New Wife Cannot Claim Life Insurance

The Supreme Court of Canada has awarded a $250,000 life insurance policy to a woman whose ex-husband never told her he removed her as the beneficiary, even though she continued paying the premiums for more than a decade after their divorce.

When Michelle Moore separated from her husband Larry in 1999, they made what is known in law as a “kitchen table agreement,” an unwritten deal that she would keep paying the annual premiums on his life insurance, and in return he would leave her as the beneficiary.

So for 12 years, Michelle paid more than $500 a year, thinking she would receive $250,000 in the event of Larry’s death, for the benefit of herself and their three children.

But there was a hitch. After the separation, Larry moved in with his new wife Risa Sweet, and immediately named her as the beneficiary of his life insurance, without telling Michelle.

When Larry died in 2013, therefore, Michelle was shocked to learn from the insurance company that she had been paying premiums toward a policy that, since her divorce, had been officially in the name of her ex-husband’s new wife.

That led to a legal battle between two “innocent” parties, as the Supreme Court put it, that went through all levels of court over five years. Michelle Moore won in her initial application, lost on appeal, and has now won at the country’s top court.

The effect is that the money, which has been held in trust, will go to her.

“Risa was enriched, Michelle was correspondingly deprived, and both the enrichment and the deprivation occurred in the absence of a juristic reason,” reads the Supreme Court ruling, written by Justice Suzanne Côté. It was a split decision, with Justices Clément Gascon and Malcolm Rowe dissenting.

Michelle and Larry Moore married in 1979, and had three children who are now adults. Michelle continues to live in the family home in Mississauga. He bought the life insurance in 1985, with Michelle designated as the beneficiary, but not irrevocably.

They separated in December, 1999, and agreed informally that she would keep paying the premiums and remain as the beneficiary.

Their separation agreement, signed in 2002, does not mention the oral agreement. But the initial application judge found as fact that this agreement was real, legally binding, and enforceable. He also found that the purpose of the policy was to provide for Michelle and the Moore children in the event of Larry’s death.

They separated in December 1999, the same year Larry met his new wife, Risa Sweet, now 63, at the Donwood Institute, an addiction treatment centre in Toronto’s Leaside neighbourhood that would later merge with other facilities into the Centre for Addiction and Mental Health.

“It is evident from the materials that the marriage breakdown between the Moores was related to Mr. Moore’s struggles with chronic pain and his alcohol and substance abuse issues which no doubt contributed to what Ms. Moore refers to as his financial irresponsibility and build-up of debts burdening them both,” according to an earlier decision of the Ontario Court of Appeal. “They clearly went through a very difficult time. In fact, the financial difficulties — including a very substantial debt of Mr. Moore to Revenue Canada of over $70,000 — led to both declaring bankruptcy in early 2000.”

Around this time, Larry Moore also lost his driver’s licence and his job, for medical reasons. In time, his disability payments were garnisheed for child support.

He moved in with Sweet in 2000, and they became common-law spouses for 13 years, caring for each other materially and financially. He made the switch to his life insurance policy in September 2000, adding Sweet, removing Michelle.

The Supreme Court found that Larry did not make the switch “surreptitiously.” In fact, he did it through a broker who was married to Michelle’s sister. But, importantly, he did not tell Michelle he had done it. She continued paying annual premiums of $507.50 until Larry died in 2013, with no other significant assets.

Sweet argued that the policy was rightly hers, as the contract said, and Moore was trying to “circumvent” the rules of Ontario’s statutory scheme to regulate insurance.

“Mr. Moore did not want me to worry about how I was going to pay the rent or buy my medications in the unlikely event he passed away before me,” Sweet said in court records. “He wanted to make sure I was able to live my remaining years in the building where I have resided for the past 40 years. And he wanted me to live worry and debt free.”

Sweet is disabled with several chronic illnesses and cannot take public transit, according to her court filings. She continues to have trouble paying rent and buying food.