Wills, Estate & Power of Attorney

Was Ex Wife Entitled to $500,000 in Life Insurance? Or Was it Merely to “Secure” Support?

black and white image of life insurance form on clipboard woman hand black nails holding pen above form
Written by Russell Alexander ria@russellalexander.com / (905) 655-6335

In Birnie v. Birnie the question for the court was this:

In a Separation Agreement, was the husband’s obligation to secure life insurance, naming his wife as a beneficiary, a “standalone” one, or was it solely for the purposes of “securing” his spousal support payments?

Michael died suddenly at age 61.  At the time, he was married to Sharon whom he had married in 2009.

Michael’s first wife was Janice, whom he married in 1987 and who he separated from in 2002.  Under his 2004 Separation Agreement from Janice, Michael agreed to secure a life insurance policy for $500,000, designating Janice as the irrevocable beneficiary for as long as he was required to pay spousal support to her.

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However, he never did.  He died without ever arranging for the policy as required under the Agreement.

Janice now claimed that the Separation Agreement clause requiring him to obtain $500,000 in insurance was a “standalone” clause, fully enforceable as against the Estate.

Sharon (who was also the Estate Trustee of Michael’s Estate) argued otherwise:  The life insurance policy was simply intended to “secure” spousal support while Michael was alive and obliged to pay it, she said.

The court had to consider which of these two opposing interpretations of the Separation Agreement were correct.  As context, the court noted that Janice was in considerable financial need:  The spousal support she had been receiving from Michael was her primary source of income.  She was now 69 years old and had not worked during their traditional marriage so that she could support Michael’s career as a lawyer, where he earned almost $1 million in annual income just prior to his death.  She had also been diagnosed with cancer.

In interpreting the wording of the Separation Agreement, the court agreed with Janice:  The Estate was required to pay her the full $500,000.

When examining the Agreement terms, the court had to look at the plain meaning of the language Michael and Janice had used. Also, if there were two competing interpretations, the more reasonable one – and the one that produces a fair result – will be the one assumed by the court to best promote the intentions of the parties.

Here, the overriding intention of parties was clear:  They wished to have their affairs settled once and for all.  As the court said:

While arguments exist that the parties’ sole intention was to have the insurance act as mere “security”, a reading of the whole contract makes clear that such an interpretation would be inconsistent with the parties’ stated goals.  The parties wanted their matrimonial issues to come to an end.  They effectively stated as much in the preamble of the Separation Agreement.  They provided each other with expansive releases.  These are clear examples where the parties acted upon their intentions.

These conclusions were especially persuasive given that both Michael and Janice were represented by separate lawyers when the Separation Agreement was drafted.  If they had intended the life insurance policy to operate as a “stand-alone” benefit on Michael’s death, without being linked to the obligation to pay spousal or child support, then it was open to them to strike such a bargain and memorialize it in their Separation Agreement.

For the full text of the decision, see:

Birnie v. Birnie, 2019 ONSC 2152 (CanLII)


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About the author

Russell Alexander

Russell Alexander is the Founder & Senior Partner of Russell Alexander Collaborative Family Lawyers.