South Carolina Lawyers Weekly
A Charleston County woman will be able to receive the proceeds from her ex-husband’s life insurance policy, a federal judge has ruled.
In a case issue of first impression, the judge said that an order resolving the couple’s marital debt and custody of their children qualified as a divorce order for the purposes of a recently enacted South Carolina statute that generally prevents life insurance proceeds from going to the deceased’s ex-spouse, and so the couple had divorced before the law went into effect.
John McMeeking and Candace Murphy entered into a separation agreement that was approved and adopted by a family court in 2010. The agreement provided that both parties would maintain life insurance policies for the benefit of their children, and in 2012 McMeeking signed a change of beneficiary form listing Murphy as a beneficiary for a sum of $100,000. He also listed his brother and his friend and employer, Shannon Horning, as additional beneficiaries. A family court judge issued a final order of divorce in March 2014.
The final order came just after the South Carolina legislature amended the state’s probate law to disqualify a former spouse from receiving insurance proceeds unless the parties agree otherwise. Such laws are designed to avoid an outcome where an ex-spouse collects life insurance benefits because the insured forgot to change the beneficiaries—it creates, essentially, a presumption that the deceased meant to have the policy amended.
After McMeeking passed way in 2015, the insurer, State Farm, filed an interpleader action and paid the $100,000 to the federal courts—in effect asking the court to decide who was entitled to the money in light of the statutory restrictions. It contended in a summary judgment motion that the statute was applicable and Murphy was not entitled to receive the proceeds.
Murphy argued that she was still entitled to the $100,000 because her divorce occurred before the statute was amended. Horning argued that he should receive those funds, although his attorney, Edward Pritchard of Pritchard and Elliott in Charleston, clarified that Horning filed the motion in an effort to ensure that the money would be used for the benefit of McMeeking’s children.
Addressing an issue of first impression, U.S. District Judge David Norton ruled that a final court order mandating the equitable distribution of all marital property and debt is a “divorce or annulment” within the meaning of the statute, and that Murphy was entitled to receive the money.
“Certainly, an Order approving an agreement that ‘addresses all issues relating to custody of the minor children, visitation, and any further equitable division of marital property and debt’ evinces a desire to terminate the marriage,” Norton wrote in his Oct. 12 opinion, saying that he was “making somewhat of an educated guess as to the intent of South Carolina’s legislature in drafting this statute,” given the absence of any previous case law considering the issue.
Norton did deny Murphy’s requests for attorneys’ fees in the case, finding that State Farm had a reasonable basis to question whether Murphy was entitled to the policy’s proceeds at the time that it filed its action with the court, and so the company did not file its interpleader motion in bad faith.
Alice Paylor and Rene Dukes of Rosen Hagood in Charleston represented Murphy. Dukes said that although this was the first time a court had considered this specific issue, many of the facts present in the case were far from unique.
“People frequently divide their property before they obtain a divorce,” said Dukes, who said that other cases might turn on how exactly a court’s order was written.
Charles Norris of Nelson Mullins Riley and Scarborough in Charleston represented State Farm Life Insurance Company. Norris declined to comment on the ruling, citing the fact that the window for filing an appeal in the case remained open.
The 13-page decision is State Farm Life Insurance Co. v. Murphy (Lawyers Weekly No. 002-176-17). An opinion digest is available online at sclawyersweekly.com.
Follow David Donovan on Twitter @SCLWDonovan
