Skip to Content

May

2012

Court Says Assignee Cannot Defeat Claim By Insured’s Widow To Insurance Proceeds That Constitute Community Property

Blogs, Life Insurance

In Genworth Life & Annuity Ins. Co. v. Cain, Civil Action No. 4:11-CV-00894, 2012 WL 1802613 (S.D. Tex. May 17, 2012), the court considered an interpleader action by plaintiff Genworth Life and Annuity Insurance Company, requesting a determination as to who is entitled to the proceeds of an insurance plan held by Clifford Warren Jr. The determination said that court, was between “the express beneficiary or the surviving spouse.” Another party also asserted a claim to a portion of the proceeds: DFS Interests, Inc. (“DFS”), a financing business that loans money to funeral homes to cover funeral expenses in exchange for an assignment of insurance benefits, sought to recover proceeds under an arrangement with the beneficiary, Mary Cain, who had entered into an arrangement to have memorial services for Clifford Warren Jr. (her son) by the Serenity Mortuary Funeral Home. Cain assigned a portion ($15,858) of her interest in the policy proceeds to Serenity, which in turn reassigned that amount to DFS. At the time of Clifford Warren Jr.’s death, he was married to defendant Kathleen Warren (the surviving spouse).

The issue, the court said, involved a decision as to whether the proceeds were the community property of Clifford Warren Jr. and Kathleen Warren. The conclusion, said the court, was that the proceeds were community property:

In opposition to DFS’s motion [for summary judgment], Warren claims that, as the surviving spouse, she is entitled to half the policy proceeds because the insurance policy was purchased with community funds. . . . Under Texas law, if the insurance contract was community property at the time of the insured spouse’s death, then the surviving spouse would be entitled to half the proceeds as her share of the community estate. Amason v. Franklin Life Ins. Co., 428 F.2d 1144, 1146–47 (5th Cir.1970). If the insurance policy was decedent’s separate property at the time of his death, the surviving spouse would be entitled to reimbursement of one-half of the community funds used to pay the premiums. Pritchard v. Snow,530 S.W.2d 889, 893 (Tex.Civ.App.1975). “Generally, whether property is separate or community is determined by its character at inception, and this general rule applies to life insurance policies.” Barnett v. Barnett, 67 S.W.3d 107, 111 (Tex.2001). . . .

Here, DFS does not dispute that Warren and the decedent were married at the time the insurance policy was purchased and that it was purchased with community funds. . . . Accordingly, the insurance policy and its proceeds are community property under Texas law. . . .
Instead of providing the Court with clear and convincing evidence that the insurance policy is not community property, DFS references case law that it contends shows a superior interest by the named beneficiary over the rights of the community estate. However, DFS has misinterpreted these cases. In Parson v. United States, 460 F.2d 228, 231–32 (5th Cir.1972), a spouse naming the other spouse as a beneficiary in a life insurance policy. The Parsoncourt was asked to decide whether the spouse had effectively made a gift of his community property share to his wife’s separate estate for estate tax purposes, an issue not relevant here. Likewise, the other cases that DFS cites would support DFS’s position if the decedent had purchased the life insurance policy prior to his marriage. McCurdy v. McCurdy,372 S.W.2d 381, 383–384 (Tex.Civ.App.1963); Gray v. Bush,430 S.W.2d 258, 267–268 (Tex.Civ.App.1968); Pritchard v. Snow,530 S.W.2d 889, 893 (Tex.Civ.App.1975); Camp v. Camp,972 S.W.2d 906, 907 (Tex.App.1998). Here, however, the insurance policy was purchased during the marriage with community funds. None of the cases DFS cites rebut the community property presumption in this circumstance.
Accordingly, the Court finds that Kathleen Warren is entitled to her community property estate interest of one-half the proceeds of the Genworth insurance policy; Mary Cain is entitled to the remaining half. DFS’s motion for summary judgment to the contrary is denied.

Genworth Life & Annuity Ins. Co. v. Cain, 2012 WL 1802613, *1-2.
The court also concluded that, by virtue of its assignment agreement, DFS was entitled to a portion of the insurance proceeds due to Mary Cain.