Life Insurance

Discovery of Corporate Owned Life Insurance Policy

Torrez v. Winn-Dixie Stores, Inc., 118 S.W. 3d 817 (Tex. App.—Fort Worth 2003, pet. dism'd).


Employer purchased a life insurance policy on Employee naming itself as the beneficiary. When Employee died in 1996, Employer collected the proceeds of the policy. Executor of Employee’s estate gained knowledge of this policy in December 2001 and filed suit approximately three months later claiming that Employer did not have an insurable interest in Employee’s life and thus requested that the court impose a constructive trust on the proceeds. Employer argued that Executor’s claim was barred by limitations and the trial court agreed.

The appellate court reversed and remanded for a trial on the merits. The court agreed with Executor’s assertion that the statute of limitations was tolled until Executor discovered the existence of the policy because the policy was inherently undiscoverable. The court rejected Employer’s claim that Executor had a duty to ask Employer whether it had purchased a life insurance policy on Employee’s life. Accordingly, the trial court’s granting of a summary judgment was improper because Executor filed suit within a few months of the policy’s discovery.

Moral: Many employers purchase life insurance policies on employees. Unless the employee qualifies as a key employee whose death would cause a financial hardship to the employer, the employer lacks an insurable interest and thus the employee’s estate would have a claim to the proceeds. Thus, a personal representative should check with the deceased’s employers, both present and past, to ascertain the existence of such a policy.