Also known as: proceeds & avails · insurance proceeds · policy avails
Written by attorneys — see sources below.
The cash-surrender value of a life-insurance policy together with values built up since the policy's issue date and the benefits payable on maturity and at the death of the insured. These amounts represent the economic value available to the policy owner or beneficiaries upon surrender, maturity, or the insured's death.
Pierce Patterson contracted to buy a home from Prosperity Investments. Before closing a fire destroyed the house. Under the majority rule on risk of loss the buyer bore the risk after contract formation. Pierce could not rescind but received the insurance proceeds and avails allocated to him as equitable owner.
Peter Park's former spouse remained the listed beneficiary on his ERISA-governed life policy after divorce. The court held federal law preempted the state automatic-revocation statute. The ex-spouse collected the proceeds and avails despite the divorce.
Donna Rae Egelhoff was married to David A. Egelhoff. Mr. Egelhoff was employed by the Boeing Company, which provided him with a life insurance policy and a pension plan. Both plans were governed by ERISA, and Mr. Egelhoff designated his wife as the beneficiary under both. In April 1994, the Egelhoffs divorced. Just over two months later, Mr. Egelhoff died intestate following an automobile accident. At that time, Mrs. Egelhoff remained the listed beneficiary under both the life insurance policy and the pension plan. The life insurance proceeds, totaling $46,000, were paid to her. Respondents Samantha and David Egelhoff, Mr. Egelhoff's children by a previous marriage, are his statutory heirs under state law. They sued petitioner in Washington state court to recover the life insurance proceeds. In a separate action, respondents also sued to recover the pension plan benefits. The trial courts, concluding that both the insurance policy and the pension plan "should be administered in accordance" with ERISA, granted summary judgment to petitioner in both cases. The Washington Court of Appeals consolidated the cases and reversed. Applying the statute, it held that respondents were entitled to the proceeds of both the insurance policy and the pension plan. The Supreme Court of Washington affirmed. Courts have disagreed about whether statutes like that of Washington are pre-empted by ERISA. The Supreme Court granted certiorari to resolve the conflict.
View caseMortgagee held a first mortgage on Blackacre. After a fire reduced value, the insurer tendered proceeds. Mortgagee recovered the amount needed to restore the loan-to-value ratio from the insurance proceeds and avails under ordinary priority rules.
Priscilla Parks sought division of the cash-surrender value of her husband's life insurance in dissolution proceedings. The court treated the proceeds and avails as marital property subject to equitable distribution. She received a portion of the accumulated value.
Joseph A. Richardson and Ida Richardson divorced in December 1997. They executed a separation agreement providing that Joseph would pay Ida maintenance of $2,425.00 per month, terminating upon Ida’s remarriage or the death of either party. The agreement stated that its terms would not be subject to modification or change, regardless of the relative circumstances of the parties. The trial court incorporated the agreement into the Judgment and Decree of Dissolution and stated that maintenance was non-modifiable. In 2004 Joseph filed a motion to modify the judgment. In Count II he alleged that Ida sought out persons to burglarize his home, sought out persons to murder him, and attempted to hire a person to murder him. He further alleged that these acts breached the separation agreement, violated public policy, committed criminal acts, and waived any claim to maintenance. The trial court dismissed Count II with prejudice for failure to state a claim upon which relief can be granted. The dismissal order was certified as a final judgment and order under Rule 74.01(b). Joseph appealed the dismissal. The Eastern District Court of Appeals transferred the matter to the Supreme Court of Missouri.
View casePedro Pacheco's ex-wife claimed the proceeds and avails of his life insurance after his death. The court examined whether the policy designation survived divorce under federal preemption rules. The ex-wife received the benefits because the plan documents controlled over state revocation statutes.
