PROVIDENT MUTUAL LIFE INSURANCE CO. OF PHILA v. Ehrlich

Citation374 F. Supp. 1134
Decision Date18 December 1973
Docket NumberCiv. A. No. 73-199.
PartiesPROVIDENT MUTUAL LIFE INSURANCE CO. OF PHILA. v. Selma EHRLICH and Shirley Ehrlich a/k/a Shirley Joan Ehrlich and Shirley Ehrlich a/k/a Shirley Joan Ehrlich, Executrix of the Estate of Edward W. Ehrlich, Dec'd.
CourtU.S. District Court — Eastern District of Pennsylvania

J. Stokes Adams, III, Philadelphia, Pa., for plaintiff.

Jay D. Barsky, Philadelphia, Pa., for Selma Ehrlich.

M. Stuart Goldin, Philadelphia, Pa., for Shirley Ehrlich.

MEMORANDUM OPINION

WEINER, District Judge.

Presented to this Court is an interpleader action filed by a life insurance company wherein the wife of the decedent insured, whom he divorced, and his wife, whom he subsequently married, each claim to be the beneficiary of the life insurance policy in question. The individual claimants in addition to asserting that they should be considered as the successful litigant in the interpleader action have also filed counterclaims wherein, in substance, each of them asserts that in the event that they are unsuccessful in the interpleader action the insurer, because of its improper behavior, remains liable to her. We turn now to the circumstances and facts which gave rise to these actions.

On June 17, 1951 defendant Selma Ehrlich (Selma) married Dr. Edward W. Ehrlich. On December 9, 1962 the plaintiff, Provident Mutual Life Insurance Company of Philadelphia (Provident) issued a $25,000.00 life insurance policy to Dr. Ehrlich with Selma designated as the primary beneficiary. On October 5, 1966 Dr. Ehrlich and his wife separated. Dr. Ehrlich was next heard of in Nevada.

Shortly after the separation, Selma instituted proceedings against her husband's property in the Court of Common Pleas of Philadelphia County pursuant to 48 P.S. § 132. On November 10, 1966 the state court issued its order1 which essentially placed particularly described real estate owned by Dr. Ehrlich in receivership. It also authorized the receiver:

"To seize and take possession of all the property, assets and effects of the defendant not limited to the described real estate."

Another provision of the order provided that:

"It is further decreed that the defendant, his agents, servants and employees and all other persons be and the same are hereby enjoined and restrained from selling, transferring, concealing, disposing of or in any manner interfering with any of the property of the defendant or taking possession of, or in any way interfering with any part thereof . . ."

Dr. Ehrlich was never personally served with this order but he did have knowledge of it.

On the 28th day of December, 1966 Dr. Ehrlich, in a Nevada proceeding, divorced Selma and on the same date married defendant Shirley Ehrlich (Shirley). The bona fides of this divorce decree is not under attack for the record indicates that Dr. Ehrlich had established a valid residence in the State of Nevada.

Prior to the divorce, on November 23, 1966 Provident was furnished with a true and correct copy of the court order of November 10, 1966. On February 20, 1967 Dr. Ehrlich wrote to Provident requesting forms for change of beneficiary and instructing them to change the primary beneficiary on his life insurance from Selma Ehrlich to Shirley Ehrlich. He further directed that this letter would serve in lieu of an official change of beneficiary form until he could complete one. Provident refused its insured's request insisting that the court order prohibited them from so acting. In response, Dr. Ehrlich wrote back to Provident notifying them that if they could not change the beneficiary, they should permit the insurance to lapse. However, he still indicated his specific intention to continue the insurance, if he could change the beneficiary. Upon receipt of this correspondence from Dr. Ehrlich Provident notified Selma's counsel that all of her rights were protected and that she would be continued as the primary beneficiary. Counsel relayed this information to Selma and she took no further action regarding the insurance.

Upon the death of Dr. Ehrlich in 1972, Selma, as the beneficiary whose name appeared on the insurance policy, claimed that she was entitled to the proceeds of the insurance policy. On the other hand, Shirley argued that she was the beneficiary of the policy and entitled to the proceeds because upon receipt of the deceased's direction to change the beneficiary, Provident had no choice but to accede to the directive. As a result of these conflicting claims Provident filed the interpleader action and deposited $25,630.26 into the registry of this Court.

Shirley and Selma have each filed counterclaims. Shirley contends that if it is determined that Dr. Ehrlich did not do enough to install her as the beneficiary, it was due to Provident's improper conduct and misleading legal advice which would render Provident independently liable to Shirley.

