Life Insurance Claims And Federal Court

Life insurance claims which are denied, often end up being litigated in Federal Court.  Here is a case from the Northern District of Texas, Dallas Division, which illustrates why an experienced insurance law attorney is needed, particularly when the case is going to be litigated in Federal Court.  The opinion discusses more than will be discussed here and is a must read for lawyers handling a case in Federal Court.  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.

Factually, Cannon and Bryant both submitted claims to recover Policy proceeds of $300,000.00 after the insured’s death.  Cannon contends that she is entitled to the policy proceeds as the primary beneficiary under the Policy.  Bryant maintains that she is entitled to the Policy proceeds as the successor beneficiary under the Policy and as the mother and heir of her son because the Insured’s and Cannon’s divorce decree did not designate Cannon as a beneficiary under the Policy,and the Insured did not re-designate Cannon as his beneficiary under the Policy after their divorce as required by Texas law.  The Court eventually ruled against Cannon being entitled to any policy proceeds.

Cannon eventually amended her petition asserting claims against State Farm for breach of contract, negligence, negligent misrepresentation, and alleged violations of the Texas Insurance Code.

State Farm contends that Cannon lacks constitutional standing to bring the claims she has asserted against it in this action.  In sum, State Farm contends that, if Cannon is not the Policy beneficiary as alleged, “she is a mere bystander to the Policy and has no standing to assert any cause of action as beneficiary,” and Cannon has no standing to bring the tort claims asserted because “they rely on legal duties which, if they were owed at all, were owed to [the Insured], not to Cannon.”  State Farm, therefore, argues that “the only persons who have standing to bring an action against it to enforce either contractual or tort duties flowing from the Policy are those in privity with the Policy: the legal representative of Mr. Bryant’s estate, or a director intended third-party beneficiary,” and Cannon’s pleadings do not establish that she is either.

Issues regarding Article III standing or constitutional standing are properly addressed under Rule 12(b)(1), whereas prudential or statutory standing issues are addressed under Rule 12(b)(6).  Even when a defendant does not argue that the plaintiff lacks Article III standing, courts have an independent obligation to assure that jurisdiction exists by examining the constitutional dimension of standing before determining whether a plaintiff has prudential standing to assert a claim.  While State Farm couches its arguments in terms of constitutional standing, its grounds for dismissal pertain to prudential standing and, therefore, should be analyzed under the standard applicable to Rule 12(b)(6) motions.  The court, nevertheless, determines that Cannon has constitutional standing for purposes of Article III, Section 2 of the Constitution to bring the claims asserted against State Farm.

To satisfy the three requirements of Article III standing, Cannon must allege an injury in fact that is fairly traceable to State Farm’s conduct and likely to be redressed by a favorable ruling.  Cannon satisfies these requirements.  She has alleged damages resulting from State Farm’s conduct in connection with the Policy under which she is a named beneficiary, and an award of damages would remedy that loss.  Accordingly, the court has jurisdiction to determine whether Cannon has prudential standing to assert claims for breach of contract, negligence, negligent misrepresentation, and alleged violations of the Texas Insurance Code, and it denies State Farm’s Rule 12(b)(1) Motion to Dismiss based on constitutional standing.

Even when a plaintiff has alleged injury sufficient to satisfy the “case or controversy” requirement, the Supreme Court has held that “the plaintiff generally must assert his or her own legal rights and interests, and cannot rest his or her claim to relief on the legal rights or interests of third parties.  One of the prudential aspects of standing is “the general prohibition on a litigant’s raising another person’s legal rights.”  As noted, the arguments made by State Farm focus on whether Cannon has standing to assert legal rights owed to others.  The court, however, declines to address the arguments raised in this regard by State Farm.  Although the court has some concern whether Cannon has prudential standing or whether her claims, as currently pleaded, state valid claims for relief under Texas law, State Farm’s motion in this regard consists only of argument without reference to legal authority as required by Local Rule 7.1(d), and it is not incumbent on the court to make legal arguments for the parties or address issues that have not been properly briefed.  The court, therefore, denies without prejudice State Farm’s Rule 12(b)(1)Motion to Dismiss based on prudential standing and its request to stay Cannon’s claims and case against it pending resolution of the interpleader action because resolution of any such request, which was made in the alternative, will likely turn on resolution of an amended motion to dismiss under Rule 12(b)(6) if State Farm opts to file one by the deadline provided below.

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