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Robert S. Lee; Gina Stevens; Laura Stevens v. West Coast Life Insurance Company

July 31, 2012

ROBERT S. LEE; GINA STEVENS; LAURA STEVENS, COUNTER-CLAIMANTS-CROSS-CLAIMANTS-APPELLANTS, AND STEVE LEE; BOBBIE BILL LEE; WILLIAM LEE,
PLAINTIFFS-COUNTER-DEFENDANTS-CROSS- DEFENDANTS,
v.
WEST COAST LIFE INSURANCE COMPANY, DEFENDANT-COUNTER-DEFENDANT-COUNTER-CLAIMANT-APPELLEE.



Appeal from the United States District Court for the Central District of California Percy Anderson, District Judge, Presiding D.C. No. 2:09-cv-06789-PA-VBK

The opinion of the court was delivered by: Paez, Circuit Judge:

FOR PUBLICATION

OPINION

Argued and Submitted May 9, 2012 Pasadena, California

Before: Kim McLane Wardlaw, Richard A. Paez, and Johnnie B. Rawlinson, Circuit Judges.

Opinion by Judge Paez

OPINION

This case, which involves a dispute over the proceeds of a life insurance policy, raises the following issue: Does the fed- eral interpleader remedy shield a negligent stakeholder from tort liability for its creation of a conflict over entitlement to the interpleaded funds? We hold that it does not, and that a claimant may seek to recover all damages directly and proximately caused by the negligent stakeholder's conduct.

I.

A.

On March 13, 1998, West Coast Life Insurance Company ("West Coast") issued a life insurance policy with a death benefit of $800,000 to the late Steve Lee, Sr. Steve Sr. was the original owner of the policy. William Lee, Steve Sr.'s brother, was the original beneficiary. In the subsequent years, West Coast received numerous change of ownership and beneficiary forms from members of the Lee family. At issue is a policy change form signed and executed in July 2005, purporting to change the ownership and beneficiaries of the policy to Robert Lee, Bobbie Bill Lee, and Steve Lee, Jr. Bobbie and Steve Jr. are Steve Sr.'s nephews. Robert is Steve Sr.'s grandson.

Robert, Bobbie, and Steve Jr. executed the aforementioned change forms in West Coast's San Francisco office with the help of West Coast's Director of Policy Administration, James Davis. Davis erroneously instructed Bobbie and Robert to sign as the existing owners of the policy, when in fact Steve Jr. was an existing owner and Robert was not. Davis also erroneously failed to ask Steve Jr. to sign a change of beneficiary form which would have transferred a 62.5% interest to Robert as a beneficiary. Nonetheless, Davis witnessed Bobbie and Robert's signatures and West Coast approved and recorded a change of beneficiary as follows: Robert, 62.5%, Steve Jr., 19%, Bobbie, 18.5%. Relying on the validity of the July 2005 changes, Robert paid premiums due on the policy until Steve Sr.'s death approximately four years later.

The Lee family members made several additional, subsequent changes to the policy's ownership and beneficiaries. The final change occurred in December of 2008 when Robert Lee and Gina Stevens became the sole beneficiaries. Steve Sr. died in January 2009. Robert and Gina then submitted claim forms to West Coast. In response, West Coast informed Robert and Gina that the July 2005 changes were improperly executed, and therefore that they had no interest in the policy. In March 2009, upon learning that he retained the interest in the policy that he held in 2005, Bobbie submitted a claim form to West Coast. In April of 2009, West Coast responded by contacting all parties involved regarding the disputed claims, urging them to reach a mutual agreement regarding payment of the insurance policy benefits, and informing them that it would file an interpleader action if no agreement could be reached. The parties were unable to reach an agreement.

B.

In August of 2009, Steve Jr., Bobbie, and William Lee (collectively, "plaintiffs") filed suit against West Coast in the Los Angeles Superior Court alleging claims for breach of contract and breach of the covenant of good faith and fair dealing under California law. West Coast removed the case to federal court invoking diversity jurisdiction, filed an answer and counterclaim in interpleader*fn1 , deposited $800,000 plus accrued interest with the district court, and added Gina and Laura Stevens*fn2 as counterdefendants. Robert, Gina, and Laura ...


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