In Shuttle v. Ligor (Mass. App. Ct., Nov. 20, 2015) the Massachusetts Court of Appeals held an employer was equitably estopped from changing the beneficiary of his life insurance policy from his employee to his wife, but the wife (who received the policy proceeds) owed nothing to the employee.
An employee of many years had been informed by her boss that she was designated as a beneficiary under his life insurance policy. The employee was told that her boss’s designation of her as beneficiary was “intended to be her retirement plan as compensation for her working for less money than her performance merited.”
In the years following the designation, the company downsized and eventually was unable to continue paying the employee a salary. The employee asserted that she continued to perform substantial work for the company without pay because she had been designated as the beneficiary on the boss’s insurance policy.
After the boss suffered a stroke, the employee confirmed with the boss that he intended to keep her as beneficiary, and also made several of the premium payments for the policy out of her own money. Unbeknownst to the employee, after that the boss changed the beneficiary to his wife.
Following the death of the boss, the policy proceeds were paid to his wife. The employee sued the insured’s estate (for breach of contract) and the wife (for unjust enrichment). The court found in favor of the employee against the estate, upholding the employee’s claim to the policy proceeds plus interest. The court held that the because the employee had detrimentally relied on her boss’s promise that she was the beneficiary by continuing to perform service for the company uncompensated, she had an equitable interest in the policy proceeds.
The wife, however, had made no promises to the employee. The Massachusetts Court of Appeals held that since no wrongdoing on the wife’s part was alleged, there was no valid claim for unjust enrichment.