Importance of Updating Life Insurance Beneficiary Designations After Significant Life Events

Business owners in Chicago often take out life insurance policies for the benefit of co-owners or partners in the event of the insured’s death. Frequently, the business even pays the insurance policy’s premiums. The purpose of such an arrangement is to compensate the co-owners for the loss of income from the death of a partner, which often cannot be replaced. Sometimes the partners will have an agreement to maintain each other as beneficiaries during the partnership, which will be revoked upon a withdrawal of any of the partners. But what happens if there is no such agreement and a partner retires, or withdraws from the business as a co-owner? A recent case analyzed this situation.

In Rozier v. Prudential Insurance Co. of America, No. 1:19-cv-577, 2023 WL 3214645 (W.D. La. May 2, 2023), Rozier co-owned a certified public accounting firm with his partner, Malcolm Harrington. The business took out a group life insurance policy, and Rozier named Harrington as the beneficiary of his coverage under the life insurance policy in 1984. In 2005, Harrington sold his interest in the partnership after being forced out, but Rozier never updated his beneficiary designation. Rozier died in 2018, and Prudential paid Harrington the benefits of Rozier’s group life insurance coverage. Rozier’s wife challenged the payment and sued Prudential and Harrington under ERISA § 502(a).

The United States District Court for the Western District of Louisiana conducted a bench trial and determined that the information on the 1984 enrollment card was in fact Rozier’s handwriting. It further determined that Rozier never changed his beneficiary designation after Harrington withdrew from the partnership. The court also found there was no agreement in place affecting what would happen with life insurance beneficiary designations in the event one of the partners withdraws or ceases to be a partner. Accordingly, the court held Prudential properly paid the benefits to Harrington as the named beneficiary of the group life insurance coverage.

If you have a claim for life insurance benefits, contact a knowledgeable ERISA life insurance lawyer today.