Examining life insurance and court ordered support
While a spouse or parent might well secure support on an ongoing basis, this does not do them much good if the payor dies. As such, the law in Ontario has created a mechanism to secure support even if the payor dies. The Family Law Act outlines:
34 (1) In an application under section 33, the court may make an interim or final order,
(i) requiring that a spouse who has a policy of life insurance as defined under the Insurance Act designate the other spouse or a child as the beneficiary irrevocably
(k) requiring the securing of payment under the order, by a charge on property or otherwise.
(4) An order for support binds the estate of the person having the support obligation unless the order provides otherwise.
While the Family Law Act clearly gives Ontario courts the authority to order that the payor of support designate the payee as the beneficiary of insurance, the statement is qualified by the word may. In other words, the court has discretion to make this order. Further, the wording does not actually state that the court may order the payor to get insurance. It says that the court may order a payor who already has life insurance, to designate a certain beneficiary. As we will see next, however, the court made use of 34(1)(k) to rectify the issue. Guidance can be found in the leading Ontario Court of Appeal case, Katz v Katz.
In Katz v Katz, 2014 ONCA 606, the Appellant brought a motion to enforce a previous order that the payor get life insurance. This was little surprise given the Respondent had been battling cancer. The court noted the following factors of the decision:
In his affidavit filed in response to the appellant's motions, the respondent described the steps he took in an effort to obtain life insurance and the advice he received concerning the availability of life insurance as follows:
• he went for "an insurance retake", consisting of a series of medical tests, with Rupert Case Management Inc. between June and August 2010 to see if he could qualify for life insurance;
• as a result of these tests, an elevated PSA level was detected;
• during this time he was told by Simon Kay of IPS Insurance that further PSA readings were required and that he would not be successful in obtaining life insurance until the PSA levels stabilized;
• each time he took a further test his PSA level was increasing;
• on July 25, 2011, he completed an insurance application in the hopes that his PSA levels would stabilize, but they never did;
• he underwent surgery for prostate cancer in the fall of 2012; and
• he was told by Mr. Kay that if he applied for insurance too soon after surgery, he would be "red flagged", which would cause difficulty in ever obtaining life insurance.
Based on the material that was before her, it was open to the motion judge to find that the respondent made reasonable efforts to obtain life insurance within the 60-day period following the divorce order and that he had been unable, due to his medical condition, to obtain traditional life insurance then or subsequently. The respondent's efforts consisted of undergoing medical tests necessary to apply for life insurance and speaking to an insurance agent. In addition to the sworn statements in the respondent's affidavit to that effect, the respondent provided some documents that were capable of supporting his assertions. It was for the motion judge to determine the credibility of the respondent's evidence. I see no basis for interfering with her conclusion.
The Court of Appeal thus found that the Respondent had made efforts to get life insurance but was unsuccessful. Therefore, he did not breach the previous order of not having gotten life insurance. However, the important issue in the case was whether it had been open to the court to force the payor to get insurance if they so decided. In relation to the issue of whether the court has the authority to force the payor to get insurance, the court said:
In Feinstat, the Divisional Court held that although s. 34 of the Family Law Act, R.S.O. 1990, c. F.3 permits a court to order a spouse who has insurance to designate a dependent as a beneficiary, s. 34 does not permit a court to require a spouse to obtain or reinstate life insurance. No specific provision of s. 34 allows that.
In my respectful view, the principle in Feinstat on which the respondent relies is incorrect. Section 34(1) of the Family Law Act lists specific powers of a court when making a support order under s. 33. Section 34(1)(i) permits a court in an application under s. 33 to "make an interim or final order ... requiring that a spouse who has a policy of life insurance as defined under the Insurance Act designate the other spouse or child as the beneficiary irrevocably".
Although there is no specific subsection permitting a court to order a spouse to obtain life insurance, s. 34(1)(k) gives a court discretion to make an interim or final order "requiring the securing of payment under the order, by a charge on property or otherwise."
Under s. 34(4) of the Family Law Act, "[a]n order for support binds the estate of the person having the support obligation unless the order provides otherwise."
