TODD: A game-changer from the 8th Circuit

By Sam Calvert

0321-Broken-House-InsuranceIn early February the 8th Circuit Court of Appeals issued an opinion that should horrify anyone who has prepared a transfer-on-death deed (TODD) for a client. 

Briefly, the facts in Strope-Robinson v. State Farm Fire & Cas. Co.1 are these. David Strope owned a house. He was dying. He signed and recorded a transfer-on-death deed to his house on August 11, 2017. The transfer-on-death deed provided that upon his death that the house would go to his niece, Dawn Strope-Robinson. He died three days later. A few days after David Strope died, his ex-wife allegedly burned down the house.

Dawn Strope-Robinson was appointed as special administrator of David Strope’s estate and made a claim against State Farm for the value of the house. State Farm turned her down and refused to pay for the house. (They did pay the estate for the personal property loss.) She then sued State Farm naming herself as special administrator of David Strope’s estate and herself, individually, as plaintiffs; the case was removed to federal court.

State Farm’s legal argument was that ownership of the house passed to Dawn Strope-Robinson at the instant that David Strope died, and therefore the estate did not have an insurable interest in the house. And because Dawn Strope-Robinson, the niece, was not a named insured under the policy, she also did not have an insurable interest in the house.

Citing Closuit v. Mitby,2 the court wrote that “in the absence of assignment or express stipulation of the parties...[,] policies of insurance do not attach to or run with the property insured... [and] [i]n case of a conveyance or assignment of the property, they do not go with it as an incident thereto....” 

Strope-Robinson argued that “[t]he Transfer on Death is not an immediate transfer under applicable law such as a Quit Claim Deed and/or Warranty Deed or other forms of immediate transfer. The Transfer on Death is only effective upon death, it can be revoked at will like a Will, it can be nullified if the owner alienates the property transferred under the TODD just like a Will, and it can convey property to a different beneficiary at will…. In fact, all property vests in the legatee(s), heir(s), beneficiar(ies) and devisee(s), etc., immediately upon death—no different than the way a TODD works.”

The argument was obviously unavailing. This is a scary case to contemplate. Who knows how many transfer on death deeds have been issued over the years with no thought at all about adding the grantee beneficiary to the insurance policy?

The U.S. district court thought it had an answer, because in his summary judgment decision, Judge Donovan Frank said: “However, when questioned by the Court, State Farm’s counsel quite reasonably countered that the advice he would give to a client considering executing a TODD would be to contact his or her insurance provider and try to add their intended grantee as an additional insured to their current policy or to advise the future grantee to obtain their own personal coverage independently. With such options available to individuals planning to use such an instrument, it does not follow that Minnesota’s TODD statute is inherently flawed or that the result in this case runs afoul of the legislative intent behind it.”

Unfortunately, the course of action suggested by State Farm counsel may not work, at least with respect to some insurance carriers. My independent agent tells me that neither Western National nor any of the many other companies they represent would add such a grantee-beneficiary to an in-force policy. The grantee-beneficiary would have to get their own policy as soon as the grantor-owner dies. Next I phoned a State Farm agency and was told that State Farm would add the grantee-beneficiary as “as additional insured” but not as a “named insured.” But the real concern is that following this decision, many people who have executed and recorded a transfer-on-death deed now face a risk of which they are not even aware.

SAM CALVERT is an attorney in St. Cloud, Minnesota, who is trying to stay inside and stay warm.


1 8th Circuit Court of Appeals Case
No. 20-1147 (2/5/2021).

2 56 N.W.2d 428, 431 (Minn. 1953).