Bacon v. Federal Kemper Life Assur. Co.

• Decision Date: 14 September 1987
• Citation: 512 N.E.2d 941,400 Mass. 850
• Parties: Adlaide R. BACON, individually and as executrix. 1 v. FEDERAL KEMPER LIFE ASSURANCE COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 941

512 N.E.2d 941

400 Mass. 850

Adlaide R. BACON, individually and as executrix. v. FEDERAL KEMPER LIFE ASSURANCE COMPANY.

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued May 6, 1987.

Decided Sept. 14, 1987.

Edward J. Duggan (Edward S. Rooney, Jr., with him), Boston, for defendant.

Neal C. Tully (Edward I. Masterman, with him), Boston, for plaintiff.

Before HENNESSEY, C.J., and LIACOS, ABRAMS, NOLAN, LYNCH and O'CONNOR, JJ.

NOLAN, Justice.

This appeal arises out of a wrongful death action in which a jury found the defendant, Federal Kemper Life Assurance Company (Kemper), liable for causing the death of Edwin C. Bacon. Adelaide R. Bacon was the wife of Edwin C. Bacon. Kemper is an insurance company which carried a life insurance policy on the life of Bacon. Bacon was found dead in his Boston office on July 30, 1974. In July, 1977, the plaintiff filed a complaint against Kemper alleging both that Kemper's breach of contract and its negligence in accepting and recording a change of beneficiary caused Bacon's murder by his business associate James Blaikie, Jr. The complaint alleged that Blaikie had forged Bacon's signature on the change of beneficiary form and murdered him in an attempt to collect the proceeds of the life insurance policy.

1. Prior proceedings. Kemper filed a motion for summary judgment in which it maintained that the plaintiff's action was barred by the doctrine of collateral estoppel. The motion was denied and a jury trial commenced in January, 1985. At the close of the plaintiff's evidence, Kemper moved for a directed verdict which was denied. The jury awarded the plaintiff $250,000 in damages. ² Thereafter, pursuant to Mass.R.Civ.P. 50, 365 Mass. 814 (1974), Kemper moved for a judgment notwithstanding the verdict. That motion was also denied. Kemper has appealed the denial of its motions. We took the case on our own initiative. We affirm the denial of Kemper's motion for summary judgment, ³ but we reverse the denial of Kemper's motion for judgment notwithstanding the verdict. ⁴

2. Summary of facts. The life insurance policy, which is central to this case, was issued by Kemper to Edwin C. Bacon on July 1, 1971. The policy carried a face amount of $50,000 and a term of five years. The beneficiary was a trust established by Bacon for his wife and children. In September, 1973, Bacon submitted an application to change the beneficiary of the policy to another but similar trust, known as the Edwin C. Bacon Trust of August 28, 1973. Kemper acknowledged the change of beneficiary by sending Bacon a printed and unsigned form. Bacon was disturbed by Kemper's response. In October, 1973, Bacon's concerns were communicated in a letter to Kemper. Bacon expressed his understanding that Massachusetts law required that the change of beneficiary form be accepted and signed by a company officer. As Bacon put it, this assurance was essential so that both parties knew they were operating from the same facts and because fifty thousand dollars was a considerable sum of money for his family. An officer of Kemper replied (correctly) to Bacon that its legal department's research had not uncovered any such Massachusetts law.

On July 19, 1974, Kemper's home office received another request to change the beneficiary on Bacon's policy. The form, bearing the purported signature of Bacon, requested that the principal beneficiary be designated as James F. Blaikie, Jr., and the Edwin C. Bacon Trust listed as the contingent beneficiary. Bacon's "signature" was witnessed by Blaikie. The application was quickly processed and approved. A letter, dated July 24, 1974, acknowledging the change was sent to Bacon's business address.

Bacon habitually went to his office late in the morning and remained there until very late at night. His wife, in contrast, preferred to arise early in the morning and went to bed before he came home. When she awoke on the morning of July 30, 1974, she realized that her husband had not come home the previous night. She went to his office, arriving there around 7:30 A.M. Mrs. Bacon had to locate the building superintendent because her husband's office door was locked. Upon opening the door, they discovered Bacon's body lying face down on the floor next to a water cooler. Shortly afterwards, the police and coroner arrived. When Bacon's body was removed from the office, a note was discovered under his chest. The note, printed in block letters, stated: "I can't stand it anymore." An autopsy was performed later that day. The medical examiner determined that the cause of death was sodium cyanide poisoning.

