A recent unanimous decision by the New Jersey Supreme Court affirmed that an act of suicide can be deemed a breach of contract where a party is obligated to maintain life insurance for the benefit of others under a contract. Connell Foley attorneys Lauren Iannaccone and Andrew Sayles represented the prevailing party in Woytas v. Greenwood Tree Experts, Inc. (A-31-18).
Woytas involved a dispute as to whether a parent breached the terms of a contract that required him to maintain life insurance policies to secure his payment obligations to his former spouse and children. That contract was incorporated into a dual judgment of divorce and included a provision that his estate would be liable for any outstanding obligations due at the time of his death. After the policies at issue were voided due to a suicide exclusion, the decedent’s former spouse and children asserted claims against the decedent’s estate for the value of the life insurance policies, representing the outstanding amount due at the time of his death.
There was another wrinkle in this case as the decedent’s estate was insolvent. After many claims were asserted against the estate, the children and ex-wife moved for summary judgment seeking a declaration that they were due the full value of the life insurance policies and that the children’s and former spouse’s claims had priority over other creditors of the estate. The chancery court agreed and granted summary judgment in favor of the ex-wife and children.
An appeal followed, wherein the administratrix argued that: no breach of the contract occurred because the decedent maintained the relevant policies by paying their premiums; a suicide did not constitute a breach of the contract as it rendered performance impossible; and the children’s claims did not have priority over the other claims that were made against the estate. The Appellate Division affirmed the trial court in a per curium holding and acknowledged that the matter involved an issue of first impression in New Jersey concerning whether the decedent’s act of suicide constituted a breach of the contract.
The administratrix sought and obtained certification to the New Jersey Supreme Court. The administratrix argued, among other things, that the qualifying language “any outstanding obligations” should be interpreted to mean only actual obligations that existed at the time of death and that those obligations do not necessarily equal the total value of the voided life insurance policies. The matter was argued by Ms. Iannaccone before the New Jersey Supreme Court on March 25, 2019. On May 6, 2019, Justice Solomon, writing for a unanimous court, affirmed the trial court holding, rejecting the administratix’s argument. The full decision can be read here.
Importantly, this holding created precedence that suicide may be deemed a breach of contract for an obligor with contractual obligations. In addition, this case sheds light on the proper priority of claims made against an insolvent estate.