Power of Attorney

Fort Dearborn Life Ins Co v Holcomb, 316 Ill App 3d 485, 736 NE2d 578, 249 Ill Dec 384 (1st D 2000).

Facts: In June of 1990, Paul Downing executed a power of attorney (1990 POA), appointing his wife Susan as agent on his behalf for certain property transactions. The agency was effective only upon a written declaration of his disability by his personal physician. The couple later experienced marital difficulties and in 1993, Susan and Paul executed a formal separation agreement. At the time, Paul was the named insured on two life insurance policies, naming Susan as the sole beneficiary. The separation agreement did not specifically refer to these policies. The couple later reconciled, but in 1995 a petition for dissolution was filed and the couple separated and remained apart. Months later, Paul was diagnosed with cancer and was confined to the hospital. On June 21, 1995, Paul executed change of beneficiary forms, naming Janet Holcomb as the beneficiary to his life insurance policies. On June 27th, at the request of Susan's attorney, Paul's physician, Dr. Stone, declared Paul disabled. On June 30th, Susan faxed a copy of the 1990 POA to the insurance company, as insurance transactions were included in the agency. Paul's attorney responded by denying the validity of the 1990 POA based on the nature of the marital relationship and its pending dissolution.

On July 2nd, Dr. Stone reexamined Paul and notified Susan and Janet that Paul was now competent to make decisions. Paul quickly executed a document designating Janet as his attorney-in-fact for making medical decisions and granted her unlimited visiting privileges. Paul also stated that Janet was not allowed to make decisions concerning his care or finances, and that Susan was prohibited from visiting or contacting him without permission from his attorney. On July 5th, Dr. Stone again declared Paul as disabled. Susan, exercising her agency authority, executed change of beneficiary forms renaming herself as beneficiary of the life insurance policies. After Paul's death on July 7th, Susan submitted a claim the Fort Dearborn Company for death benefits.

Fort Dearborn filed an interpleader action stating that the rightful claimant to the insurance proceeds was unclear. Janet alleged that the change of beneficiary designation by Paul entitled her to the proceeds. Susan alleged that those forms naming Janet as beneficiary were void due to Paul's lack of capacity and Janet's undue influence, and that her renaming herself as beneficiary was a proper exercise of her agency power. The lower court determined that the 1990 POA was not a Statutory Short Form Power of Attorney for Property, but rather a nonstatutory property power governed by the Durable Power of Attorney Law. This meant that Susan was granted broad plenary powers, including the power to change the beneficiary on Paul's life insurance policies. Since Paul had not revoked Susan's agency powers, renaming herself as beneficiary was a valid exercise of that power. Summary judgment was granted in favor of Susan. Janet appealed.

Holding: Reversed and remanded. The Short Form Act allows a person to designate an agent to act for them in regarding their property and financial affairs. If the 1990 POA was a Short Form, then it is clear that Susan would not have had the authority to rename herself as beneficiary to Paul's life insurance. Section 3-3 of the Short Form Act provides the necessary conditions for a form to be considered a Short Form. The lower court concluded that since the 1990 POA was not identical to the form outlined in the statute, it did not constitute a Short Form.

The Appellate Court disagreed. There is no requirement that the form must be exactly like the form outlined in the statute to constitute a Short Form. It would be an "absurd or unjust result" if the power of attorney loses its status as a "statutory property power" solely because one or two particular provisions that are included in the statute are changed. The legislature intended to create a document that could be altered in some ways to meet the needs of the principal. The court looks at the power of attorney in its totality to determine whether the Short Form Act requirements had been satisfied.

Paragraph 3 of the Short Form is a provision that can be altered allowing the principal to grant the agent additional powers not mentioned elsewhere. An example is the authority to name, appoint or change beneficiaries which otherwise would not be permitted under the Short Form. Paul did not include this paragraph in his 1990 POA, an exclusion that the Appellate Court interpreted as meaning that Paul did not intend for his agent, Susan, to have the power to change beneficiaries. Therefore, Susan was statutorily prohibited from changing the beneficiary on Paul's life insurance policies.

Even if the court concluded that the 1990 POA was a nonstatutory property power governed by the Durable Power of Attorney Law, the outcome would be the same. The 1990 POA included a catch-all provision at the end that gave the agent authority to do what was necessary to carry out the above-listed powers. Although Paul authorized Susan to act concerning insurance transactions, section 3-4 of the Short Form Act says that enumerated powers do not include the authority to change any beneficiary that the principal has named under contractual agreement without explicit authority to do so. A catch-all provision does not expand a specifically limited power, whether statutory or nonstatutory, absent the principal's intent for it to do so.

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