A federal district court in Colorado has ruled that a letter changing the beneficiary of a life insurance policy, written by the policy’s owner the day before his suicide, was effective to change the beneficiary even though it was not on the insurer’s “beneficiary designation” form.
On February 24, 2004, Richard M. Talley applied for a life insurance policy with Transamerica Life Insurance Company. He listed Cheryl Talley on the application as the sole primary beneficiary.
Transamerica issued the policy, with a face amount of $1,000,000, on or about April 1, 2004. The policy listed “the insured,” Mr. Talley, as the owner.
Sometime before January 2006, Mr. Talley executed a “beneficiary designation” form designating American Title Services Company as the primary beneficiary of the policy. From 2001 until his death, Mr. Talley was the president, director, and shareholder of American Title, which provided title insurance through Title Resources Guaranty Company (“TRGC”), which had a right to audit American Title’s business.
Transamerica effectuated the change that Mr. Talley requested even though the beneficiary designation form was incomplete because the “Date Signed,” “Witness Signature,” and “Address of Witness” lines in the form were left blank.
American Title paid at least seven premiums on the policy.
Beginning around 2007, Mr. Talley allegedly misappropriated funds from American Title for his personal use. In either January or early February 2014, TRGC conducted an audit of American Title’s books and records and discovered Mr. Talley’s alleged theft.
On February 3, 2014, Mr. Talley wrote a letter to Transamerica stating, in relevant part:
I Richard Talley…hereby change the beneficiary to Ms. Cheryl Talley, living at [address], my wife. I [sic] is my desire for this change to take effect immediately upon execution of this notice.
Mr. Talley committed suicide the next day.
On February 19, 2014, Transamerica wrote to Mr. Talley that it was “unable to process the request” for a change in beneficiary because “[t]he incorrect form was used for the requested change.” The letter also stated that “[n]o changes will be made until we receive the requested information and fully completed forms.” Transamerica’s beneficiary designation form was attached to this correspondence.
After receiving news of Mr. Talley’s death, however, Transamerica appended an electronic note dated March 10, 2014 to Mr. Talley’s February 3, 2014 letter stating “going to accept this.”
Transamerica then recorded a change in the records to reflect that Ms. Talley was the primary beneficiary of the policy.