In August, 1974, Kemper received proof of Bacon's death from Blaikie and a request for the proceeds of the policy. A similar claim was made by Bacon's wife in September. Faced with these conflicting claims, Kemper submitted the last change of beneficiary form to a handwriting expert. The expert concluded that Bacon had not signed that form. Consequently, in December, 1974, Kemper instituted an action of interpleader for an adjudication of the rival policy claims. On June 12, 1975, a judge of the Superior Court entered a judgment, pursuant to Mass.R.Civ.P. 58(a), as amended, 371 Mass. 908 (1977), discharging Kemper "from any and all liability whatsoever on its policy" and enjoining the claimants from making "any further claim or commencing or prosecuting this action or any further action or actions ... on account of said policy of insurance or anything growing out of the same." ⁵ Thereafter the judge determined that the proceeds be distributed to the Edwin C. Bacon Trust. Three years later, the plaintiff commenced the present action.

3. Negligence. In order to impose liability on Kemper for the death of Edwin Bacon, the plaintiff had the burden of proving by a preponderance of the evidence that (a) Blaikie murdered Bacon; (b) Kemper owed a duty to Bacon; (c) Kemper breached that duty, and (d) Kemper's breach of duty was the proximate cause of Bacon's murder. Kemper contends that it was entitled to the entry of judgment in its favor because the plaintiff's proof was insufficient as a matter of law with respect to each of these issues.

There was sufficient evidence to warrant a finding that Blaikie murdered Bacon and that Kemper owed a duty of care to Bacon in effectuating a change of beneficiary. However, we conclude that there was no evidence to warrant a finding of a breach of duty by Kemper after reviewing the evidence in the light most favorable to the plaintiff and after giving the plaintiff the benefit of every inference favorable to her. Ferragamo v. Massachusetts Bay Transp. Auth., 395 Mass. 581, 591, 481 N.E.2d 477 (1985).

Kemper correctly argues that the evidence was insufficient to justify the jury's finding that its conduct fell below the standard of a reasonably prudent insurance company. Kemper claims that there was no evidence which proved that it knew or should have known that its acceptance and approval of the change of beneficiary request exposed Bacon to an unreasonable risk of harm from criminal conduct by a third party. We agree. The plaintiff contends that Kemper acted unreasonably in approving the beneficiary change because it was not signed by a disinterested witness and because Kemper did not attempt to verify whether Blaikie was actually Bacon's business partner. In addition, the plaintiff claims that the October, 1973, letter Bacon sent to Kemper was further evidence that Kemper should have known that the beneficiary change request was suspicious.

The facts relied on by the plaintiff are simply too innocuous to have aroused Kemper's suspicion that Bacon had not consented to the change of beneficiary. William Jones, a former head of Kemper's policyholder service department, whose deposition was read in evidence by the plaintiff, conceded that it was not unusual for a business partner to be listed as a beneficiary on a policy. Moreover, even though Kemper required a beneficiary to have an insurable interest in an insured's life, and Blaikie would qualify in that respect, there is no such requirement under our law. Strachan v. Prudential Ins. Co., 321 Mass. 507, 509, 73 N.E.2d 840 (1947). Thus, it is immaterial who was listed as the beneficiary. Nor can we say that Blaikie's signature as witness was enough to put Kemper on notice that the request was doubtful. Although Jones testified that he thought the requirement of a disinterested witness had been added as a precaution against fraud or foul play, he did not explain how it could obviate such a possibility. It is conceivable that it could prevent a potential beneficiary from exercising undue influence over an insured, but that obstacle could easily be overcome by a beneficiary forging the witness' signature. An insurance company would have no way of knowing if the witness' signature was forged. At the time the application in this case was received, the disinterested witness requirement was no longer in effect. The woman who assumed Jones' position in April, 1974, testified that she made the decision to eliminate that requirement because the company was receiving too many complaints from agents that it was a hindrance to insureds. Finally, the plaintiff produced no expert testimony that such a requirement was considered good practice in the insurance industry or has any support in law.

The only duty that the law imposes on an insurance company to protect its insured is that the company take reasonable steps to determine whether the insured has consented to the policy or the change of beneficiary. In the cases in which an insurance company has been found liable for harm to its insureds, the company either had actual knowledge that the insured had not consented to the policy, Life Ins. Co. v. Lopez, 443 So.2d 947, 948 (Fla.1983) and Ramey v. Carolina Life Ins. Co., 244 S.C. 16, 21, 135 S.E.2d 362 (1964), or should have known that the person who procured the policy did not have an insurable...