficiary), so that the benefit of the contract belongs to A or A’s estate unless public policy intervenes. Once the murdering beneficiary is removed from the picture by operation of law, the beneficial interest should pass back to or remain with the estate of the insured, who, after all, has committed no wrongdoing.

[ 18 ] The policies herein are clearly first party policies where Allan contracted with the insurers to insure his own life and named Demitry as the beneficiary. Allan is described, at least in the Manulife certificate of insurance, as the insured person and as the owner of the policy.

[ 19 ] Demitry finally relies on a decision of Molloy J. in Ferry Estate v. Lloyds. This was a case that Norwood would describe as a first party policy. The wife had insurance coverage through a group policy and she named her husband as beneficiary. She was then murdered by her husband. The court stated the issue before it as follows: “It is common ground that Peter Ferry is not entitled to the insurance proceeds. The issue before me is whether the insurer is obliged to pay the insurance proceeds to Suzanne Ferry's Executrix for distribution to her beneficiaries (being her parents and siblings).” The court accepted Brissette as authority for the position that as a matter of law the estate of the innocent life insured is not entitled to the insurance proceeds when the beneficiary murders the life insured. The court stated:

It is trite law that when a beneficiary under a life insurance policy murders the insured, it is against public policy for the wrongdoer or anybody claiming through him to recover the insurance proceeds. There is also clear and well-established case authority that where the murderer of the insured is the sole beneficiary designated in the policy, and no alternate is designated either in the contract or by legislation, the courts cannot step in and substitute some other beneficiary for the murderer. This is simply a matter of contract law. While public policy will prevent the criminal from profiting from his crime, this does not mean that public policy can be invoked to rewrite the insurance policy to provide that the insurance proceeds are to be paid to some other person or persons innocent of the crime. In such a situation, the insurer is under no obligation to pay out the proceeds at all.

[ 20 ] The court did not distinguish the policy in Ferry, which was owned by the deceased and the deceased named the killer as beneficiary, from the policies in Brissette and Demeter where the policy was owned by the killer on the life of the deceased and the killer named himself as beneficiary. As stated by Norwood about the Ferry decision: “It may well be that the court applied rules applicable to third-party policies which do not fit first-party insurance at all.” It may be that Ferry was wrongly decided on that issue, but, subject to future appellate guidance, it is a decision made by a Superior Court judge that is binding on me.

(continued with full text exactly as provided…)

Master R. Dash

DATE: November 27, 2012