In 1998, while serving as a volunteer driver for the Department of Veterans Affairs Medical Center, Turner struck up a romantic relationship with Vester Mayo, a nurse at the Medical Center. Vester died in December 2000. She had taken out a life insurance policy through a federally-administered program. Her beneficiary designation form, contained in her personnel file, listed Turner and her mother, Lorenza Mayo, as co-beneficiaries. In January 2001, Turner filed a claim for his share of the life insurance benefits and later received a money market account valued at $20,562.90. In preparing her claim, Lorenza examined her daughter’s papers and concluded that Vester’s beneficiary designation form contained forgeries. The dates on the form were inconsistent, Lorenza’s name and address were misspelled, and Vester’s social security number was incorrect. Lorenza reported this to federal authorities. The ensuing investigation revealed that shortly after obtaining his life insurance payout, Turner wrote a $1,000 check from the proceeds to his friend, LaTanya Andrews. Andrews was a payroll technician at the Medical Center who had worked in the human resources section housing employees’ personnel files. A government agent interviewed her in November 2005. At first Andrews said she never received more than $10 from Turner, but when shown the check she gave conflicting accounts about its purpose, and agents found nothing in her bank records to support her claims. The grand jury charged Turner and Andrews with conspiracy to defraud the United States and bribery. Evidence showed that Vester’s signature on the beneficiary form had been forged, that Andrews had easy access to Vester’s personnel file, and that Lorenza saw Turner forge her daughter’s signature on two checks. The jury convicted both defendants on both counts after a trial. Turner was sentenced in September 2007 to 33 months’ imprisonment. He appealed his conviction and sentence to the D.C. Circuit.
View casePhuong Pham recovered proceeds and avails from a manufacturer's liability policy after a defective product caused injury. The court applied the risk-utility test to determine defect. The insurer paid the policy limits directly to the injured claimant as the proceeds and avails of the coverage.
Around 2:30 a.m. on June 20, 2007, neighbors reported a fire that had erupted at the home of the Tinchers in Downingtown, Pennsylvania. Investigators concluded that a lightning strike near the Tinchers’ home caused a small puncture in the corrugated stainless steel tubing transporting natural gas to a fireplace. The CSST was part of the TracPipe System manufactured and sold by Omega Flex. The resulting fire burned for over an hour and caused significant damage to the home and belongings. Following the fire, the Tinchers reported the incident to their insurer, United Services Automobile Association. USAA compensated the Tinchers for their loss up to the limit of their policy and received an assignment of liability claims. The Tinchers suffered an additional out-of-pocket loss because a portion of their claimed loss exceeded the limits of the USAA policy. In January 2008, the Tinchers filed a complaint against Omega Flex in the Chester County Court of Common Pleas. They asserted claims premised upon theories of strict liability, negligence, and breach of warranty, with the strict liability claim based on Section 402A of the Second Restatement. The case proceeded to a jury trial in October 2010 before Judge Ronald C. Nagle. The Tinchers offered expert testimony that the CSST walls were only one-hundredth of an inch thick and therefore inherently defective because lightning-generated currents were highly likely to perforate them. Omega Flex presented its own experts who testified that the TracPipe System met all applicable industry standards. They also stated that the lightning strike lacked sufficient energy to cause the puncture and that an attempted bonding clamp found disconnected after the fire may have prevented the incident if properly installed. After the close of evidence, the trial court denied Omega Flex’s motions for nonsuit and directed verdict. On October 20, 2010, the jury returned a verdict in favor of the Tinchers on the strict liability claim. The jury awarded compensatory damages totaling $958,895.85 plus delay damages. The jury found for Omega Flex on the negligence claim. Omega Flex filed post-trial motions that the trial court denied, leading to entry of judgment. The Superior Court affirmed the judgment in September 2012. The Supreme Court granted Omega Flex’s petition for allowance of appeal limited to the question of whether to replace the strict liability analysis of the Second Restatement with that of the Third Restatement.
View caseThe term includes the cash-surrender value, accumulated values since issuance, and benefits payable at maturity or the insured's death. These amounts are the economic interests available to the owner or beneficiaries.
Under the majority rule the buyer bears the risk after contract formation and may not rescind merely because improvements are destroyed. The seller holds title as trustee and insurance proceeds may be allocated by contract or equitable principles to the buyer.
A mortgagee may recover from the proceeds to the extent necessary to restore the loan-to-value ratio or satisfy the debt when the mortgage requires the mortgagor to insure and name the mortgagee as loss payee. The mortgagee's rights are governed by ordinary priority rules.
Yes. ERISA preempts state statutes that automatically revoke a spouse's beneficiary status upon divorce when the policy is governed by ERISA. The plan documents control and the former spouse may still receive the proceeds and avails.
…Dissenting — Justice Ginsburg Responding to Holocaust victims' and their descendents' long-frustrated efforts to collect unpaid insurance proceeds, California's Holocaust Victim Insurance Relief Act of 1999 (HVIRA), Cal. Ins. Code Ann. § 13800 et seq. (West Cum. Supp. 2003), requires insurance companies operating in the State to…