Obtaining Life Insurance to Secure Support Obligations
Katz v Katz, 2014 ONCA 606
This case addresses the issues of civil contempt and the power of Courts to order a payor to obtain a life insurance policy to secure their support obligations.
The parties in this matter were married for 18 years and had three children, aged 15, 22 and 26. Pursuant to the divorce Order, the Wife was granted custody of the two younger children and the Husband was ordered to pay lump sum spousal support, periodic child and spousal support and fifty percent (50%) of specified section 7 expenses under the Federal Child Support Guidelines. Of note, the Husband was ordered to obtain a life insurance policy for $500,000 with children as beneficiaries. The divorce Order included a provision whereby the Wife would be entitled to full indemnity costs if she was required to bring an enforcement motion. The Husband argued that he was prevented from obtaining a life insurance policy after being diagnosed with prostate cancer.
On appeal, the Appellant, the Wife, sought to “introduce fresh evidence concerning the availability of life insurance through a ‘non-medical requirement carrier’” (paragraph 45). The evidence was attempting to introduce evidence through an Affidavit sworn by the law clerk of the Solicitor of Record for the Appellant. The Court found that the fresh evidence did not comply with Rules 14(19) and 31(3) of the Family Law Rules (paragraph 54).
Further, even assuming the Affidavit of the law clerk complied with the Family Law Rules, and was otherwise capable of being admitted, it would only demonstrate that life insurance for up to $300,000 may be available through a “non-medical requirement carrier”. Such evidence failed to demonstrate that the Respondent could have complied with the specific terms of the divorce Order (paragraph 54).
The Court considered the Affidavit filed in response to the Appellant’s motions which provided the steps taken by the Respondent in an effort to obtain life insurance. Included in the Respondent’s affidavit were several exhibits substantiating the Respondent’s efforts. One such exhibit included a letter from an Insurance underwriting who opined that the Respondent would be declined for “traditional life insurance because of his prostate cancer and that future consideration may be given after a minimum period of two years from the date of the letter” (paragraph 48).
The Court of Appeal continued its analysis by discussing the elements necessary to support a finding of civil contempt. To establish civil contempt, the Court of Appeal found in paragraph 51 that a party must establish the following:
- That the order at issue states clearly and unequivocally what should and should not be done;
- That the party who disobeyed the order did so deliberately and willfully; and
- That the evidence establishes contempt beyond a reasonable doubt.
As such, the Ontario Court of Appeal found no error in the “motion judge’s decision to dismiss the contempt motion” given the evidence before the Court. Having accepted the Respondent’s evidence, “there was no basis for a finding that the Respondent disobeyed the divorce order deliberately and willfully or that contempt had been established beyond a reasonable doubt” (paragraph 53).
The Court of Appeal then considered the issue of whether a Court may order a party to obtain insurance to secure payment of support payments. The Court first considered the powers of a court under the Family Law Act. The Court of Appeal found that under section 34(1)(k), a Court has discretion to make an interim or final order “requiring the securing of payment under the order, by a charge on property or otherwise” (paragraph 67). The Court of Appeal held that section 34(1)(k) of the Family Law Act is broad enough to permit a court to order a spouse to obtain an insurance policy to secure payment of the order following the payor spouse’s death (paragraph 69). “The concluding words ‘or otherwise’ in s. 34(1)(k) afford the court broad scope for securing the payment of a support order” (paragraph 69).
Although the Court of Appeal found that the situation under the Divorce Act is somewhat different, as there is no provision similar to s. 34(1) of the Family Law Act, the Court held that the same power that exists under the Family Law Act to order a spouse to “obtain insurance to secure payment of support payments that are binding on the payor’s estate also exists under the Divorce Act” (paragraph 73). The Court continues by stating in paragraph 74,
That said, where there is no existing policy in place, a court should proceed carefully in requiring a payor spouse to obtain 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.
Given the above, the Court of Appeal dismissed the appeal and awarded costs of the appeal to the Respondent in the amount of $10,000.