The Incident
This case involves a widowed 87-year-old decedent, an annuity owner with two children. It is a dispute between his two children, a son and a daughter, over the correct distribution of death benefits on two annuities: one for over $40,000 and the other for nearly $750,000. Upon learning his father's health was beginning to decline, the son contacted the agent and asked him to meet with his father, so his father could change the beneficiary on one of his annuities.
The principal beneficiary on both annuities was his daughter, who had not been in contact with her father for several years. The son had been around and frequently cared for his father as his health slowly declined. The agent went to the hospital, where he met with his client and the client's son. After discussion, the father clearly expressed his desire to make his son the beneficiary on the larger annuity and leave his daughter as the beneficiary of the smaller annuity.
While in the hospital room, the agent pulled out his laptop computer and put the annuity number for the smaller annuity on the change of beneficiary form. None of the parties realized at that time that this was the smaller annuity. The father died two weeks later.
The Claim
A few weeks after the father's death, the error was discovered, and the agent was contacted by the son about the mistake. The agent immediately contacted the annuity carrier, who sent some paperwork to both children, asking them to try and resolve the dispute. That never happened, and the annuity carrier filed a complaint asking the court to make a determination as to whom the larger annuity should go to.
The siblings cross-complied against each other over rights to the proceeds, and the son filed a third-party action against the agent for negligence to recover the whole proceeds of the larger annuity. The daughter claimed her father was not of sound mind at the time the change was made and was under undue influence of the son, and the agent should not have made the change.
The Outcome
The court ruled the proceeds of the larger annuity were intended for and should be directed to the son. The agent was responsible for all the defense costs, totaling nearly $25,000, which were paid by the agent's errors and ommissions carrier, less the deductible of $2,500.
How it could have been avoided
A simple, innocent mistake could have been avoided by double-checking the change forms before they were submitted. Mistakes are not uncommon, especially in such high tension situations. The fact that the agent carried E&O insurance through a knowledgeable, reputable carrier saved him more than $20,000 and potentially much more, had the court not ruled as it did.
Lisa Rush is AVP and program leader for Cita Insurance Services (www.broprog.com), which specializes in E&O insurance for insurance agents. Rush has been in the insurance industry for more than 28 years. Her experience with Professional Liability includes well over a decade of sales, servicing and underwriting programs, including insurance agents, accountants, dentists, lawyers, architects and engineers, real estate as well as many miscellaneous professional liability programs. Rush can be contacted via e-mail at lrush@broprog.com or by phone at (800) 280-7250, ext. 440.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.