Oakland Tennessee Divorce Injunction Restricts Insurance Options

Have you consulted with an Oakland TN divorce lawyer about the impact the temporary injunction will have on your insurance options?

Oakland TN divorce injunction restricts insurance options

Many men and women view divorce as an opportunity to reinvent themselves and start afresh. In many ways that is true and a healthy response to ending one’s marriage. A spouse may move into a new apartment, change career goals, buy a new car, and attempt to save money and simplify by dropping insurance coverage that benefits the other spouse. That last attempt at reinvention could be a real problem, though.

Before you leap into a smart lifestyle and begin swapping insurers, policies, and beneficiaries, take a step back. Consider the consequences of violating Tennessee’s version of the automatic temporary restraining order. Exercise caution and seek competent legal advice before making changes to your pre-divorce insurance picture.

How the Divorce Injunction Affects Insurance Decisions

The Tennessee statutory provision invoking a mandatory divorce injunction is T.C.A. § 36-4-106(d). The provision prohibits any unilateral modifications to insurance coverage during the divorce proceedings. In other words, you will need either a court order or your spouse’s consent to the changes to avoid violating the automatic injunction.

What insurance policies are we talking about? Under Tennessee law, any insurance policy in effect at the time of the divorce could potentially fall within the scope of the temporary injunction. This includes “life, health, disability, homeowners, renters, and automobile” insurance coverage. Even modest changes to existing policies are, technically, sufficient to violate the restriction on altering insurance. (By way of example, reducing life insurance coverage from a payout on death of $1.5 million to a payout on death of $1.49 million to the child-beneficiary may violate the injunction.)

Prohibited Changes to Insurance

Making any of the following changes to existing insurance coverage without a court order or the other party’s consent could result in a contempt petition being filed:

● Canceling, terminating, or allowing insurance coverage to lapse for nonpayment of premiums. Restriction: the parties cannot discontinue any policy by act or omission without violating the divorce injunction.

● Modifying policy coverage or changing any beneficiary’s status. Restriction: the parties cannot shift percentages from one beneficiary to the other, change beneficiaries, add beneficiaries, remove beneficiaries, or otherwise alter the insurance coverage.

● Assigning a beneficial interest under an insurance policy. Restriction: neither spouse may assign his or her interest in the policy to someone else, such as a creditor. If the wife is a beneficiary under her husband’s life insurance policy, for instance, then the divorce injunction prohibits her assigning her beneficial interest to a lender-assignee as collateral for a loan.

There is some leeway, however, as when the insurance policy does not cover or pertain to either party or their children. The injunction only restricts the activities of divorcing spouses. Ordinarily, it does not limit the acts of any third party, such as a business entity.

Key Person Business Insurance May Not Fall Under Injunction

An example of business insurance coverage that may not fall within the scope of Tennessee’s temporary injunction is key person insurance for company officers and high-level personnel.

Assume that the company’s key person is one of the spouses. The business entity may take out an insurance policy to protect itself in the event something happens to that key individual. The covered events are typically accidental death or incapacitating injury; accidents or illnesses that prevent the key person from returning to work. The beneficiary under the policy is the business itself, not the other spouse or the couple’s minor children. Key person insurance (or key man insurance) compensates the company, buying it time to focus on hiring a successor to take over a critical position at the firm.

Matters become more complicated, however, when key person insurance is taken out on a spouse who happens to own the company. If you have specific questions regarding the impact T.C.A. § 36-4-106 will have on your insurance plans and how to request court orders to change coverage, arrange to meet with an experienced divorce lawyer. Do so before taking action to modify or cancel any policies that might affect your family and your case.

Oakland TN Divorce Attorney

Memphis divorce attorney, Miles Mason, Sr., practices family law exclusively and is founder of the Miles Mason Family Law Group, PLC. Check out The Tennessee Divorce Client’s Handbook: What Every Divorcing Spouse Needs to Know, available on Amazon and Kindle. To schedule your confidential consultation, call us today at (901) 683-1850.