An appellate court in Michigan, reversing a trial court's decision, has ruled that the state was entitled to 90 percent of the total life insurance proceeds received by an inmate following his grandmother's death.
The Case
Irmtraud Dishner named her grandson, Matthew I. Chauncey, an inmate in a Michigan prison, as the sole beneficiary of her life insurance policy. After her death, a check totaling $8,062.52 was issued to Chauncey and deposited into his prison account.
Thereafter, the state filed a complaint under the State Correctional Facility Reimbursement Act (“SCFRA”) seeking 90 percent of the life insurance proceeds as reimbursement for Chauncey's cost of care during his incarceration.
Chauncey asserted that his grandmother had told him that “the money was to be split three ways and that [Chauncey] was to give 1/3 to each of his sisters.” He contended that this amounted to an oral contract, and he asked the trial court to “take into consideration any legal or moral obligation” that he had with respect to the life insurance proceeds. Ultimately, Chauncey asked that the trial court “award the State of Michigan 90% of [Chauncey's] 1/3 share of the death benefit.”
The trial court decided that it would “exercise its discretion and its equitable powers and order that the policy … be split three ways.” It then entered an order awarding $2,687.51 to each of Chauncey's sisters. It also awarded $2,418.75 to the state, which represented 90 percent of Chauncey's one-third share in the proceeds; the remaining funds were remitted to Chauncey.
The state appealed.
The Appellate Court's Decision
The appellate court reversed.
In its decision, the appellate court explained that Chauncey's grandmother had named him as the sole beneficiary of her life insurance policy; that she had obtained this policy before Chauncey's incarceration; and that, before her death, she had made no efforts to change the named beneficiary on the policy through the insurer that had issued it.
The appellate court then ruled that the trial court had erred by exercising its equitable and discretionary powers to award Chauncey's sisters a share in the life insurance proceeds. According to the appellate court, as a matter of law, the life insurance proceeds belonged exclusively to Chauncey as the sole beneficiary of his grandmother's policy and the state was entitled to a 90 percent share of the proceeds. Chauncey could not elect to pay family members before reimbursing the state and, because his sisters were not his dependents, he could not claim a moral or legal obligation to his sisters that would usurp the state's entitlement to his assets under the SCFRA, the appellate court concluded.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].