Life Insurance And Additional Recovery

Life insurance claims which are denied, often end up being litigated in Federal Court and thus, have to be analyzed differently than when in State Court.  Here is a case from the Northern District of Texas, Dallas Division, which illustrates why an experienced insurance law attorney is needed.  The opinion is styled, State Farm Life Insurance Company v. Mae Katheryn Bryant and Amy Cannon.

This is an interpleader case.  The ruling is the result of State Farm filing a Rule 12(b)(6) Motion to Dismiss and a Rule 12(b)(1) Motion to Dismiss.

Bryant and Cannon both claimed to be entitled to the insurance proceeds after the death of Cannon’s deceased ex-husband.  The Court eventually ruled that Bryant was entitled to the money.  As a result of that ruling, State Farm requested that the Court dismiss Cannon’s claim against State Farm.

The Court denied State Farm’s request and discussed and ruled as follows:

As noted, State Farm’s Rule 12(b)(6) Motion to Dismiss focuses on whether Cannon’s amended pleadings violate the court’s May 16, 2019 opinion and law applicable to interpleader actions.  In this regard, State Farm contends:

Cannon has failed to plead any new claim that is independent of her alleged right to receive the policy proceeds.  All of her claims are expressly predicated on her alleged rights as the primary beneficiary, and continue to seek the policy proceeds, together with associated fees and costs, as damages.  They are all barred as a matter of law and should be dismissed.  These are the precise types of claims which create the risk of double exposure for a single disputed fund which interpleader is designed to remedy.

In addition, State Farm argues that the Fifth Circuit authority cited in the court’s prior opinion is inapplicable because:

New York Life Ins. Co. v. Deshotel, discussed in the Court’s order, was decided based on the unique properties of a Louisiana delictual action, which gave a would-be beneficiary of a policy immediate standing under Louisiana law to sue the insurer for negligence as soon as the interpleader was filed.  Texas has no analogous cause of action, and here, Cannon has no standing to pursue any claims under Texas law against State Farm based on her allegation that she is the proper beneficiary unless and until she demonstrates that she is in fact the proper beneficiary.

The court cited Deshotel for the limited purpose of explaining that a compulsory counterclaim must be brought in an interpleader action as opposed to a subsequently-filed action.

Additionally, State Farm does not cite any legal authority to support its contention that Cannon cannot, under Texas interpleader law, recover a sum equal to or in excess of the amount of the Policy proceeds as damages for the claims asserted.  In other words, it has not established that Texas law precludes the assertion of a claim for damages in an amount equal to or more than that payable under an insurance policy based on various tort theories, as opposed to asserting an entitlement to the benefits payable under an insurance policy as the policy beneficiary.  Additionally, as explained, State Farm’s argument regarding Cannon’s status as a beneficiary and other prudential standing arguments were not adequately briefed.  Regardless, Cannon’s request for damages is not limited to the amount of the Policy fund.  Cannon alleges that she incurred damages for storage rental and funeral costs, as well as other costs, and State Farm’s motion does not cite legal authority to demonstrate that such damages are not recoverable under Texas law.

On the other hand, the court agrees with State Farm that Cannon’s inclusion of a contract claim in her amended pleading violates Texas interpleader law and its May 16, 2019 opinion denying her request to amend her pleadings to assert a contract claim against State Farm based on her contention that she is entitled to recover the Policy proceeds, as such a claim goes to the heart of the interpleader action and the issue of whether Cannon or Bryant is entitled to recover such proceeds.  The court, therefore, grants State Farm’s Rule 12(b)(6) Motion to Dismiss with respect to the breach of contract claim asserted by Cannon against it and dismisses with prejudice this claim.  The motion is otherwise denied without prejudice.

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