## Facts

- Stephen Kapcar worked for J.C. Penney and was covered by an employer-provided group life-insurance policy issued by Aetna Life Insurance Company (Aetna).
- After Stephen married Christine Kapcar (later Christine B. McCarthy), he designated McCarthy as the policy’s beneficiary.
- The policy allowed an employee to change the beneficiary only by submitting a written request filed with the employer’s headquarters or Aetna’s home office.
- Stephen and McCarthy separated in 1977 and divorced in 1978.
- The separation agreement, incorporated into the divorce decree, contained broad mutual releases of rights in the other spouse’s property and estate, but it did not mention the Aetna policy, its proceeds, or any beneficiary designation.
- After the separation, Stephen—who suffered from multiple sclerosis—lived with his father, Emil S. Kapcar.
- In 1977, Stephen executed a holographic (handwritten) will leaving all his property, including “insurance benefits,” to Emil.
- Stephen never contacted Aetna (or filed any written request through J.C. Penney) to change the beneficiary designation under the policy.
- When Stephen died in 1984, McCarthy remained the last recorded beneficiary on the Aetna policy.
- McCarthy sought the policy proceeds from Aetna. Aetna filed an interpleader action, deposited the proceeds with the court, and brought Emil into the case so McCarthy and Emil could litigate entitlement.
- The trial court awarded the proceeds to McCarthy. The Appellate Division reversed and awarded the proceeds to Emil based on Stephen’s will and surrounding circumstances. McCarthy appealed to the New York Court of Appeals.

## Issues

1. Whether an insured can change the beneficiary of a life-insurance policy by a testamentary gift in a will when the policy requires a written request filed with the insurer or employer and the insured never filed one.
2. Whether a broad divorce settlement waiver of rights in an ex-spouse’s “property or estate” bars the ex-spouse from recovering as the named beneficiary of the ex-spouse’s life-insurance policy, absent specific reference to the policy or beneficiary designation.

## Decision

- The New York Court of Appeals reversed the Appellate Division and reinstated the trial court’s judgment awarding the insurance proceeds to McCarthy.
- A will referring to “insurance benefits” did not effect a beneficiary change because the insurance contract required a filed written request, and Stephen did not use that procedure.
- The court declined to apply the substantial-compliance doctrine because Stephen took no affirmative steps to make a policy-compliant change (such as notifying Aetna or submitting change paperwork).
- The divorce settlement’s general release language did not waive McCarthy’s contractual right as the named beneficiary, because the policy proceeds were payable by contract to a designated beneficiary and the settlement did not specifically address that right.

## Legal Principles

- When a life-insurance policy specifies an exclusive method for changing beneficiaries, a change is ineffective unless the insured complies with that method or meets the requirements for substantial compliance.
- A testamentary disposition is not a substitute for the change-of-beneficiary procedure required by the insurance contract, where the insured made no attempt to follow the contract’s method.
- Substantial compliance may apply only when the insured has taken concrete steps to complete the beneficiary change and completion failed due to events outside the insured’s control; it does not apply when the insured does nothing beyond expressing intent.
- Life-insurance proceeds payable to a named beneficiary pass by contract and do not become part of the insured’s probate estate.
- A general divorce waiver of rights in an ex-spouse’s “property” or “estate” does not, without specific language, relinquish the waiving spouse’s rights as the named beneficiary under a life-insurance contract.

## Conclusion

The court held that McCarthy, as the last properly designated beneficiary, was entitled to the life-insurance proceeds because Stephen never filed the written request required by the policy to change beneficiaries, his will could not substitute for that contractual procedure, and the divorce settlement’s broad releases did not specifically waive McCarthy’s independent contractual right to receive the policy proceeds.


McCarthy v. Kapcar, 704 N.E.2d 557 (1998)