The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Acting Chief Justice is urging Parliament to “do everything in its power” to reform a 140 year-old law designed to protect married women and “cure” uncertainties that could spark increasing legal disputes.

Justice Deborah Fraser made her plea after ruling in favour of three life insurance policyholders in their separate disputes with Family Guardian over the BISX-listed carrier’s refusal to let them change the policy beneficiaries following deaths in their families.

Mertis Archer, Pamela Russell and Almanda Clarke all sought adjustments after originally-selected beneficiaries pre-deceased them, but Family Guardian asserted that it was prevented from effecting these changes for all three by section seven of the Married Women’s Property Act 1884. 

This stipulates that the payout from any life insurance policy taken out by a husband and wife, with their spouse and/or children listed as the beneficiaries, goes into an automatically-created “statutory trust” that is kept separate from the insured’s estate upon their death.

Asserting that this section applied to all three policyholders, Family Guardian took the position it was unable to change the policy beneficiaries because the Act created “an absolute vested interest” that was irrevocable in favour of the original beneficiary and thus could not be changed.

Its position on the disputes, which have lasted between eight to ten years, triggered policyholder complaints against Family Guardian to industry regulator, the Insurance Commission of The Bahamas (ICB). The latter, according to Justice Fraser’s ruling, took a different stance to the BISX-listed life and health insurer as the two “were unable to reach an agreement on the issue” leaving it for the Supreme Court to settle.

The Acting Chief Justice, in her September 13, 2024, verdict called on both houses of Parliament to act on legislative reforms that would clear up when section seven of the Married Women’s Property Act applies so as to avoid an ever-increasing number of contract and trust-related disputes.

“I believe it is time for the legislature to revisit the statutory regime currently in place to avoid any potential claims for breach of contract or breach of trust that may arise based on differing interpretations of existing laws. Express language should be used so there is no confusion as to how and when section 7 of the Married Women’s Property Act applies (if at all),” Justice Fraser wrote.

“Until section seven of the Married Women’s Property Act is cured, this is bound to cause future issues and the legislature should do everything in its power to provide express terms that are not open to any other interpretation.”

The Married Women’s Property Act was designed to protect the wife’s right to own, buy and sell assets, both her own and those accumulated during the marriage, as well as give her a separate legal identity from her husband.

Justice Fraser, consolidating the three disputes into one ruling because they all raised similar legal issues, noted that Mrs Archer converted her original term life insurance policy, taken out on July 28, 2009, to a select life plan policy with Family Guardian on December 28, 2011. The policy had a face value of $100,000.

The beneficiaries, who stayed the same under both policies, were Mrs Archer’s husband, Bertram Archer, and her children, Karla Prince, Karie Prince, Damian Tomlinson and Karow Prince. “It is alleged that, at no time prior to the issuance of the policies, were such policies designated as irrevocable,” Justice Fraser noted.

Mr Archer pre-deceased his wife on January 20, 2016, and she sought to invoke the ‘owner and beneficiary’ clause that allowed her to change any policy beneficiary without their approval provided it was lawful to do so.

“In February 2016, Mrs Archer instructed Family Guardian to remove her husband as a beneficiary under the select life policy, thereby leaving her four children as the sole beneficiaries,” Justice Fraser wrote in her judgment.

“Family Guardian advised Mrs Archer that she could not make any changes to the select life policy until her husband’s estate was probated. She also attempted to obtain the cash surrender value of the select life policy, but Family Guardian did not allow her to do so.”

After Mrs Archer complained to the Insurance Commission, Family Guardian told the regulator via a March 8, 2017, letter that she “would not be permitted to change her beneficiaries as a resulting trust was created by virtue of section seven of the Married Women’s Protection Act”.

Thus led Mrs Archer to initiate Supreme Court legal action on April 29, 2019, seeking declarations that the statutory trust created under that Act is revocable; that she can remove her late husband as a beneficiary; that her instructions “are valid and fully effective” under the Insurance Act 2009; and that upon her death the policy payout will go to her four children.

In similar fashion, Ms Russell named her daughter, Arimentha Clarke, as beneficiary of the $10,000 whole life policy she took out with Family Guardian on November 13, 1989. The policy again stated that Ms Russell could change the beneficiary upon written request.

He daughter passed on June 25, 2008, and Ms Russell subsequently “attended Family Guardian’s office numerous times and requested that Family Guardian change the beneficiary of the whole life policy to Ms Russell’s grandchildren, Rikera Ingraham and Michael Bain Jr, who are two of Ms Clarke’s children.

“On each visit to Family Guardian, it refused to effect the requested change,” Justice Fraser wrote. “An unidentified insurance agent of Family Guardian purportedly advised Ms Russell to cease making payments on the whole life policy as Family Guardian refused to allow her to change her beneficiary. Ms Russell stopped making payments on June 27, 2013, thus the whole life policy lapsed.

“Ms Russell then formally wrote to Family Guardian on October 24, 2013, with the same request to have her grandchildren designated as her beneficiaries under the whole life policy. She sent a copy of this letter to the Insurance Commission of The Bahamas.

