An attorney’s powers under insurance policies: Who can really change a beneficiary designation?

To what extent can an appointed attorney act under an insurance policy and change a beneficiary designation? In the case of Re Hanson Estate, the question before the court was whether the owner of a life insurance policy who had the requisite mental capabilities but was physically disabled had the ability to validly instruct their attorney to change a beneficiary designation on their policy.

What Happened?

Gordon Hanson never married and had no children. In 1988, he purchased a life insurance policy valued at $100,000.00, naming his mother Yvette Hanson as the beneficiary. Gordon also executed a continuing power of attorney for property, naming his mother and brother, Richard Hanson, jointly and severally, as his attorneys for property. By 2005, Yvette Hanson had become mentally incompetent due to dementia.

In March of 1999, Gordon added his two nieces, two nephews, and a friend as beneficiaries under his policy. Just two months later, however, he revised the designation again naming his mother alone as the beneficiary.

Gordon was eventually diagnosed with multiple sclerosis. In October of 2005, he wished to change the beneficiary designation once again, naming his two nieces, two nephews, and friend as beneficiaries under the policy, excluding his mother. There were no issues with Gordon’s mental competence. However, the symptoms of multiple sclerosis made him physically unable to alter the beneficiary designation on the policy. He directed his brother, Richard, who was also his attorney for property to do so on his behalf.

As instructed, Richard changed the designation and sent the requisite form to the insurer. He also advised the insurance company that Gordon was not able to complete the form as a result of his advanced multiple sclerosis. The insurance company took no issue with it at the time. Gordon died on March 27, 2010. On April 26, 2010, the insurer advised Richard that the beneficiary designation was invalid because “the law was unclear regarding the authority of an Attorney for Property to change the beneficiary designation”.

Gordon’s will made no reference to the life insurance policy. His executor died in 2012 and the funds remained in court. His mother, died intestate on May 2, 2013 and her trustee claimed that the insurance proceeds belong to her estate.

The Substitute Decisions Act

Section 7(2) of the Substitute Decisions Act, SO 1992, c30, sets out the authority an attorney has under a continuing power of attorney, such that the person named as attorney can do anything on the grantor’s behalf with respect to property that the grantor could do, if capable, except make a will.

The judge in this case decided that the Substitute Decisions Act has no application in this case because Richard was not acting pursuant to the power of attorney, but rather at Gordon’s direction.

The question the insurer should have asked was whether the beneficiary designation was a valid declaration pursuant to the requirements of the Insurance Act.

The Court considered whether it was necessary for an insured to physically sign the declaration. Justice Pierce found that Richard’s change in beneficiary designation in accordance with the Insurance Act was valid. Accordingly, Gordon’s two nieces and nephews and his friend were the beneficiaries of Gordon’s life insurance policy.

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