Country legend Tammy Wynette sang about the heartache of divorce. As most exes and their lawyers know, the pain is also felt in the pocketbook. Divorce insurance may help ease that pain. Family lawyers understand why the idea has become reality, but they remain unsure about its merits.
"Given the statistics on marriage breakdown, I am surprised the insurance industry did not grab on to the concept of divorce insurance sooner," said Leisa MacIntosh, a family mediator and lawyer with MacIntosh MacDonnell & MacDonald in New Glasgow, Nova Scotia.
"Divorce insurance might be seen by some couples as a pessimistic approach to marriage. The reality is that about half of marriages end in divorce. This makes the probability of divorce much higher than other life events that we commonly insure against," noted Brian Galbraith, a lawyer with Galbraith Family Law Professional Corporation in Barrie, Ont.
That reality convinced John Logan, chairman and CEO of SafeGuard Guaranty Corporation in Kernersville, North Carolina, to create Wedlock Divorce Insurance, promoted as the world's first such insurance. "You can't turn back time and get a pre-nuptial agreement after the wedding, and unless you have a very good reason for doing so, a conversation at the kitchen table about a post-nuptial agreement will likely not go well," Logan told The Lawyers Weekly.
"Most divorces don't happen overnight; people see them coming for years and hate to admit it," he added. "We give people a realistic and affordable way to protect some of their net worth from the financial devastation that so often accompanies divorce. As the old insurance maxim goes, it's better to have it and not need it, than need it and not have it."
Family lawyers in Canada - who fully expect to see divorce insurance become available in this country - acknowledge the benefits of the safety net. "As with other forms of insurance, divorce insurance allows you to move the cost of an unanticipated but catastrophic event onto an insurance. It permits you to spread the risk," said James Morton, head of the litigation group at Steinberg Morton Hope & Israel LLP in Toronto.
It may also provide enhanced access to justice, said MacIntosh. "All family lawyers, mediators, judges and court administrators would embrace a solution for separating couples who cannot afford the services they want."
Indeed, said Galbraith, "as a family law lawyer, I often see clients who have serious family law issues, but don't have the funds to pay for a lawyer to help them. As a result, they either incur crippling legal fees, which makes the pain of divorce even worse, or they just cave in to the other side because they can't afford the battle. If divorce insurance was available, it would enable clients to afford legal representation during a very difficult transition in their lives."
Tipping the scales, however, are concerns about money, motivation and litigation.
"The disadvantages of the insurance will be cost - the insurance will not be cheap - and the potential sense on buying the insurance that you expect to get divorced," said Morton.
As well, noted Galbraith, "I worry that having such funds available might fuel unnecessary litigation. That is, some clients might engage in a legal battle simply because they have the funds to do it and they want 'revenge.' This could have a very negative impact on families, the family court system and society."
MacIntosh also pointed out that clients will need to read the fine print carefully. In one case, she said, "I found it concerning that the policy must be four years old before it can be used and that the insured can only make the claim after the divorce is granted, requiring the insured to cover the legal costs up-front.
"Also worrisome was the description of how a claim is valued," she noted. "It simply says that the company will pay 'the current value of a divorce claim for the policy at that time,' without any further explanation of what expenses are eligible to be covered."
Canadians may also have better options than opting for divorce insurance. "Probably a better approach for people considering the insurance is to get a good domestic contract. The best idea on going into a marriage is to plan the consequences coming out," Morton said.
More broadly, noted MacIntosh, "our communities will be better served with action regarding the risk factors that make divorce insurance a viable business.
"Public education regarding healthier and more cost-effective services for separation and divorce is a good starting place," she added. "In Nova Scotia, family mediation and collaborative divorce are in the infancy stage, largely due to a lack of public education that these services exist. There is also a growing movement in family law towards limited legal representation in an effort to at least allow some legal support to people who feel they cannot afford to retain lawyers for their entire file."
In the meantime, divorce insurance seems to be gaining ground with couples south of the border. At Wedlock Divorce Insurance, "we're slightly ahead of our projections to date," said Logan. "I will tell you that our average premium sold is about 40 percent higher than we projected."