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State Farm Life Insurance Co. v. Davis

December 17, 2008

STATE FARM LIFE INSURANCE COMPANY, PLAINTIFF,
v.
INDEE JANE DAVIS, HEATHER ELIZABETH GREENOUGH AND M.D., A MINOR, DEFENDANTS.



The opinion of the court was delivered by: John W. Sedwick United States District Judge

ORDER AND OPINION [Re: Motion at Docket 54]

I. MOTION PRESENTED

At docket 54, plaintiff and counter-defendant State Farm Life Insurance Company ("State Farm") renews its motion for summary judgment seeking an order dismissing the counterclaim filed by defendant and counter-plaintiff Indee Jane Davis ("Jane"). Jane opposes State Farm's motion at docket 61. State Farm replies at docket 64. Oral argument was heard on November 7, 2008.

II. BACKGROUND

Much of the background of this matter is recited at docket 53 and will not be repeated here. State Farm filed this interpleader on August 23, 2007. Jane answered and counterclaimed September 18, 2007, seeking costs and damages against State Farm arising from alleged negligence, bad faith, and breach of contract. On June 3, 2008, this court denied State Farm's initial motion for summary judgment, which sought an interpretation of AS 13.12.804 (Alaska's revocation-upon-divorce statute) and dismissal of Jane's counterclaims, holding that "the Alaska Supreme Court would construe the revocation-upon-divorce provision of the Alaska Probate Code to create a rebuttable presumption" in favor of revocation-upon-divorce, and that Jane had rebutted the presumption in this case. The court then concluded as a matter of law that Jane was the primary beneficiary of the life insurance policy held by John B. Davis, Jr. ("John") (the "policy") and was therefore entitled to all the proceeds. The court denied State Farm's motion with respect to Jane's counterclaims because those issues had not been fully briefed.

Jane alleges in her counterclaim that John's insurance agent, Jeannie Campbell ("Campbell"), who is an employee of the David Strike Agency, failed to assure Jane's status as the primary beneficiary under John's policy and that State Farm forced her to litigate with John's successor beneficiaries - Jane's daughters and co-defendants, Heather Greenough and M.D. (a minor). John and Jane have worked with Campbell for approximately 30 years on numerous insurance policies.*fn1 It is undisputed that John spoke with Campbell after his divorce from Jane and reaffirmed his intention to maintain Jane as his primary beneficiary.*fn2 Campbell also communicated John's intention to Jane.*fn3 In addition, John remained the primary beneficiary of Jane's life insurance policy, which was also placed by Campbell.*fn4 The parties have not discussed, nor is the court aware of, all of the specifics of the conversations between John and Campbell or Jane and Campbell. Although John communicated his intent to maintain Jane as primary beneficiary, Campbell did not revise the policy because Jane was already listed as the primary beneficiary of John's policy. Because Campbell "believed there was nothing [she] needed to do to make sure that John's life insurance proceeds were distributed as requested," she did not revise John's policy.*fn5 It is unclear whether Campbell was aware of Alaska's revocation-upon-divorce statute.

State Farm nevertheless interpleaded the policy proceeds because it was unsure of the effect that John's divorce from Jane had on his policy in light of AS 13.12.804. State Farm was aware, through Campbell, that John had reaffirmed his intent to maintain Jane as his primary beneficiary. The court is unaware of the specific facts regarding Campbell's communications with State Farm or State Farm's decision to file the interpleader. On the eve of the first summary judgment hearing, Jane settled with her daughters to avoid potentially losing all of the proceeds of John's life insurance policy by an adverse judgment as to the operation of the revocation-upon-divorce statute. Jane took only one-third of the insurance proceeds under the terms of the settlement. Now, Jane maintains her counterclaim for damages against State Farm for the remaining two-thirds of the proceeds and costs associated with this litigation. As the court indicated at the end of its order at docket 53, "[n]either State Farm nor Jane has yet briefed the extent of the duty owed by State Farm to Jane in the context created by the settlement [with her daughters] and whether her decision to settle is an independent act for which State Farm is not responsible." The parties have now briefed these issues, and the court considers their arguments below.

III. STANDARD OF REVIEW

Federal Rule of Civil Procedure 56 provides that summary judgment should be granted when there is no genuine dispute about material facts and when the moving party is entitled to judgment as a matter of law. The moving party has the burden to show that material facts are not genuinely disputed.*fn6 To meet this burden, the moving party must point out the lack of evidence supporting the nonmoving party's claim, but need not produce evidence negating that claim.*fn7 Once the moving party meets its burden, the nonmoving party must demonstrate that a genuine issue exists by presenting evidence indicating that certain facts are so disputed that a fact-finder must resolve the dispute at trial.*fn8 The court must view this evidence in the light most favorable to the nonmoving party, must not assess its credibility, and must draw all justifiable inferences from it in favor of the nonmoving party.*fn9

IV. DISCUSSION

The parties do not dispute whether the David Strike Agency or Jeannie Campbell are authorized agents of State Farm. The court assumes that Campbell's knowledge and actions may be imputed to State Farm under an agency theory. State Farm argues that neither it nor Campbell owed a professional duty to provide legal advice to John or Jane regarding the existence and legal effect of Alaska statutes regarding divorce or probate.*fn10 Even if State Farm or Campbell did owe such a duty, State Farm claims that it did not breach its contract with John (or Jane as third-party beneficiary), act in bad faith, or act negligently.*fn11 State Farm also argues that Jane's settlement was an intervening act that eviscerates the element of causation required to sustain breach of contract, negligence, or bad faith claims.*fn12 State Farm further contends that Jane has disclaimed and/or waived her right to be paid the full amount of the policy by settling with the successor beneficiaries*fn13 or should be estopped from asserting a claim for extra-contractual damages.*fn14 Finally, State Farm claims that damages arising from an interpleader action are not permitted under Alaska law.*fn15

Jane opposes State Farm's motion and argues that there are genuine issues of material fact precluding this court from finding for State Farm on any of Jane's claims. First, Jane argues that State Farm owed and breached tort and contract duties when it failed to distribute the proceeds of John's policy in accordance with John's expressed intent.*fn16 Jane also argues that State Farm acted in bad faith by failing to fulfill John's reasonable expectation that Jane would receive all of the policy proceeds.*fn17 Jane further claims that the settlement between Jane and her daughters was not an intervening act precluding relief because State Farm placed the risk of losing the policy proceeds on Jane by interpleading the funds.*fn18 Finally, Jane claims that State Farm owes her attorney's fees and costs incurred in connection with State Farm's alleged wrongful acts.*fn19

The key issues to be decided include (1) whether State Farm or Campbell acted in bad faith or owed and breached a professional duty to Jane, as a third-party beneficiary of John's policy, when Campbell failed to revise John's policy after he expressed his intent to maintain Jane as primary beneficiary following their divorce; (2) whether State Farm's interpleader constituted breach of contract or was filed in bad faith; (3) whether State Farm or Campbell's actions caused Jane to be deprived of the entirety of the policy proceeds; and (4) whether Jane waived or should be estopped from asserting claims against State Farm because she settled with her daughters. The court addresses each issue in turn.

A. Existence of a ...


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