We all know that life insurance policies pay a benefit on the death of the individual who owns the policy. The holder of the policy can name any person their beneficiary. The beneficiary is usually a spouse or child. However, there are occasions when an unusual beneficiary is named.

Here is a true story of unusual events, where a man named a woman in an illicit affair as beneficiary instead of his wife and child. This is a story of great frustration, loss and yet a difficult but fair ending to tragedy.

In California, with very few exceptions, the wishes of the decedent are followed in a beneficiary designation, the form you fill out saying who is to receive proceeds on death. Most states follow the California rule. The beneficiary is paid the proceeds of the policy, even if at first blush it seems inconceivable and unfair to the family. This is Celeste’s story.

The decedent, Jeremy (names have been changed) was residing in California and married to Celeste for almost six years. They lived three great years as husband and wife but soon that would change. Celeste and Jeremy worked to support themselves, but Celeste became pregnant. After during preganacy she had to quit work because of pregnancy complications. Unfortunately about this time, Jeremy lost his job in construction due to the economic downturn. With both out of work, they could not afford the health insurance Cobra payments.

Celeste eventually gave birth to Stuart, a young blue eyed strapping child that looked the spitting image of Jeremy. Celeste recalls he was a proud papa that day in the hospital. They went home shortly to start a new life as parents, with all the expectations and excitements, mixed with the confusion of caring for a new child. Celeste had to resume working to support the family. Jeremy, still out of work, was to watch and care for Stuart, as day care would rob them of the benefit of Celeste’s return to work. They barely made ends meet, but were happy for six months. To protect each other and young Stuart, they each bought a life insurance policy designating the other as their beneficiary, paying for benefits on either of their deaths.

Unfortunately, as Jeremy remained unemployed, he became increasingly frustrated with himself, depressed and began to drink alcohol daily. Celeste found out he was drinking during the day while watching Stuart, and so had to hire day care. They began to fight, and predictably, Celeste demanded he clean up his act. Their bills for the birth of Stuart remained unpaid. No matter how much she tried to emotionally support Jeremy, he further withdrew, and remained despondent.

On Stuart’s second birthday, Jeremy did not come home. He was still not working, and had taken some of his things with him. Celeste did not know where he had gone. He left her with over $50,000 in debt, rent for their apartment payment and the continued need for day care. Unknown to Celeste, Jeremy found a “friend”, a woman in Arizona. He met this woman in California, the details unclear, but moved in with her for several months. Finally, Jeremy called one day to tell Celeste that this “friend” had supported him through his tough time. He begged to come back and Celeste agreed.

Jeremy came home, and was different, seemingly renewed. The “friend”, a female, would call from time to time, and eventually introduced herself to Celeste, always complimenting her on her great effort to raise Stuart and the strength to take Jeremy back. The friend assured Celeste their relationship was platonic. Jeremy got some temporary work and was at least paying some of the large debt that had accumulated.

But Jeremy’s new found enthusiasm soon evaporated. He once again slumped into despair. Whether frustrated at his job or home, he would not sy. In the two weeks before his death, he was caught drunk on the job and lost the temporary position. He kept his job loss a secret, advising that he had to go out of state for a job in Arizona. He returned several days later, but one morning, while Celeste was at work, his truck went off a cliff and he was killed. Celeste’s nightmare was about to worsen.

The “friend” called to wish condolences after his death, but before the funeral. She offered to help Celeste in any way that she could, agreeing to speak at the funeral. After his funeral, which cost $5,000 that Celeste did not have, Celeste applied for the modest life insurance policy to help pay off the many bills that had been accumulated. She was told she was not the beneficiary. Shocked she asked who, and was told the Arizona “friend” had been named as beneficiary when Jeremy had moved out of the house almost 1 year before.

Celeste called the “friend” and asked her to resign her interest. That request was declined. The ‘Friend” declared “apparently he wanted me to have this money.” Celeste after consulting with several attorneys, and told she had little chance of winning a case, asked Celeste to at least pay for the funeral and some of Stuart’s birth medical bills, that were Jeremy’s obligations as well. The “friend” refused.

Wouldn’t you think this is an obvious case of unfairness? Unfortunately, the lawyers that she interviewed all knew California law is very inflexible, usually awarding the beneficiary the benefit of the decedent’s last wishes. Celeste had no evidence that Jeremy had changed his mind and wanted his wife and child to have the insurance after his return from Arizona. In fact a week before his death, he had visited this “friend ” again, and by now it is obvious he was having an affair. Can you see a way for her to win favor and the benefits?

Totally despondent, she consulted with an attorney that believed in her cause. The success of this case turned on three fair propositions;

1. The parties mutually agreed to have policies of insurance. There was an unexpressed but arguable promise that the surviving spouse was to remain a beneficiary. Changing that designation breached the oral agreement.

