A recent news article about a Pennsylvania woman who dropped out of sight back in 2002. She abandoned her family and became a vagrant. Eventually, she was declared legally dead (they never said when). The husband remarried and the life insurance was paid. Fast forward to 2013, and she comes out of hiding. I assume the 2nd marriage is legal, but what happens to the life insurance?
Assuming life insurance fraud was not the motive, would it make any difference if she turned up 24 hours after being declared legally dead?
Well, yes, because the life insurance carrier would not have had time to pay out the policy in 24 hours. Generally, the rule is that a life insurer which pays a death claim not under protest (as they will 99% of the time) assumes the risk that the decedent isn’t dead and the condition precedent to payment of the policy amount isn’t necessary.
“[T]he administration was not conclusive as to the fact of his death, but only as to the fact of his absence and the concealment of his whereabouts from his family for seven years. But the facts which justified the administration would also as evidence have established a right of action on the policies by the administrator and the assignees to recover the insurance money, for those facts would have been sufficient evidence of death to sustain a judgment based on that fact.” 134 Iowa at 617, 112 N.W. 96.Faced with the threat of litigation, the insurer tendered drafts for the policy amounts “with the condition that the administrator and assignees should give a bond of indemnity to the [insurance] company for the return of the money in case it should be subsequently discovered that [insured] was not dead at the time of this settlement.” *977 134 Iowa at 615, 112 N.W. 96. The condition was refused, and the insurer paid “without further insistence upon this condition.” 134 Iowa at 615, 112 N.W. 96. When it was proved that the insured was alive and the insurer sought repayment, the court concluded that there should be no recovery. It reasoned that a judgment obtained by the administrator would have been conclusive and “that a settlement by which the money was paid for the purpose of avoiding a suit in which such a judgment might have been rendered is also conclusive.” 134 Iowa at 618, 112 N.W. 96.Here, it was KFB who directed Farmway to obtain an order pursuant to 59-2704 in order to process its claim under the insurance policy. KFB chose to pay the policy proceeds to Farmway based upon the presumption of death order and not on the mistaken fact that Schreuder was dead. Schreuder’s death was not a fact. KFB was under no legal obligation to pay the proceeds to Farmway, and Schreuder’s death remained in doubt after the presumption of death was entered by the district court pursuant to 59-2704. The court-ordered presumption of death is not more than a presumption. It is an integral part of the procedure that allows interested parties to prevent waste or administer an absentee’s estate. KFB chose not to proceed under the Estates of Absentees Act but, rather, paid the insurance proceeds directly to Farmway. KFB did not require Farmway to execute a restitution or indemnity agreement in the event Schreuder was not dead. We conclude that KFB assumed the risk that Schreuder was not dead and is not entitled to repayment from Farmway. Having so concluded, it follows that the district court erred in granting summary judgment to KFB and not to Farmway. In view of this holding, we need not consider Farmway’s second issue that KFB’s action is barred by the statute of limitations.
Kansas Farm Bureau Life Ins. Co., Inc. v. Farmway Credit Union, 256 Kan. 968, 976-77, 889 P.2d 784, 789 (1995)
This assumes that the money is all gone (or no longer segregated from other funds) when the decedent is found. If, however, the decendent turns up alive, and the money is in a trust for the kids or somesuch, the insurer is generally entitled to recover what’s left:
Liberty Life claims Erin and Kristen are liable for unjust enrichment for the amount of the Proceeds that was transferred to them after they knew Eric was alive. (Doc. 228 at 9–10). Liberty Life asks the Court to grant summary judgment on this claim and seeks restitutionary relief. (Id. at 16).A claim of unjust enrichment under Arizona law has five elements: “(1) an enrichment, (2) an impoverishment, (3) a connection between the enrichment and impoverishment, (4) the absence of justification for the enrichment and impoverishment, and (5) the absence of a remedy provided by law.” Freeman v. Sorchych, 245 P.3d at 936 (citing City of Sierra Vista v. Cochise Enters., Inc., 144 Ariz. 375, 697 P.2d 1125, 1131–32 (Ariz.Ct.App.1984)). “In order to be granted restitution, [a plaintiff] must demonstrate that [the defendant] received a benefit, that by receipt of that benefit [the defendant] was unjustly enriched at [plaintiff’s] expense, and that the circumstances were such that in good conscience [defendant] should make restitution.” Pyeatte v. Pyeatte, 135 Ariz. 346, 661 P.2d 196, 202 (Ariz.Ct.App.1982). “ ‘However, the mere receipt of a benefit is insufficient’ to entitle a plaintiff to compensation. Instead, for an award based on unjust enrichment, a plaintiff must show ‘that it was not intended or expected that the services be rendered or the benefit conferred gratuitously, and that the benefit was not conferred officiously.’ ” Freeman, 245 P.3d at 936–37 (citing Murdock–Bryant Constr., Inc. v. Pearson, 146 Ariz. 48, 703 P.2d 1197, 1202 (Ariz.1985).Looking at the elements of an unjust enrichment claim in Arizona, the Court finds Liberty Life has established that Erin and Kirsten were enriched by the $478,651 left of the Proceeds that was transferred to them after they became aware Eric was alive. Plaintiff has established that it was impoverished by paying out $870,103.80 for Eric’s death even though Eric was not dead. Plaintiff has established the connection between the $870,103.80 that was originally put in trust for Erin and Kirsten and the $478,651 left from that amount that was transferred to them after they became aware Eric was alive. Finally, no remedy is provided by law for this unjust enrichment claim. The only element of Plaintiff’s unjust enrichment claim disputed by the parties is element (4): the absence of justification for the enrichment and impoverishment.
Liberty Life Ins. Co. v. Myers, CV 10-2024-PHX-JAT, 2013 WL 530317 (D. Ariz. 2013)
Cecil presciently discussed this issue several years ago.
Slate also ran an article on this topic, but of course without Cecil’s authority.