The Department of the Treasury and the Internal Revenue Service released new guidance that is “designed to expand the use of income annuities in 401(k) plans.”
By Cyril Tuohy
The Mississippi Supreme Court has ruled against a couple who claimed they were due the proceeds from a critical illness policy in accordance with the wishes of the deceased policyholder.
The high court, in overturning an appeals court decision, ruled that Michael and Betty Strait were not entitled to the policy proceeds from the estate of Joseph Bagley because the terms of the critical illness policy underwritten by American Heritage Life did not provide Bagley with an option to name a beneficiary.
Furthermore, the Straits, who were engaged in negotiating the terms of Bagley’s will, never contested passage of the proceeds of the cancer care policy to Bagley’s estate when it was settled in probate, the Mississippi Supreme Court found.
“The Straits were never eligible to be third-party beneficiaries under the policy, and they have failed to show any equitable entitlement to reimbursement,” the court said in a 10-page decision issued earlier this month.
Bagley was diagnosed with cancer in 2008. Before his death, he promised the policy proceeds to the Straits. He signed a beneficiary change form but the Straits were never listed on it, as Bagley’s agent could not get in touch with the underwriter.
The insurance agent, Jackie McPhail, based in Jackson, Miss., sold the policy to Bagley, who was a friend. By 2008, McPhail was no longer an agent for American Heritage but she continued to service policies underwritten by American Heritage.
According to court documents, McPhail was delayed in reaching the underwriter, first by Tropical Storm Fay, which lumbered ashore Aug. 19, 2008, and then when the underwriter’s legal department declined to return her phone calls, according to court papers.
Bagley died shortly after and the beneficiary form was never completed.
In 2009, proceeds totaling $44,973.50 were issued to Bagley’s estate from the policy, an amount claimed by William Kinstley, the executor of Bagley’s will.
A Hinds County Chancery Court granted the executor’s request, but later in 2009 the Straits filed suit against McPhail and American Heritage for breach of contract, negligence, breach of fiduciary duty and bad faith, and refusal to pay, court documents indicate.
A lower court granted requests from McPhail and American Heritage to have the case dismissed but the Mississippi Court of Appeals found “genuine issues of material fact” as to the liability of American Heritage “because of McPhail’s confusion over the proper way to change a beneficiary.”
The appeals court also found grounds to overturn the lower court on the issue of whether American Heritage is “vicariously liable for McPhail’s activities in ‘servicing’ the policy.”
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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