New York: Beneficiary Disputes and Interpleader Under New York Law

When New York law decides the dispute

Federal law controls ERISA employer plans and federal programs such as FEGLI and military life insurance, so check that first. See federal programs. For other policies, which state’s law applies depends on the policy and the facts. In State Farm v. Hobin, a federal court in New York applied New York’s divorce statute to a policy on a New York insured.¹

Divorce and ex-spouse beneficiaries

“Except as provided by the express terms of a governing instrument,” a divorce (including a judicial separation) or an annulment revokes “any revocable … disposition or appointment of property made by a divorced individual to, or for the benefit of, the former spouse, including, but not limited to, a disposition or appointment by will, by security registration in beneficiary form (TOD), by beneficiary designation in a life insurance policy or (to the extent permitted by law) in a pension or retirement benefits plan.”²

• What counts as a governing instrument. The list includes an insurance policy, a court order, and “a contract relating to the division of property made between the divorced individuals before or after the marriage, divorce, or annulment.”² So the divorce papers themselves can keep a designation in force, but only by their express terms.
• Effect. The instrument is read as if the former spouse had died first, as of the time of the revocation. Remarriage to the former spouse revives the revoked provisions.²
• Insurers and other payors. A payor that pays under the instrument before it receives written notice of the divorce, sent by registered or certified mail to its main office or served like a summons, is not liable for that payment. A payor that has the notice may instead deposit the money with the court handling the probate proceedings or, if none have begun, the court with jurisdiction over the divorce. A deposit with the court discharges it.²
• Recipients. Someone who received a payment the statute revoked, and who did not pay value for it, must return it, or its value, with interest.²
• Automatic effect. New York’s Appellate Division has described the statute as creating “a conclusive and irrebuttable presumption” that a revocable disposition to a former spouse is revoked on divorce, as quoted in Hobin.³

In Hobin, a separation agreement made unpaid “amounts due” to the wife a claim against the husband’s estate, payable first from “any life insurance policy in effect at the time of death.” The court held that the clause did not preserve her designation. The agreement did not mention the policy, the clause reached only debts past due at death, child support ends at death unless the parties agree otherwise, and evidence of the insured’s intent could not override the statute.¹ See the decision below and Divorce.

Not verified here. This page does not say which divorces the current version of EPTL 5-1.4 reaches by date. Its effective dates were not checked against an official source. Compare Alabama and Illinois, where that question decided cases.

Changing a beneficiary

Under EPTL 13-3.2, a beneficiary designation “must be made in writing and signed by the person making the designation” and meet one of several listed conditions, one of which is that the insurance company agrees to it. Rights of a designated beneficiary are not defeated by the statutes governing wills and intestacy.⁴

The Court of Appeals has said that, as a general rule, “the method prescribed by the insurance contract must be followed in order to effect a change of beneficiary.” Strict compliance is not always required, but “there must be some affirmative act or acts” by the insured, and substantial compliance will do only if the insured made “every reasonable effort” to follow the policy. A will alone did not change the beneficiary. An insurer that interpleads may no longer insist on strict compliance, but it may still require proof of substantial compliance.⁵ See change of beneficiary.

Slayer rule

New York has no general slayer statute for life insurance. The rule comes from Riggs v. Palmer: “No one shall be permitted to profit by his own fraud, or to take advantage of his own wrong, or to found any claim upon his own iniquity, or to acquire property by his own crime.”⁶ Courts apply it to life insurance proceeds.⁷

• Conviction. A criminal conviction, by plea or after trial, is conclusive proof of the same facts in a later civil case.⁷
• No conviction. “Absent a conviction, however, there can be no forfeiture unless it is proven [by a preponderance of the evidence] that a person acted recklessly or intentionally in causing the victim’s death, not that the person acted negligently,” as a federal court quoted New York decisions.⁷
• Reckless versus negligent. A Surrogate’s Court has explained that forfeiture applies to intentional killings and has been extended to reckless ones, but does not automatically arise from a conviction for criminally negligent homicide. Where the beneficiary had pleaded guilty to criminally negligent homicide, the court ordered a hearing on whether she had acted recklessly.⁸
• Accident, self-defense, insanity. A New York Surrogate’s Court decision quoted in Oldham said forfeiture “does not occur where the killing was accidental, in self-defense . . ., or where the killer acted under a disability sufficient to negate a culpable mental state, such as insanity.” Other decisions have gone the other way on insanity, so that point is not settled.⁷
• Joint bank accounts. A separate statute provides that a joint tenant convicted of murder in the first or second degree of the other joint tenant is not entitled to the money in their joint bank account, except the killer’s own contributions.⁹

In New York Life v. Oldham, a federal court denied summary judgment against a beneficiary who had been indicted but not convicted and had been adjudicated an incapacitated person, leaving the facts for trial.⁷ See the slayer rule guide.

