Insurer has no Obligation to Investigate Change of Beneficiary
It has often been said that where there is a will there are relatives & their lawyers. The same type of dispute arises when the beneficiary and owner of a life insurance policy changes shortly before the death of the life insured. In Emery v. Guarantee Trust Life Insurance Company, A20A2082, Court of Appeals of Georgia (January 22, 2021) Georgia was faced with a claim by a previous beneficiary to funds paid to a new beneficiary claiming her signature on the change request was forged.
Sarah Emery lost at trial and appealed from the trial court’s grant of summary judgment in favor of Guarantee Trust Life Insurance Company (“GTL”).
Upon the death of Emery’s grandfather, Donald Usher (“Donald”), GTL paid the death benefit of a life insurance policy insuring Donald’s life to Gayle Usher (“Gayle”), Donald’s wife. Emery maintains that she is the rightful owner and the beneficiary of the policy because prior to Donald’s death, her signature was forged on a policy service form changing ownership and beneficiary of the policy from Emery to Gayle. The trial court concluded that because GTL paid the beneficiary named in its file, it complied with applicable law and is therefore insulated from liability.
The record revealed that on October 15, 2010, GTL issued a life insurance policy to Donald. In 2015, Emery became the sole beneficiary and owner of the policy. In August 2016, about a month prior to Donald’s death, Gayle called GTL and inquired about the policy. Initially, GTL informed Gayle that it could not discuss the policy with her without the owner’s permission.
When GTL received the beneficiary change forms back from Gayle, it was missing a page requiring the signatures of both Emery and Gayle. GTL notified both Gayle and Emery that it could not process the change of policy form because it did not contain their signatures. Emery (without explanation) did not respond to GTL’s communication. Gayle responded that she had retained a copy of the signature page, and faxed it to GTL; the fax bore the purported signatures of Gayle and Emery.
On August 31, 2016, GTL updated its records to reflect that Gayle was the new owner and beneficiary under the policy. Donald passed away on September 9, 2016, and On October 15, 2016, GTL paid the proceeds of the policy to Gayle. In October 2017, Emery notified GTL for the first time that she disputed Gayle’s entitlement to the death benefit. Emery did not dispute that a change of policy form was in fact executed prior to Donald’s death.
Ultimately, Emery filed suit against GTL alleging bad faith failure to perform under an insurance contract, breach of contract, and negligence. After a hearing, the trial court granted GTL’s motion for summary judgment.
Emery argued that the trial court erred by finding that GTL paid the benefits to Gayle in accordance with the terms of the policy.
Under Georgia statute OCGA § 33-24-41: “[w]henever the proceeds of or payments under a life . . . insurance policy or annuity contract become payable in accordance with the terms of the policy or contract or the exercise of any right or privilege under the policy or contract and the insurer makes payment of the proceeds or payments in accordance with the terms of the policy or contract or in accordance with any written assignment of the policy or contract, the person then designated in the policy or contract or by the assignment as being entitled to the proceeds or payments, if legally competent, shall be entitled to receive the proceeds or payments and to give full acquittance for the proceeds or payments and the payments shall fully discharge the insurer from all claims under the policy or contract unless, before payment is made, the insurer has received at its home office written notice by or on behalf of some other person that the other person claims to be entitled to the payment or some interest in the policy or contract.”
Georgia law does not impose a duty upon insurance companies to investigate and determine if a person fraudulently completes and submits a change of policy form. Georgia law provides that, once the insurer pays the person designated in the policy as being entitled to the proceeds, the insurer is discharged from all claims under the policy.
The plain meaning of OCGA § 33-24-41 is clear: It discharges the insurer from liability unless, before payment is made, the insurer receives written notice by or on behalf of another claimant to the policy proceeds.
The Court of Appeals concluded, based upon the clear meaning of the statute, concluded that trial court properly granted summary judgment to GTL. Emery did not provide notice to GTL that she had a competing claim prior to payment as required by the statute. Additionally, GTL — having no legal duty to investigate a fraudulent change of policy form — paid “the person” appearing on the face of the change of policy form. The purpose of the statute is to “protect an insurer” that pays benefits to one then designated as the beneficiary against a subsequent claim by one actually possessing a superior right to the benefits.
Emery has no one to blame but herself. If her signature was forged she should have responded to GTL when the forms were submitted rather than waiting a year after the death and payment to the wife. Laches, not mentioned, controls here because Emery waited to long to assert her rights and the insurer, GTL, did everything that it needed to do: it paid the beneficiary listed in its policy only to be faced with a late filed claim requiring it to defend a bad faith lawsuit and an appeal.
© 2021 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
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