In other words, it is section 34(1)(k), not 34(1)(i), which gives the court wide discretion to order that a payor get life insurance since the court expressly has authority to force the payor to secure payment. The court further qualified, however:
[W]here there is no existing policy in place, a court should proceed carefully in requiring a payor spouse to obtain insurance. This case demonstrates the desirability of having evidence of the payor's insurability and of the amount and cost of the available insurance. Careful consideration should be given to the amount of insurance that is appropriate. It should not exceed the total amount of support likely to be payable over the duration of the support award. Moreover, the required insurance should generally be somewhat less than the total support anticipated where the court determines that the recipient will be able to invest the proceeds of an insurance payout. Further, the amount of insurance to be maintained should decline over time as the total amount of support payable over the duration of the award diminishes. The obligation to maintain insurance should end when the support obligation ceases — and provision should be made to allow the payor spouse to deal with the policy at that time. Finally, when proceeding under the Divorce Act, the court should first order that the support obligation is binding on the payor's estate.
The court is saying that if in fact a court decides to make an order for life insurance, particular attention should be paid to the insurability and the numbers. After all, not everyone can get insurance by reason of their health. Further, the proceeds of the insurance, or the insurance award, should not be greater than what the payee is to receive under their support order. This should also have regard to the fact that the payee receiving the big insurance award would be able to invest the amount. Later, the court suggests that if the payor cannot get insurance, perhaps by reason of things such as health status, they can bring a motion to change to explain that it simply is not possible to fulfill the order.
Case law appearing just after this decision has been very mixed, some suggesting that the court will not make an order without evidence of the insurability of the individual, and the amount of insurance that would cover the support claim, such as in Sooriyanarayana v Sooriyanarayana, 2015 ONSC 1184:
I have no evidence regarding Kosa's insurability and the cost and amount that would be appropriate. As such, I am not in a position to order life insurance be put into place.
As well as Silver v Silver, 2017 ONSC 5177:
I will not order the father to have life insurance because I have no evidence as to his insurability and the cost of the insurance. I also have no calculation as to the amount of life insurance required to secure the amount of support.
Whereas other cases did not care if this sort of evidence was not provided, such as in Liu v Huang, 2018 ONSC 3499:
Ms. Huang testified that she did not feel comfortable letting Mr. Huang hold insurance on her life, and would not consent to reinstating the joint-first-to-die policy. That policy does not meet the criteria set out in Katz.
I order that Ms. Huang maintain in good standing a life insurance policy with a face value of not less than $200,000, in order to secure Ms. Huang's child support and section 7 expenses obligation; the beneficiary is Mr. Liu, to secure the child support obligations; and the insurance must be binding on the Estate of Ms. Huang.
Mr. Liu is similarly directed to maintain his life insurance policy, with a face value of $200,000.
Most recently, the court has been reluctant to order life insurance and has instead simply made the support obligations binding on the estates of the payors. Although, the court is still open to ordering life insurance if they so decide:
In H v M, 2022 ONSC 1826:
As stated by the Court of Appeal in Katz, at para. 74, "where there is no existing policy in place, a court should proceed carefully in requiring a payor spouse to obtain insurance." As opposed to ordering Mr. Harris to obtain a life insurance policy, I instead include specific language in my order that the support orders herein are binding on Mr. Harris' estate.
Switzer v Switzer, 2022 ONSC 1149:
Since the applicant has no life insurance at this time, I order that the applicant's obligation to pay child and spousal support shall be binding on his estate. Further, I order that the applicant shall advise the respondent in writing if and when he has his life insured and provide the particulars of any policy of life insurance including but not limited to the name of the insurance company, the policy number and the named beneficiary. I order that upon the production of the particulars of the life insurance policy, this shall constitute a material change in circumstance permitting the respondent to apply to court to be designated as the beneficiary for both the child support and spousal support as applicable.
Obvious takeaways? Ontario courts have the discretion to make a payor of support get a life insurance policy, although they have the sole discretion for this award. If the payor does not yet have life insurance, then the court should have regard for the insurability of the payor, as well as evidence of how much life insurance is required to satisfy the support obligation.