Edward R. Weinstein, Esq.Edward R. Weinstein, Esq.

Why Must I Have Life Insurance If Alimony or Child Support Is Part Of My Divorce?

In a New Jersey, seasoned divorce attorneys understand that, in addition to alimony and child support, most divorce orders or settlement agreements also contain provisions for maintenance of life insurance by the supporting spouse for the benefit of the supported spouse. The experienced attorneys at my law firm understand that, like all support provisions, New Jersey divorce courts place great importance on the enforcement of life insurance provisions, and take a failure to maintain such an obligation very seriously. In Ashmont v. Ashmont, the Honorable Judge Jones of the Ocean County Family Part court found that ex-husband, Steven Ashmont, failed to abide by the life insurance obligation provision in his property settlement agreement, and order two forms of relief to remedy the failure.  Judge Jones ordered: (1) a change of ownership of the current policy; and (2) financial sanctions against Steven.

In a divorce action, if a supporting spouse has an obligation to provide alimony or child support, a court can order that spouse to also maintain a life insurance policy to financially protect the dependent spouse, or child, just in case the supporting party passes away pre-maturely. Moreover, if a supporting spouse has a duty to provide life insurance, then a court may order that spouse to name the supported spouse as an owner of the policy. This principle is generally implemented when the supporting spouse has consistently failed to abide by a life insurance obligation.

If someone intentionally breaches a court order to maintain life insurance, under Rule 5:7-3, then the court can step in and implement various forms of relief. This relief may include, but is not limited to, continuing financial sanctions. Sometimes a person may violate a court order, but start complying with the same order when the other party files a lawsuit to enforce the order. This type of compliance does not necessarily remedy the original violation. Regardless, corrective compliance is still significant in mitigating penalties and sanctions. A duty to maintain life insurance is a continuing financial duty, very much related to alimony and child support, Therefore, a life insurance obligation can potentially be modified by a showing of changed circumstances.

Renee and Steven Ashmont divorced in 2007, and had two children together. Their final judgment of divorce incorporated a matrimonial settlement agreement in which they mutually agreed that Renee would have primary residential custody of the kids, and Steven would pay her permanent child support and alimony. In addition, Steven also agreed to maintain life insurance on his life with Renee and the children named as beneficiaries. Despite this mutually agreed to position, however, Renee still had to file a motion in 2015 to enforce the life insurance provisions. She argued that Steven breach the agreement because he failed to provid proof that he was in fact maintaining life insurance with Renee and the kids named as beneficiaries. She further argued that he was in violation of the life insurance obligation for a number of years, and thus he compromised both her and their children’s financial security. To protect her and her children’s financial future, Renee also requested the court institute sanctions on Steven for his violations of the life insurance provision.

 During the trial Steven admitted that was not in compliance with the life insurance provision for the past four years. After receiving notice of Renee’s motion, however, he took out a life insurance policy as per the settlement agreement. Steven argued that the court should consider the fact the he did finally secure life insurance, and bring himself into compliance with the settlement agreement before the trial ended.  

Judge Jones explained that when someone willingly violates a court ordered responsibility to maintain life insurance, the other party can file a motion to aid in litigant’s rights under Rule 1:10-3. As per Rule 5:3-7(b), the court can consider numerous other remedies as well, such as suspending their driver’s or occupational license, economic sanctions, community service, or even incarceration. Rule 5:3-7(b)(8) contains a catch all provision that gives a judge to the power to order “any other appropriate remedy”. Court of equity have the discretion to order remedies to fit the changing circumstances of every case. Equitable remedies can vary from case to case depending on the circumstances.

Steven clearly violated the provisions of the parties’ settlement agreement by not providing life insurance to adequately protect his child support and alimony obligations. Furthermore, there was no evidence in the record that he was not able to get a policy for financial, health or any other reason. While he did take out a life insurance policy after Renee filed the enforcement order, that action did not change the fact he was he was not in compliance with the life insurance obligation for an unreasonable amount of time, that was a risk to both Renee and the children. Therefore, Judge Jones decided to implement two forms of relief: change of ownership of the current policy, and financial sanctions.

Even without a violation of court order, there is some practical logic in having the person who is getting support serve as the owner of the life insurance policy. When there is a history of life insurance obligation violations this logic only rises to a higher level. The owner of a policy receives any and all notices from the insurance company in relation to the policy status, invoices, notices of proposed cancellations, and renewal dates. Third parties are not allowed to receive the same notices. Potentially, if Steven fails to pay the premium or keep the policy, Renee has no way of knowing from insurance company at all. The main benefit to having Renee as the named owner of the policy is that she will receive actual notice of proposed changes to policy. Judge Jones ordered Steven to arrange a transfer of ownership of the life insurance policy to Renee within 30 days. Steven was further ordered to provide Renee with a signed and completed written authorization form that would permit her to talk directly to the insurance company about the policy. After the transfer of ownership, Steven would still be required to make all the payments for the policy on time as he was in the original settlement agreement. Renee would be responsible for emailing Steven scanned copies of the premium amounts and due dates, at least thirty days before they became due. Steven would have to pay these premiums ten days before each due date, and email Renee proof of the same.

Renee also sought sanctions against Steven. She wanted either day-to-day sanctions, or penalties consistent with how much money he saved by not maintaining a life insurance policy during the past four years, which was approximately $ 7440. However, in its discretion the court also considered that Steven did ultimately comply with the life insurance provision before sanctions and the end of the hearing. Moreover, Renee did not suffer any actual damage through his violation. Still this does not negate Steven’s wrong doing. Family Part courts value creative solutions to support positive and persuasive reinforcement for a breaching parties’ cooperation. The court considered the totality of the circumstances and implemented a sanction of $ 2500, plus paying Renee back for the filing fee. Furthermore, Judge Jones held that if Steven breached is obligation again Renee could seek further relief in the form of additional sanctions.

Please contact my office if you have any questions related to divorce in New Jersey.