Life Insurance Company of North America v. Ortiz
United States Court of Appeals for the Ninth Circuit
Appeal from the United States District Court for the Central District of California
Filed August 1, 2008
Cite as 07-55308

Divorced Wife’s Claims on Husband’s Insurance Coverage Upheld

On August 2, 1998, Luis Gerardo Ortiz took insurance in his life with Life Insurance Company of North America and Reliance Standard. On that policy, Luis Gerardo Ortiz designated his former wife Gloria Ortiz, as the beneficiary.

Following the events, Luis Gerardo Ortiz and Gloria Ortiz separated in March of 2002. The Superior Court of California entered a Judgment on Reserved Issues in their divorce on December 15, 2004.

The Judgment on Reserved Issues awarded all right, title and interest in all of Luis Gerardo Ortiz’s retirement/pension, 457(b) plans, 401(k) plans and other deferred benefits in Luis Gerardo Ortiz’s name to Luis Gerardo Ortiz.

The document also included a pre-printed notice indicating that it does not automatically cancel the rights of a spouse as beneficiary on the other spouse’s life insurance policy.

February of 2005, Luis Gerardo Ortiz’s divorce attorney sent an exit letter urging him to reaffirm and/or change any beneficiaries on any insurance policies. Luis Gerardo Ortiz has indicated that he intended to go and look into those policies and thus made an assurance thereto.

Despite these assurances, Luis Gerardo Ortiz did not attempt to change the written beneficiary designations on file with Life Insurance Company of North America and Reliance Standard.

In the meantime, Luis Gerardo Ortiz married Graciela Ortiz on May 28, 2005. Jerry did not work May 28-31 because of the marriage and the honeymoon.

On June 24, 2005, Jerry died because of a gunshot wound to the head while he was on duty.

The term life insurance payment that funded Luis Gerardo Ortiz’s coverage at the time of death was withdrawn from his May paycheck. The life insurance companies deposited life insurance and accidental death benefits totaling $518,483.13 with the clerk of the court.

Apparently, the two wives involved in the case made their contradicting claims as to the Life insurance policy of Luis Gerardo Ortiz.

To resolve this, the life insurance companies instituted an interpleader action in the United States District Court for the Central District of California naming both Gloria Ortiz and Graciela Ortiz as defendants.

In resolving the case, the district court has made the following findings:

• That the life insurance policies became Luis Gerardo Ortiz’s separate property at the time of his divorce from Gloria Ortiz


• That Luis Gerardo Ortiz expressed an intent to name Graciela as his beneficiary, but he died intestate before he could make that change

Thus, accordingly, the district court awarded the proceeds of the policies to the estate to be split equally between Graciela and Luis Gerardo Ortiz’s two sons.

Gloria Ortiz then move to stay the judgment pending appeal and an application for an emergency stay order. The District court denied the motion to stay the judgment pending appeal but the court granted the unopposed application for an emergency stay order.

Thus, the case was then brought to the United States Court of Appeals for the Ninth Circuit.

On appeal, in reversing the District Courts findings, the United States Court of Appeals for the Ninth Circuit has held that divorce between Luis Gerardo Ortiz and Gloria Ortiz did not extinguish the latter’s (Gloria) expectancy interest in Luis Gerardo Ortiz’s life insurance policy.

The court held that this applies especially, where text of property settlement agreement was not clear that wife’s (Gloria) beneficiary status was contemplated.

Further, intentionally waived document containing a pre-printed notice that such form would not automatically cancel the rights of a spouse as beneficiary, offers support to this findings.

As the appellate court found, the District court’s reliance on husband’s post-divorce intent was misplaced.