“On January 30, 2014, Family Guardian sent a letter to Ms Russell stating that Family Guardian was prepared to allow the beneficiary change to be made provided that, if Arimentha Clarke had a will, it contained a bequest of the proceeds payable under the whole life policy to Ms Russell’s grandchildren.

“Family Guardian also stated that, in the event that Arimentha Clarke died intestate, it required confirmation that the two named grandchildren were Arimentha Clarke’s only children and a release from Arimentha Clarke’s husband containing a hold harmless provision in respect of future claims in relation to the whole life policy.”

Following an investigation by the Insurance Commission, Family Guardian again cited section seven of the Married Women’s Property Act for why it would not permit the beneficiary to be changed, leading to Ms Russell filing legal action similar to that initiated by Mrs Archer.

In the final case, Alamanda Clarke took out a Family Guardian $5,000 whole life policy on October 16, 1995, designating her son, Simeon Clarke, as beneficiary. However, he passed on December 22, 2013, and in accordance with the policy terms Alamanda Clarke applied to Family Guardian on February 9, 2015, to change the beneficiary to her daughter, Nicolette Clarke.

“Family Guardian refused to comply with the request and has declined to acknowledge Ms Clarke as the new beneficiary under the whole life policy,” Justice Fraser ruled. “On May 15, 2015, Ms Clarke’s mother filed a formal complaint with the Insurance Commission against Family Guardian for its failure to carry out her instructions to remove Simeon L. Clarke as the named beneficiary and replace him with Ms Clarke.

“On October 10, 2015, Almanda Clarke passed away. The death benefit payable under the whole life policy has not been paid to Ms Clarke.” This triggered the third legal claim subject to Justice Fraser’s judgment.

Krystle Saunders, Family Guardian’s general counsel, revealed in an affidavit that the Insurance Commission disagreed with the position taken by the BISX-listed insurer based on legal opinions it had received “but the parties were unable to reach an agreement on the issue”. The carrier stuck to its position that the Married Women’s Property Act and its section seven prevented it from making the beneficiary changes.

Justice Fraser said the issue of whether this Act applied, and how, to the three life insurance policies in dispute had to determined alongside the Insurance Act 2009 and the Trustee Act. She added that the former, which would apply only to Mrs Archer’s case as the policy was taken out after the Insurance Act came into effect, allowed any policyholder to revoke or alter a named beneficiary.

And the Insurance Act’s section 241 also asserted specifically that the Married Women’s Protection Act had no impact on insurance policies taken out after 2009 when it came to changing beneficiaries. The Acting Chief Justice also noted that the Trustee Act allows a trust settlor to retain powers to change the beneficiaries with no effect on the trust itself, and also applies to any trust in existence.

Referring to the three disputes before her, Justice Fraser wrote: “As all three policies in the instant case are statutory trusts, which all have a change of beneficiary clause, the Trustee Act applies to them and the settlor (or policyholder) retaining the power to change the named beneficiary does not invalidate the trust.”

Applying all this to the three life insurance policies before her, the Acting Chief Justice found that in the case of Mrs Archer it was “patently clear” she could change the beneficiaries and that the Insurance Act coming into force meant the Married Women’s Protection Act did not apply.

As a result, this had created a revocable trust with “wide powers” for Mrs Archer to remove and/or add beneficiaries as long as she complied with the policy’s terms. “Accordingly, I rule that Mrs Archer’s select life policy is revocable and that no absolute interest vested in her late husband,” Justice Fraser said. “Mrs Archer is entitled to change the named beneficiaries in accordance with the select life policy.”

As for Ms Russell, the Acting Chief Justice said it was clear she wanted to change beneficiaries if she so chose. And she, too, had “wide powers” for achieving that provided she complied with the policy’s terms.

“Family Guardian’s counsel asserts that the wording of section seven of the Married Women’s Protection Act creates an absolute trust in favour of any originally named beneficiary,” Justice Fraser said, referring to Robert Adams KC of Delaney Partners.

“Courts must adopt a more robust approach to statutory interpretation on occasions where rigid or strict adherence to express wording would create an absurdity or create circumstances which clearly is the opposite to what a private individual intended to do with his assets – particularly when a statute may not necessarily reflect modern commercial practices, and the intentions of parties under a private contract.”

Taking the Married Women’s Protection Act section seven, and reading it alongside the Trustee Act’s section three, Justice Fraser said it was clear that a settlor (policyholder) can change beneficiaries but the trust stays valid.

“I find it difficult to accept that it was in the contemplation of the settlor that she intended a deceased beneficiary’s estate (who pre-deceases her) to benefit from the proceeds of a life insurance policy and the insured is expected to continue paying for said policy,” Justice Fraser said of Ms Russell’s circumstances. 

“That, in my view, cannot be the true intention of the settlor/insured or the purpose of the trust. I do not believe this is a true reflection of the legislative regime together with the express terms of the statutory trust. It goes against the very nature and tenor of the trust.”

As a result, she ruled that Family Guardian “must comply” with Ms Russell’s instructions to change the beneficiaries. She gave a similar verdict in the case of Ms Clarke. Timothy Eneas KC and Ashley Sands represented the three policyholders.