The Importance of Preventing Gaps in Insurance Coverage When Transferring Property Ownership

The recent case of Dawn Strope-Robinson v. State Farm Fire and Casualty Company¹ created some important new insurance requirements for TODDs in Minnesota. The story behind the case is startling and the court’s decision was also surprising to many.

David Clair Strope owned a home in Orr, Minnesota. Sadly, he was dying of a terminal illness. Shortly before his death he recorded a TODD for the benefit of his niece, Dawn Strope-Robinson. David passed away on August 14, 2017, and according to Minnesota state statute, ownership of the property transferred to Dawn immediately upon his death. Just days after David’s death and before Dawn took physical possession of the property, his ex-wife intentionally set fire to the home, and it burned to the ground.

Dawn filed a claim with her uncle’s insurance company, State Farm, for the loss of the property, but they denied the claim for the loss of the building because David’s policy ended at the time of his death. Since Dawn wasn’t insured under the policy, the court ruled in favor of State Farm Insurance based on the terms of David’s insurance contract.

This ruling created an unexpected gap in the law that left property owners at risk.

Under the law at the time of this case, beneficiaries of a TODD couldn’t get insurance on the property until the original owner died. They didn’t have an insurable interest in the property. If there was damage to the property before new insurance could be acquired, the beneficiary had no recourse to recover that loss through insurance.

The Minnesota legislature created statute 507.072 governing property insurance for grantee beneficiaries of TODDs. This statute seeks to prevent gaps in insurance coverage by requiring insurance companies to extend coverage to the grantee when real estate is transferred via a TODD. To benefit from this new law, property owners are required to follow specific steps outlined in the statute. This new Minnesota law went into effect August 1, 2024, and other states are expected to pass similar laws.

This case didn’t involve a charitable gift, but it does create new best practices for any nonprofit that is named as beneficiary of a TODD.

Nonprofit organizations that have been named as a beneficiary of the deed may want to reach out to their donors to alert them of these new rules so that they can consult with their legal advisors. These organizations may also want to coordinate with their outside counsel to draft an appropriate letter and/or talking points.

We can also facilitate gifts of real estate for nonprofits that need help with these kinds of complex gifts.

At the Saint Paul & Minnesota Foundation, we are experts at accepting gifts of real estate. We’ve been helping Minnesotans make gifts of real estate for the benefit of their favorite causes for decades. Reach out to us at 651.244.5463 or email us at philanthropy@spmcf.org.