Thank you for your question
My name is Clare
I shall do my best to help you but I need some further information first
What do you actually know about the policy?
Ho wold is your granddaughter - and is she willing to take official steps regarding this if necessary
Unless the Policy was directly payable to his father then what her other grandfather has done amounts to criminal fraud
I would suggest that you write a clam and formal letter to him on her behalf asking for a full accounting of the monies received and the debts paid.
i suggest you use the words
"We understand that there was no intention to commit fraud but need to understand what money was received and how it was spent.
It is always better to deal with these matters between ourselves rather than involving any other authority"
Please ask if you need further details
Send another letter - use the wording above - but where I say "other authority" put Police