Simultaneous death

When ownership or the passing of property depends on one person surviving another, a person who is not “established by clear and convincing evidence to have survived” by 120 hours is treated as having died first. The rule covers governing instruments, which include an insurance or annuity policy. If co-owners with a right of survivorship die and neither is shown to have survived by 120 hours, the property is split equally. The 120-hour rule does not apply if the policy deals explicitly with simultaneous deaths or a common disaster and that language fits the facts, or if the policy sets its own survival period or expressly requires none, among other exceptions.¹⁰ See simultaneous death.

Interest on delayed death claims

New York requires interest on life insurance death proceeds from the date of death. If no lawsuit has been filed, it is computed daily to the date of payment at the rate the insurer pays on proceeds left with it under its interest settlement option; if a suit ends in a judgment or settlement, interest also runs from the date of death. The statute does not require interest “for any period during which an insurer is required to pay interest under any state or federal law pertaining to interpleader.”¹¹ See discharge, fees, and interest.

Interpleader in New York courts

CPLR 1006 is New York’s interpleader rule. A stakeholder, “a person who is or may be exposed to multiple liability as the result of adverse claims,” may bring an interpleader action against two or more claimants, and a defendant who is sued may bring in other claimants. Claims need not have a common origin, and the stakeholder may deny liability to some or all claimants.¹²

• Discharge. After the time for all parties to plead has expired, the stakeholder may move to be discharged. The court may require payment into court and may charge just expenses, costs and disbursements against the fund.¹²
• Interest. If the court finds a party entitled to interest and the stakeholder has not agreed to a rate, interest to the date of discharge is capped at the Federal Reserve Bank of New York’s lowest discount rate for the period.¹²
• Deposit. A stakeholder may move, before or after being sued, to pay the money into court or to a designated person.¹²

See interpleader in state court.

Decisions

Related guides

• State law differences
• Divorce and beneficiary designations
• Change of beneficiary
• Slayer rule
• Key decisions

Footnotes

1. State Farm Life & Accident Assurance Co. v. Hobin, No. 1:22-cv-00611-LJV-LGF (W.D.N.Y. Feb. 27, 2024). Decision and order (PDF); judgment (PDF). ↩ ↩²

2. N.Y. Est. Powers & Trusts Law § 5-1.4(a)–(f). Justia (unofficial). ↩ ↩² ↩³ ↩⁴ ↩⁵

3. U.S. Life Ins. Co. v. Shields, 171 A.D.3d 1262 (3d Dep’t 2019), as quoted in State Farm Life & Accident Assurance Co. v. Hobin, No. 1:22-cv-00611-LJV-LGF (W.D.N.Y. Feb. 27, 2024). Decision and order (PDF). ↩

4. N.Y. Est. Powers & Trusts Law § 13-3.2(a), (e). Justia (unofficial). ↩

5. McCarthy v. Aetna Life Ins. Co., 92 N.Y.2d 436 (1998). Cornell LII (unofficial). ↩

6. Riggs v. Palmer, 115 N.Y. 506, 511 (1889). New York State Law Reporting Bureau. ↩

7. New York Life Ins. Co. v. Oldham, No. 1:19-cv-00669-EAW (W.D.N.Y. Feb. 1, 2022), quoting Prudential Ins. Co. of America v. Govel (N.D.N.Y. 2017), In re Karp (Sur. Ct. 2011), and In re Estate of Macaro, 182 Misc. 2d 625 (Sur. Ct. 1999), and citing In re Demesyeux, 42 Misc. 3d 730 (Sur. Ct. 2013). govinfo.gov (PDF). ↩ ↩² ↩³ ↩⁴ ↩⁵

8. Matter of Viafore, 2018 NY Slip Op 50048(U), 58 Misc. 3d 1210(A) (Sur. Ct. Dutchess County Jan. 16, 2018). New York State Law Reporting Bureau. ↩

9. N.Y. Est. Powers & Trusts Law § 4-1.6. Justia (unofficial). ↩

10. N.Y. Est. Powers & Trusts Law § 2-1.6. Justia (unofficial). ↩

11. N.Y. Ins. Law § 3214(a)–(d). NY Senate; Justia. ↩

12. N.Y. C.P.L.R. 1006(a), (b), (d), (f), (g). Justia (unofficial). ↩ ↩² ↩³ ↩⁴