Insurance Claims Denial Attorney – Life Insurance

Well, here is a case where the claim isn’t denied.  In fact it was paid.  But now the insurance company is suing the person who received the money and seeking to have the money returned.

The opinion is a 2020 opinion from the Western District of Texas, San Antonio Division, and it is styled, Metropolitan Life Insurance Company v. Lilliam Soto, Felix W. Soto.

MetLife initiated this declaratory judgment action seeking to resolve a dispute between the Soto’s.  Each assert entitlement to life insurance benefits payable under the Federal Employees’ Group Life Insurance Act (FEGLIA).  The decedent, Juan Soto, had a policy worth $350,000, which was payable on his death to his properly designated beneficiary and then, only if there was no designated beneficiary, to his wife Lilliam.

Shortly after Juan’s death on October 25, 2016, MetLife was notified by the Office of Personnel Management (OPM) that Juan had not designated a beneficiary.  Based on this representation, on November 14, 2016, MetLife paid the benefits plus interest to Lilliam.  Later, on January 13, 2017, OPM informed MetLife that Felix was the sole beneficiary pursuant to a September 25, 2016, Designation of Beneficiary executed by Juan.  At the same time, OPM also provided MetLife a February 28, 2001, designation naming Lillian as the sole beneficiary.

On May 10, 2017, Felix submitted a claim for death benefits to MetLife.  MetLife thereafter advised Lilliam that she wasn’t the proper beneficiary and that she would need to repay the benefits that had previously been disbursed to her. Lilliam, however, contests the 2016 designation, claiming that her husband wasn’t mentally competent at the time he executed it.

In the declaratory judgment filed by MetLife, it seeks to hold Lilliam liable for the money paid to her.

In response Lilliam filed a Rule 12(b)(1) and 12(b)(6) Motion to Dismiss, arguing that she and Felix had entered into a binding mediated settlement agreement.  Thus, Lilliam contends that both she and Felix have settled any alleged conflict between them regarding distribution of the benefits.

On June 4, 2020, Felix filed a counterclaim against MetLife, without leave, based on MetLife’s alleged negligence in handling his claim.  Felix claims entitlement to recover from MetLife the full amount of benefits owed to him as the proper beneficiary, plus interest and damages in the amount of $50,000, due to MetLife’s alleged wrongful disbursement to Lilliam and lack of due diligence in handling his claim.   According to Felix, MetLife owes him these benefits regardless of whether MetLife can ultimately recover them from Lilliam.

The Court denied Lilliam’s motion.  The private settlement doesn’t change that Felix seeks a recovery from MetLife and any recovery ordered against MetLife would, in MetLife’s view, be owed in full or part by Lilliam.  MetLife, moreover, seeks a declaration of rights that involves both Lilliam and Felix.  It is for these reasons MetLife has requested an order directing Lilliam to place the disputed funds in the Court’s registry.  There is, therefore, a justiciable case or controversy between MetLife and Lilliam, notwithstanding Lilliam’s arguments to the contrary.  Moreover, the statute of limitations wouldn’t bar MetLife’s claims to claw back the disbursed funds from Lilliam because those claw-back claims have yet to accrue.  If money is owed to Felix by MetLife under the policy, in other words, MetLife urges that Lilliam is liable for some or all of it.

The fact of the settlement between Lilliam and Felix does not render the case nonjusticiable.  Basically, the question in each declaratory judgment act case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.

Lilliam and Felix’s private settlement doesn’t change that Lilliam and MetLife have a live dispute.  Felix has filed a counterclaim against MetLife to recover the full amount of decedent’s insurance benefits.  In the event Felix is determined the proper beneficiary, MetLife would then seek to recover those benefits from Lilliam.  MetLife, meanwhile, has asked the Court to declare the proper beneficiary; it is either Lilliam or Felix.

This case spends additional time discussing its reasoning and the case law supporting the conclusion.  It is a very good read for lawyers handling disputes between life insurance beneficiaries.


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