2. Since the policy was paid for with community property assets, the wife should be entitled to at least one-half of the benefits, despite the designation form.

3. Finally, Celeste had not only paid with community property, but she was the one who earned almost all the money after the birth of Stuart, and so she paid for the entire policy. Why should someone else gain, gain from her payments.

When she filed her claim the “Friend” hired an attorney who advised that Celeste had no chance of winning and insisted she drop her suit. Thankfully an arbitrator felt otherwise, and awarded this hard working single mom the entire policy of insurance and costs of the lawsuit.Greed did not prevail. If you found the three above factors to be convincing to you in this true story, then you have experienced the real thrill and yet awesome responsibility of a lawyer, when helping those in need and in life.

About The Author

Injury victims have relied on Author and accident trial lawyer James Ballidis to help them with their recovery after an accident or devastating injury. You can obtain free useful books he has written to help manage an accident claim, injury or find a qualified attorney for your case. Call now 866 981-5596 or visit his firm website to read more from and about the law, accidents and him. http://www.thecaliforniainjurylawyer.com

NEW YORK (Reuters) –
Citigroup Inc's (C.N) spinoff of its life insurance unit, Primerica Inc (PRI.N) saw its shares gain more than a third in its debut on optimism that the life insurer will benefit from a rebounding economy.

The IPO's reception was also the latest glimmer of positive news for the third-largest U.S. bank, which was forced to seek various government rescues in 2008 and 2009. Citi shares closed up 3.2 percent at $4.18.

The first day rally followed investor interest that led underwriters to raise the size of the offering by 19 percent to 21.36 million shares. The shares were priced at $15 each, above the expected range of $12 to $14.

But the IPO still sold at a price-to-book value discount to Ameriprise Financial (AMP.N), MetLife (MET.N) and Prudential Financial (PRU.N), which it identified in its prospectus as competitors, said IPOdesktop.com President Francis Gaskins.

The relatively low valuation, plus signs of confidence in a gradually rebounding economy, both contributed to the share's gains, analysts said.

“Life insurance has been hammered by the recession like everything else has, but there has been an uptick over the past year in applications for issuance of traditional bread-and-butter life insurance,” said Clark Troy, a senior analyst at Aite Group LLC. “Insurers have been looking to bulk up their sales forces, and Primerica has one.”

The Dow Jones U.S. Life Insurance index has more than quadrupled since March 2009 (.DJUSIL).

Primerica shares rose much as 35 percent above their initial public offering price. They opened at $19.15 and rose as high as $20.20 Thursday afternoon.

The shares closed up 31 percent, at $19.65, on the New York Stock Exchange.

DIVIDING THE SPOILS

Citi, which accepted $45 billion worth of U.S. government bailout funds, is seeking to divest assets that are not part of its core banking business.

The bank tried to sell Primerica last year, but failed to find a buyer willing to pay a high enough price. Citi has taken nearly $1 billion in dividends out of the company since 2007 and will take another $622 million before the end of the IPO process.

Citi will take all of the proceeds from the offering and most of Primerica's existing accounts. Primerica will keep its new policies.

Primerica said in its prospectus that it would enter into co-insurance agreements with three affiliates of Citi. Those affiliates would take 80 to 90 percent of the risks and rewards of the term life insurance policies Primerica held at the end of 2009.

Despite Citi's retention of most accounts, Primerica is gaining more autonomy over its strategy, analysts said.

“This will give an opportunity for Primerica management to step out of the shadow of the larger organization and assert itself,” Troy said.

With a door-to-door sales force of independent contractors topping 100,000, Primerica sells life insurance to households earning between $30,000 and $100,000 annually.

Co-Chief Executives John Addison and Rick Williams told CNBC they planned to add sales people.

“We're going to be a smaller, faster-growing company going forward,” Williams said. “When we grow the sales force, the underlying sales grow.”

Citi was the sole bookrunner on the IPO. If the company and other underwriters purchase their full overallotment of 3.2 million shares, Citi's stake in Primerica will be reduced to 39 percent.

ANOTHER STEP FOR CITI'S SELL-OFF

Cutting troubled assets has been a major goal of Citi's restructuring. The IPO and a private deal with Warburg Pincus LLC (WP.UL) should reduce Citi's GAAP assets by about $5 billion during the second quarter, the bank said in a statement.

Michael Holland, chairman of Holland & Co in New York, said that Primerica's offering was a good sign for Citi, “but I wouldn't overstate the significance. It's something they had to do and they did it well.”

Holland said the offering could provide some momentum for banks trying to rid themselves of non-core assets. The Primerica offering is a good way to “go out there and test the marketplace,” he said.

The life insurance portion of Primerica was founded in 1977, but the company has roots in American Can Co, a food packaging business. It became part of Citigroup in the 1980s.

(Reporting by Clare Baldwin and Maria Aspan; Editing by Maureen Bavdek, Richard Chang and Leslie Gevirtz)