Life Insurance – Slayer Statute

Here is a 1994 opinion dealing with the Texas Slayer Statute.  The opinion is from the 14th Court of Appeals and is styled, Adams v. Aetna Life Insurance Company.
The insured was murdered in 1986.  Her husband was initially suspected of the murder, but was cleared by the county sheriff’s department.  After the husband was absolved by the sheriff’s department, Aetna paid him as the named beneficiary on the life insurance policies.  Three years later, it was established that the husband did kill the insured, and the husband was incarcerated.
The grandmother brought suit on behalf of the minor children against the life insurance carriers for wrongful payment of insurance benefits to the husband.  Pursuant to the Slayer Statute of the Texas Insurance Code, section 1103.151, the interest of the beneficiary in a life insurance policy is forfeited when the beneficiary is the principal or an accomplice is willfully bringing about the death of the insured.  The statute further provides if no contingent beneficiary is named, then the nearest relative of the insured shall receive said insurance benefits.  The Plaintiffs alleged that the insurance carriers had constructive notice of their adverse claims and that the companies had acted in bad faith by not conducting a reasonable investigation.
The trial court granted summary judgement in favor of the insurance carriers under the Texas Insurance Code that provides that life insurance carriers shall, in the absence of the receipt of notice of an adverse claim to proceeds of the policy by one having a bona fide claim to proceeds or a part thereof, must pay such proceeds to the person designated as the beneficiary.  Once such payment is made, absent any prior notice of an adverse claim, the insurance carrier is discharged from all liability under the policy.  The Plaintiffs contended that the application of this statute to minors was unconstitutional because as minors, the children were unable to file notice of an adverse claim as required.
The Appellate Court affirmed the trial court’s summary judgement holding that the statute was constitutional even as applied to minors.  In so holding, the Court noted that the children ‘s right to redress had not been abrogated.  The children could still sue the husband.  The Court rejected the contention that the cause of action against the husband was not an alternative remedy because the proceeds from the insurance policy had already been spent.  According to the Court, the open Court’s provision of the Texas Constitution does not guarantee a recoverable judgment or create new rights, but merely protects those rights which exist in common law.  According to the Court, the minor children still have a cause of action, and thus, the Legislature had not unreasonably or arbitrarily interfered with a common law cause of action or barred access to the courts.
In so holding, the Court also rejected the Plaintiffs contention that the insurance carrier had constructive notice of the minor children’s claim since the husband was originally suspected of killing the insured.  Once the sheriff’s investigation exonerated the husband, the suspicion cast on him as a beneficiary was rebutted.  The court further rejected the Plaintiff’s contention that they had a cause of action for bad faith as a separate tort against the insurance carriers.  According to the Court, the insurance companies waited for the sheriff’s investigation to be completed before paying the husband, and since there was no adverse claim, the insurance companies could not deny or delay payment given the provisions of the Texas Insurance Code.  Citing the Texas Supreme Court opinion in Transportation Ins. Co. v. Moriel, the Court held that na insured claiming bad faith must prove the insurer had no reasonable basis for denying or delaying payment of the claim and that it knew or should have known that fact.
Contact Information