When a couple ends a relationship, they may sign a separation agreement outlining their responsibilities to one another, such as the division of property and other shared assets, and spousal support. In some cases, separation agreements might require one party from a relationship to purchase life insurance, naming the other as a beneficiary. Of course, it’s one thing to make an agreement, but it’s another thing altogether to comply with what is agreed to. In a recent decision from the Ontario Superior Court of Justice, the court asked what to do when a deceased husband failed to comply with a separation agreement.

A tale of two marriages

The deceased (“MB”) was married to his first wife (“JB”) from 1987 to July 2002. They had no children together, but JB did have two children from a previous relationship. They were independent adults at the time of the trial, however. Following their separation, JB and MB signed a separation agreement in which MB agreed to secure a life insurance policy in the amount of $500,000, naming JB as the irrevocable beneficiary. Following his first marriage, MB married his second wife (“SL”) in December 2009. Unfortunately, MB died in 2017 at the age of 61 after a brief illness.

 The clause requiring the husband to purchase the life insurance policy was found under the “spousal support” section of the agreement. It stated,

“(a) The Husband shall pay to the Wife spousal support for the Wife in the amount of $6,250.00 per month commencing on January 1st, 2004 and on the first day of each and every month thereafter….

(g) The Husband undertakes and agrees to obtain a life insurance policy on his life in the face amount of $500,000.00.  The Husband will designate the Wife as the irrevocable beneficiary under the terms of the aforementioned life insurance policy; with the beneficiary designation to continue for so long as the Husband is required to pay spousal support to the Wife.  Upon the execution of the Separation Agreement by both Parties, the Husband will forthwith provide documentation to the Wife confirming the details of the life insurance coverage, confirmation of the face amount of the policy, and confirmation that the Wife is designated as beneficiary under the terms of the said policy.  In addition, the Husband shall provide a direction and authorization to the Wife addressed to the life insurer allowing the Wife to obtain any and all information that she may require directly from the life insurance company with regard to the details of the life insurance designation outlined herein.

It turned out that MB had failed to secure the life insurance policy he agreed to purchase upon his separation from JB. After

A standalone clause, or part of a larger discussion?

Following MB’s death, JB realized the insurance policy had not been purchased. As a result, JB attempted to recover $500,000 from MB’s estate. She claimed the clause requiring MB to obtain life insurance was a “standalone” clause, which means it must be read and understood independently from the rest of the agreement. The estate argued the clause was intended only to ensure spousal support would be paid by MB.

 The court noted that JB was no 69-years-old and had been relying on spousal support as her primary source of income. She testified that the couple’s marriage was traditional in nature, and she did not work outside of the home in order to support MB’s career. In addition, she had been diagnosed with cancer prior to the trial.

The court also found that the agreement contained no language indicating the purpose of securing life insurance was to “secure” support. The court held,

“Accordingly, it is clear to me that there is no genuine issue for trial insofar as the insurance obligation in the Separation Agreement is not intended to act solely as “security” for spousal support.  Instead, the impugned clause is a “stand alone” clause whereby (JB) would be entitled to receive $500,000 upon (MB’s) passing. I accept that the parties structured this clause to both “secure” support as well as accomplish other ends.”

Talk to the experienced family lawyers at Jason P. Howie if you have spousal support of separation agreement questions you need to work through. We can be reached by phone at 519.973.1500 or online. Many of our clients are referred to us by former and current clients, as well as by lawyers, accountants and other professionals.