Shannon v. United States

• Decision Date: 07 October 1969
• Docket Number: No. 25074.,25074.
• Parties: Annie Lenora SHANNON, Appellant, v. UNITED STATES of America and Prudential Insurance Company of America, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

417 F.2d 256 (1969)

Annie Lenora SHANNON, Appellant, v. UNITED STATES of America and Prudential Insurance Company of America, Appellees.

No. 25074.

United States Court of Appeals Fifth Circuit.

October 7, 1969.

Vincent McCauley, Columbus, Ga., for appellant.

Kirk McAlpin, Atlanta, Ga., Albert W. Stubbs, Columbus, Ga., Morton Hollander, Jack H. Weiner, Leonard Schaitman, Attys., Dept. of Justice, Washington, D. C., for appellees.

Before JOHN R. BROWN, Chief Judge, and AINSWORTH and GODBOLD, Circuit Judges.

GODBOLD, Circuit Judge:

This is an appeal from the district court's dismissal of a suit against the United States and Prudential Life Insurance Company. The suit arises from a dispute over the proceeds of insurance coverage on the life of a soldier, provided under a group policy purchased from Prudential by the Administrator of Veterans Affairs under the Servicemen's Group Life Insurance Act, 38 U.S.C. § 765 et seq. The district court dismissed the Amended Complaint, holding that the United States was not a proper party because the claim asserted against it was not one for which the United States had consented to be sued under 38 U.S.C. § 775, and that dismissal as to it required dismissal of the claim against Prudential for lack of jurisdictional amount.

We reverse.

The Act provides for purchase by the Administrator of policies of group life insurance on the lives of members of the uniformed services¹ on active duty. Monthly deductions are made from the pay of the insured for the cost of his coverage except costs traceable to the extra hazard of active duty. The latter costs are paid by contributions from the Administrator.

Section 770(a) of the title covers beneficiaries and payment of insurance:

(a) Any amount of insurance under this subchapter in force on any member or former member on the date of his death shall be paid, upon the establishment of a valid claim therefor, to the person or persons surviving at the date of his death, in the following order of precedence:

First, to the beneficiary or beneficiaries as the member or former member may have designated by a writing received in the uniformed services prior to such death;

Second, if there be no such beneficiary, to the widow or widower of such member or former member;

Third, if none of the above, to the child or children of such member or former member and descendants of deceased children by representation;

Fourth, if none of the above, to the parents of such member or former member or the survivor of them;

Fifth, if none of the above, to the duly appointed executor or administrator of the estate of such member or former member;

Sixth, if none of the above, to other next of kin of such member or former member entitled under the laws of domicile of such member or former member at the time of his death.

The insured, Jesse E. Shannon, became insured in September 1965 under a group policy purchased by the Administrator from Prudential. In December 1965 he completed the government Form DA 3054, "Election of Amount, Beneficiary Designation and Settlement Options for Servicemens' Group Life Insurance." Thereon he exercised several choices. He elected to retain the full coverage of $10,000 (which is automatic unless disclaimed). He chose a lumpsum settlement option. He elected a beneficiary provision to "have payment made in the order of precedence set forth in the law."

Shannon was killed in Viet Nam June 11, 1966. The Army sent to Prudential a completed Report of Casualty form dated June 17, 1966, described thereon as an "Interim" report. Under "Interested Persons" it described Sharon Shannon as decedent's wife. There were two footnotes to the word "wife." One stated (without qualifying language) "adult of kin," the other "beneficiary for unpaid pay and allowances, as designated on record of emergency data." The section of the form relating to Group Life Insurance showed the amount of coverage and the settlement option and described the beneficiary designation as "To be determined according to law." And it stated "Claim for death benefits mailed to wife." The record does not disclose the nature and contents of the claim, whether it was filed with Prudential by Sharon Shannon, or whether Prudential requires from the person described as beneficiary any proof other than the data coming from the Army.

The policy proceeds were paid to Sharon around July 7. Prudential states that the basis of its payment was the election of beneficiary form described above, which under the order of precedence set out in the law made the proceeds payable to the wife, and the Report of Casualty form listing Sharon Shannon as wife. The Army paid Sharon the gratuity pay payable by reason of Shannon's death and issued to her a Dependent's Identification and Privilege card.

