Life Insurance Policy Must be Applied as Written
Life insurance policies, and the benefits promised, are property. They belong to the owner of the policy and the beneficiary(ies). They can only be changed with the permission of the owners and the insurer. When one owner dies before the insured life others try to move into the position of the owner and beneficiary. However, such a change is not automatic.
In D. Pulliam v. Alfa Life Insurance Corporation, NO. 2018-CA-01735-COA, Court Of Appeals Of The State Of Mississippi (October 6, 2020) an incompetent attempt to change ownership caused litigation by the relatives and three appeals to the Court of Appeal.
Annie Patterson purchased a $50,000.00 life insurance policy on the life of her nephew and ward, Christopher Nance, through Alfa Life Insurance Corporation. Annie was the owner and primary beneficiary of the policy, and Christopher’s biological mother, Angela Nance, was listed as the contingent beneficiary. Annie died and her father, C. D. Pulliam, attempted to modify the policy to have himself replace Annie as an owner and as the primary beneficiary of the policy. However, he was ultimately unsuccessful due to completing the wrong forms to effectuate the changes.
Christopher died and as a result of Christopher’s death, a dispute arose as to whether Angela, as a contingent beneficiary, or C.D., as a person who claimed to be the substituted primary beneficiary, was entitled to the life insurance proceeds. Alfa, unable to resolve the dispute, filed a complaint for interpleader and a motion for leave to deposit funds and requested injunctive relief pertaining to the payment of the life insurance proceeds. C.D. filed his answer, affirmative defenses and a counter-complaint against Alfa which alleged multiple breach of contract and negligence claims.
Ultimately, the chancery court held that:
- Alfa was entitled to interplead the insurance proceeds,
- Angela was entitled to the insurance proceeds and
- D.’s counter-complaint should be “dismissed as moot.”
In Pulliam v. Alfa Insurance Co. (Pulliam I), 238 So. 3d 620 (Miss Ct. App. 2018), the Court affirmed in part and reversed and remanded in part the chancery court’s judgment. The Court of Appeal held that C.D.’s counter-complaint should not have been “dismissed as moot,” and therefore that ruling was remanded to the chancery court for further proceedings. Subsequent to Pulliam I Alfa filed a second motion for summary judgment in response to C.D.’s counter-complaint. Eventually the chancery court entered an order granting Alfa’s summary judgment motion dismissing the legal claims asserted by C.D.
C.D. asserted that his counter-complaint contained genuine issues of material fact to overcome Alfa’s motion for summary judgment. He asserted that had he known that he could not and had not successfully transferred ownership of the existing policy, he would not have continued making the premium payments and would have sought additional coverage from another insurance provider.
In Pulliam I, the Court of Appeal held that C.D. lacked the authority to change the original policy taken out by Annie. The only purported authority for C.D.’s and Otis’s action is an affidavit they provided to Alfa identifying themselves (and Willie Mae) as Annie’s heirs. This was insufficient to give them authority to change the ownership of a policy that, by its clear and unambiguous terms, was the property of Annie’s estate. Absent a valid contract or obligation of a duty owed by Alfa, all of the claims asserted in C.D.’s counter-complaint are without merit.
The Court of Appeal refused to honor and correct C.D.’s error and concluded that the chancery court correctly held that there was no genuine issue of material fact to substantiate any of C.D.’s claims in his counter-complaint against Alfa and properly granted Alfa’s motion for summary judgment.
Whenever people die, whether insured or not, relatives and others gather like vultures to a dead Gnu, trying to get a share of what was left. In this case C.D., had he been competent after Annie’s death, could have changed the policy to name him as the beneficiary, but did not do so and tried, by litigation and appeals, to have the court cure his error. The court, properly, refused. Insurance is not a right. It is a contract and the contract must be applied as written.
© 2020 – 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 firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 52 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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