## Facts

- Rebecca Tyre and Louis Tyre married in 1917 and remained married until Louis’s death in 1957.
- In 1926, Aetna issued a $20,000 life insurance policy on Louis’s life; all premiums were paid with community funds.
- The original beneficiary was a corporation; after Louis retired in 1946, he changed the beneficiary designation so the policy would pay Rebecca a lump sum.
- In 1950, without Rebecca’s knowledge or consent, Louis elected an alternate settlement option: on his death, Rebecca would receive monthly annuity payments for her life, with a 10-year minimum period; if she died within 10 years, the remaining payments during that period would go to their three adult daughters.
- At Louis’s death, Rebecca was 59 years and 8 months old; she had suffered three heart attacks, and the trial court found her life expectancy could be below average.
- Under the annuity option, Rebecca would receive more than $20,000 only if she lived long enough; if she died within 10 years, total payments could be substantially less than the face amount, and she would not receive $10,000 unless she survived about 6.77 years.
- The policy had been held by a bank as collateral, so Rebecca learned of the 1950 settlement election only months after Louis’s death; she promptly rejected it and demanded cash payment.
- Rebecca and the daughters sued, seeking $10,000 in cash for Rebecca’s claimed one-half community interest and a declaration that the remaining $10,000 be paid under the elected settlement.
- The trial court entered judgment for Aetna, and the intermediate appellate court affirmed.

## Issues

1. Whether an insured spouse managing community personal property may, without the other spouse’s consent, elect a life-insurance settlement option that materially risks or reduces the noninsured spouse’s ability to realize her vested one-half community interest.
2. Whether the noninsured spouse may demand a cash equivalent for her one-half community share of policy proceeds purchased with community funds, notwithstanding the insured’s unilateral post-issuance settlement election.

## Decision

- The California Supreme Court reversed and remanded with directions to enter judgment protecting Rebecca’s community property rights.
- The court held that Louis could not, without Rebecca’s consent, elect a payment method that unreasonably or improperly impaired her vested one-half community interest in the policy proceeds.
- Rebecca was entitled to recover the cash value or equivalent of her one-half community share, rather than being confined to the contingent annuity stream created by Louis’s unilateral election.
- Louis remained free to control the disposition of his one-half community share, but not to place Rebecca’s one-half at substantial risk of loss through a unilateral settlement choice.

## Legal Principles

- When life-insurance premiums are paid with community funds, the policy and its proceeds are community property to that extent, and the noninsured spouse holds a present vested one-half interest.
- The managing spouse’s authority over community personal property is limited; he may not make dispositions that operate as an improper impairment of the other spouse’s community rights.
- A settlement option election that makes the noninsured spouse’s receipt of her one-half share substantially speculative or contingent may exceed the insured spouse’s managerial power when made without the other spouse’s consent.
- An insurer may not rely on policy settlement provisions to defeat the noninsured spouse’s vested community interest; the contract must be applied consistently with community property law.
- The appropriate remedy is to secure the noninsured spouse the equivalent value of her one-half community interest, while permitting the insured spouse’s election to govern distribution of his one-half share.

## Conclusion

The court held that a unilateral election of an annuity settlement funded by community-paid premiums cannot lawfully place the surviving spouse’s vested community share at substantial risk of receiving less than its equivalent value; the surviving spouse may obtain a cash-equivalent recovery for her one-half interest despite the insured’s settlement election.


Tyre v. Aetna Life Ins. Co., 54 Cal. 2d 399, 353 P.2d 725 (Cal. 1960)