A "Final" Report of Casualty form appears to have been prepared on July 18, 1966. In late July appellant made known to the Army her claim. A "Corrected Final" Report of Casualty was prepared August 26. It shows the conflicting claims of appellant and Sharon and refers to a possible bigamous marriage.

The appellant sued, alleging that she is the widow of Shannon, and claiming judgment in the amount of $10,000 against the United States and Prudential, or either. Appellant's marriage certificate shows her to have been married to Shannon in 1961. Examination by the Army of its records, and an investigation by it, have disclosed that in 1963 Shannon executed an Army Record of Emergency Data Form showing that he was married to appellant. Army finance records show Shannon's marriage to appellant in 1961 and that he was still married to her at the time of his death. For an undisclosed period of time before his death, and at the time he was killed, Shannon had in effect an allotment payable to appellant as his wife, for the basic quarters allowance for an enlisted man in his grade with two dependents. Allotment checks were mailed to appellant at an address in Columbus, Georgia. On December 31, 1965, Shannon went through a purported marriage ceremony with Sharon Jenne in New York. On January 14, 1966, he filed with the Army another Record of Emergency Data form showing Sharon Shannon as his wife. The same date he executed and filed a separate form, Application for Allotment, showing Sharon Shannon as his sister. Both forms gave the same address for Sharon. The government received no information showing a divorce between appellant and Shannon.

The thrust of the claim against the government is that there existed a duty on its part, either cast on it by the Act or voluntarily assumed by it, to maintain its records accurately so as to reflect the identity of the person entitled to receive insurance proceeds under the order of precedence set out in § 770 and to convey that information to Prudential. More narrowly, appellant contends that at least in this instance there was a duty on the government to inform Prudential that its records were contradictory and to convey full and accurate details of what they showed. Alternatively she urges that the program is in substance a government program and Prudential only an agent to make payment and perform actuarial services, and she claims that the government and Prudential are engaged in a joint effort to provide the insurance, with each the partner, agent, servant or employee of the other. She urges that any — or all — of these theories give her a cause of action for which the government has consented to be sued under 38 U.S.C. § 775:

The district courts of the United States shall have original jurisdiction of any civil action or claim against the United States founded upon this subchapter.

Prudential's asserted defense is that its payment to Sharon Shannon, as the person shown as wife on the "Interim" Report of Casualty form, discharged all its obligations relating to the decedent.

Appellant moved for summary judgment based on the pleadings, depositions, and extensive interrogatories and requests for admission and responses thereto, and her affidavit that she was never divorced from Shannon. Prudential filed a cross-motion for summary judgment and a motion to dismiss. The government filed a motion to dismiss. Subsequently the appellant filed an amended complaint. Thereafter the court granted the motions to dismiss.²

Neither the group policy nor the certificate of insurance required to be furnished the insured under § 772 is in the record.

We conclude that the district court erred in its premise that once the government has purchased group insurance for the serviceman it has discharged all obligations to him under the Act.

By the Act Congress "established a program of group life insurance which shall be provided by private insurance companies for members of the armed services who are on active duty." H.R. Rep.No. 1003, 89th Cong., 1st Sess. (1965), 1965 U.S.Code Cong. & Admin. News, p. 3232. The Congressional purpose must be discerned in the light of the way in which group insurance in general and this group insurance program in particular operate.

Group insurance is concerned with the rights of a definite insured — the employer — and employees who are "in the position of third party beneficiaries,"³ and the named beneficiaries of the employees, and at times assignees. 1 Appleman, Insurance Law & Practice, § 45 p. 66, § 41 p. 52. Normally the employer is neither an insurer nor a guarantor of payment. "This does not mean, however, that the employer may not have a liability imposed upon him either by reason of his actions or by reason of his failure to act, if the employee has been adversely affected thereby." Id. § 43 p. 57. He may, for example, be liable for failure to perform a contractual obligation to furnish group insurance, or to perform a contractual obligation to pay premiums, or for negligent omission of the insured's name from the list of those covered. Id. § 43, pp. 57-58.

The Congressional history evidences intent to make group insurance...