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A federal district court in California has ruled that a short form power of attorney did not authorize the person granted the power of attorney to change the beneficiary on the grantor’s life insurance policy.

The Case

When Ramon Razo (“Ray”) retired from General Motors, he received a life insurance policy from Metropolitan Life Insurance Company (“MetLife”) as part of his retirement. Ray completed and executed a beneficiary designation form naming his nephew Eddie Razo (“Eddie”) as the sole beneficiary.

In early April 2017, Ray was diagnosed with Stage 4 pancreatic cancer, but he refused chemotherapy or other radiation treatment for his cancer, opting instead for pain medication.

While in the hospital, Eddie, Eddie’s brother Charles, and Charles’ wife Lisa visited Ray on multiple occasions. Ray was kept at the hospital until the end of April 2017.

After returning home, Ray remained in a state of sedation due to the medication provided by the hospital prior to his discharge. He was placed into hospice care, and hospice nurses visited Ray regularly and provided him with morphine and Ativan to treat his pain and anxiety, respectively. Lisa remained home to take care of Ray, and Lisa provided Ray with half of his prescribed medication as advised by Ray’s hospice nurses.

Several days after returning home, Ray told Charles and Lisa that Ray wanted Charles to have power of attorney on behalf of Ray so that Charles could manage Ray’s affairs. Charles agreed to accept power of attorney on behalf of Ray, and an attorney prepared the necessary papers for conveying power of attorney to Charles.

On May 2, 2017, in the presence of Charles, Lisa, and the attorney, Ray signed the statutory short form power of attorney prepared by the attorney, who notarized Ray’s signature.

Over the course of May 2017, Ray’s condition worsened, and Lisa continued to care for Ray at home. At some point, Lisa contacted MetLife and requested a beneficiary designation form, which MetLife faxed to Lisa. Lisa filled out the beneficiary form, listing Charles as Ray’s primary beneficiary and Lisa as Ray’s contingent beneficiary.

Charles signed the form as Ray’s agent under Charles’ power of attorney and dated his signature as May 25, 2017. Lisa faxed the completed beneficiary form, with Charles’ power of attorney form attached, back to MetLife that same day. Ray did not sign the beneficiary form.

On May 27, 2017, Ray passed away. Three days later, on May 30, 2017, MetLife rejected the beneficiary designation form, stating that Charles’ power of attorney did not authorize Charles to change Ray’s beneficiaries.

MetLife initiated an interpleader action to settle the competing claims between Charles and Eddie for Ray’s life insurance proceeds.

The district court held a one-day bench trial.

The District Court’s Decision

The district court entered judgment in favor of Eddie.

In its decision, the district court explained that powers of attorney in California generally are governed by California Probate Code §§ 4200-4600, with Section 4401 providing a statutory form of power of attorney. A statutory short form power of attorney created using the form in Section 4401, the district court observed, did not empower the agent to take any of the actions specified in Section 4264 unless the statutory short form power of attorney expressly granted that authority to the attorney-in-fact.

Moreover, the district court noted, as provided in Section 4264(f), a power of attorney must expressly grant the attorney-in-fact the authority to designate or change the designation of beneficiaries to receive any property, benefit, or contract right on the principal’s death.

The district court then found that the power of attorney signed by Ray designating Charles as Ray’s agent did not explicitly grant Charles the authority to change the designation of beneficiaries for any of Ray’s property or benefits, including the MetLife life insurance policy.

Therefore, it ruled, the power of attorney was insufficient as a matter of law to allow the change of Ray’s life insurance beneficiary from Eddie to Charles.

The district court explained that, as a general rule, California requires a change to a beneficiary designation to be made in accordance with the terms of the policy. The district court then found that the beneficiary designation form completed by Ray in March 2013 naming Eddie as the beneficiary for the MetLife life insurance policy satisfied the requirements of Ray’s life insurance policy, because MetLife had not challenged its validity.

As the district court pointed out, there are three exceptions to the general rule that a beneficiary change must abide by the insurance policy terms:

(1) When the insurer waived strict compliance with its own rules regarding the change;

(2) When it was beyond the insured’s power to comply literally with the insurer’s requirement; or

(3) When the insured did all that the insured could to effect the change but died before the change actually was made.

In this case, the district court said, the only relevant exception was the third, regarding whether Ray had done all he could to effect a change in the designated beneficiary for the MetLife life insurance policy prior to his death. The district court determined that Charles had not provided sufficient evidence to establish that Ray had a clearly manifested intent to designate Charles as the beneficiary for Ray’s life insurance policy with MetLife.

Moreover, the district court said, even assuming that Ray did have such an intent to change the MetLife beneficiary from Eddie to Charles, Charles had not provided sufficient evidence to establish that Ray had done all he could, or even that Ray had taken substantial steps, to effectuate that intent. The fact that Ray had not signed the beneficiary designation form completed by Lisa and executed by Charles was, the district court concluded, “particularly probative.”

The case is Metropolitan Life Ins. Co. v. Razo, No.: 2:18-cv-04751-SVW-SS (C.D. Cal. Jan. 16, 2019). Attorneys involved include: For Metropolitan Life Insurance Company, Plaintiff: Chakameh Ganji, LEAD ATTORNEY, James C Castle, Hinshaw and Culbertson LLP, Los Angeles, CA. For Eddie Razo, an individual, Defendant: Christopher Allen Fortunati, Law Office of Robert M Baskin, Ventura, CA.

Steven A. Meyerowitz, Esq., is the Director of FC&S Legal, the Editor-in-Chief of the Insurance Coverage Law Report, and the Founder and President of Meyerowitz Communications Inc. As FC&S Legal Director, Mr. Meyerowitz, a member of the team that conceptualized FC&S Legal, provides daily analysis and commentary on the most significant insurance coverage law decisions from courts across the country and news regarding legislative and regulatory developments. A graduate of Harvard Law School, Mr. Meyerowitz was an attorney at a prominent Wall Street law firm before founding Meyerowitz Communications Inc., a law firm marketing communications consulting company.