SW Legal studies in Business

Insurance Company May Request Court to Decide Which Heirs Get Policy Proceeds
Description

Court held that it was proper for a life insurance company to refuse to pay proceeds from a policy following the death of the policy holder when it was not clear who were the beneficiaries. When an estate is complex and there are multiple claims, an insurance company may request the court to resolve the dispute before making payment.

Topic Wills, Estates, and Trusts
Key Words

Trust; Proceeds; Life Insurance; Claims; Bad Faith

C A S E   S U M M A R Y
Facts

Madenfrost bought life insurance from National Life and listed Doris, his wife, as beneficiary. Later, he created a revocable trust that stated the insurance proceeds would go to the trust and be paid, upon his death, to his spouse and descendents. His sister was named trustee. Later, Doris and Madenfrost, who had two children, divorced. Madenfrost married Amasilia. No change was made to the life insurance policy, but the revocable trust was revoked. National Life received the revocation and asked the trustee if there were any changes in beneficiary. She did not reply. Madenfrost and Amasilia divorced, having had no children. Madenfrost died. National Life was not clear as to who was the beneficiary. One party claimed the proceeds should go to Amasilia and the children from the prior marriage; the trustee claimed Madenfrost was mentally incapable of handling his affairs and the proceeds should go to the trust she controlled as it was not properly revoked. National refused to pay the proceeds and deposited them into the registry of the court and requested the court, as an interpleader, to determine who was the rightful beneficiary of the policy. The trustee sued National for bad faith and breach of contract for failing to pay the proceeds to the trust.

Decision

National had the right to file an interpleader action since there could be multiple claims against it for the policy proceeds. There were a number of unresolved issues. National was not sure how many children existed. It did not act in bad faith in refusing to pay out the proceeds to the trustee and instead bring this action. National will be awarded attorney fees for the expenses of filing this action since the rightful claimant to policy proceeds was unclear. When it is clear who the beneficiary is, there is no right to bring an interpleader action, but in such a complex matter there is such a right.

Citation

National Life Insurance Co. v. Alembik-Eisner, ---F.Supp.2d--- (2008 WL 4265168, N.D. Ga., 2008)

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