Selma reasons that there was a contract of insurance under which she was the named beneficiary. She asserts that due to the advice tendered by Provident she was lulled into a false sense of security and did not pursue this issue any further.

The first issue presented to this Court is who is the legal beneficiary of the insurance policy? The policy permitted the insured to change the beneficiary and provided that:

"Every change of beneficiary must be made in writing and filed with the Company at its Home Office, accompanied by this policy, and the Company shall be charged with notice of such change only when endorsed on this policy by the Company."

Dr. Ehrlich twice, in writing, notified Provident of his desire to change the beneficiary. Provident refused and would not even forward the change of beneficiary forms to Dr. Ehrlich.

The law in Pennsylvania is clear that where an insured wishes to change the beneficiary of his insurance, he need only do that which is reasonable under the circumstances to accomplish the desired result. Ruggeri, Admx. v. Griffiths, 315 Pa. 455, 457, 173 A. 396 (1934). Justice Eagen speaking for the majority of the Pennsylvania Supreme Court in Breckline v. Metropolitan Life Insurance Co., 406 Pa. 573, 577, 178 A. 2d 748, 750 (1962) stated the prevailing standard.

"This Court has repeatedly ruled that where the provisions of a life insurance policy require that a written change of beneficiary be filed with the company in order to be effective, and every reasonable effort is made to comply with the requirements of the policy, the change of beneficiary is valid and binding, even though it is not filed with the insurer before the death of the insured. The Court logically reasoned that such provisions are procedural in nature, written into the contract for the company's benefit and may be waived. See, Riley v. Wirth, 313 Pa. 362, 169 A. 139 (1933); Ruggeri v. Griffiths, 315 Pa. 455, 173 A. 396 (1934); and, Skamoricus v. Konagiskie, 318 Pa. 128, 177 A. 809 (1935). Other jurisdictions have arrived at the same result by concluding that only substantial compliance with such provisions of the policy is necessary. See, Kochanek v. Prudential Ins. Co., 262 Mass. 174, 159 N.E. 520 (1928); Prudential Ins. Co. v. Swanson, 111 N.J.Eq. 477, 162 A. 597 (1932)."

We believe that Dr. Ehrlich made every reasonable effort to comply with the policy's requirements to change the beneficiary. As a matter of fact, Provident's house counsel testified that even if Dr. Ehrlich mailed them his policy with the proper change of beneficiary forms, it would have been a futile act. Provident's policy is that whenever a husband desires to change the beneficiary of his insurance from his divorced wife to his second wife, Provident would refrain from making the change if the first wife or her attorney protest. It would not be reasonable for us to require an insured to do a vain and useless act. See, Fedas v. Insurance Co. of the State of Pennsylvania, 300 Pa. 555, 151 A. 285 (1930). In addition, we do not believe, as Selma asserts, that it would be reasonable to require Dr. Ehrlich to return to Pennsylvania, and thus submit himself to the jurisdiction of Pennsylvania in order to compel Provident to change the beneficiary on his insurance policy.

Furthermore as Justice Eagen stated above, an insurance company may waive procedural provisions set forth in the policy which are included for the insurer's benefit. In the case of Riley v. Wirth, supra, the Court was presented with an insurance policy whose change of beneficiary clause was identical to the clause in the instant policy. In that case, which was an interpleader action, where two parties claimed the proceeds of a life insurance policy, the Pennsylvania Supreme Court held that the insurance company's payment of the proceeds into the registry of the court was conclusive proof of the insurer's waiver of the requirement of having the policy endorsed by the company to effectuate the change of beneficiary. We believe that proposition of law to be equally applicable in the present case and compels the conclusion that Shirley is the legal beneficiary of the insurance policy.

The next issue before the Court is the effect of the court order of November 10, 1966. The order was secured pursuant to the Act of May 23, 1907, 48 P.S. § 132 which contemplates a proceeding against a defendant who is outside the jurisdiction and is therefore purely in rem. Boudwin v. Boudwin, 320 Pa. 147, 182 A. 536 (1936).

Shirley avers inter alia, that the insurance policy was not affected by the court order because it was not specifically included in the property which was ordered to be seized. Only real estate owned by Dr. Ehrlich was specifically described in the complaint and court order. According to the Pennsylvania Supreme Court's interpretation of the aforementioned statute, the failure to specifically mention the insurance policy in the property to be seized is a fatal defect. In the case of Boudwin v. Boudwin, supra, at 150, 182 A. at 537 the Court stated:

"The bill mentioned no
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