Prudential Ins. Co. of America v. Kamrath

• Citation: 475 F.3d 920
• Decision Date: 01 February 2007
• Docket Number: No. 06-1794.,06-1794.
• Parties: The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff, v. Mary Beth KAMRATH, Defendant-Appellee, Sharri Kamrath Rocca, as Personal Representative of the Estate of Bradley G. Kamrath, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

475 F.3d 920

The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff, v. Mary Beth KAMRATH, Defendant-Appellee Sharri Kamrath Rocca, as Personal Representative of the Estate of Bradley G. Kamrath, Defendant-Appellant.

No. 06-1794.

United States Court of Appeals, Eighth Circuit.

Submitted: October 20, 2006.

Filed: February 1, 2007.

Matthew J. Padberg, argued, St. Louis, Missouri, for appellant.

Stephen F. Graunt, argued, Rolla, Missouri (David L. Steelman, on the brief), for appellee.

Before SMITH, BOWMAN, and COLLOTON, Circuit Judges.

BOWMAN, Circuit Judge.

Following a bench trial, the District Court¹ held that Mary Beth Kamrath is entitled to the proceeds because she is the named beneficiary on the policy. The District Court found that Bradley Kamrath's efforts to change the policy beneficiary did not meet the requirements for application of the substantial-compliance doctrine. We affirm the judgment of the District Court.

On August 1, 1989, Prudential issued Bradley Kamrath a group life insurance policy that insured his life in the amount of $500,000.00. This policy designated Bradley's wife, Mary Beth, as the primary beneficiary. In 1994, Bradley and Mary Beth began experiencing marital difficulties. In 2002, these problems escalated, prompting Bradley to move out of the couple's home on December 13, 2002. Shortly thereafter, Mary Beth obtained a protection order that restricted Bradley's contact with the couple's children, and Bradley fired Mary Beth from the couple's CPA firm. Bradley filed for divorce on December 31, 2002. During the dissolution proceedings, the couple shared custody of their oldest child while the two younger children regularly visited Bradley.

Bradley met with attorney John Williams on March 6, 2003. Williams testified that Bradley asked him to draft several estate-planning documents, including a testamentary trust for the children's support that would be funded by the policy proceeds. In a letter dated March 31, 2003, Williams requested a change-of-beneficiary form from the policy administrator, Aon Insurance Services. On April 3, 2003, Bradley brought a policy-assignment form to Williams's office. Williams testified that the form appeared to be a change-of-beneficiary form, although Williams knew the assignment form could not have been sent in response to his March 31 letter on account of the short passage of time. Bradley executed the assignment form next to the words "Signature of Assignee," and Williams witnessed the execution. App. at 16. Bradley wrote, "Estate of the Insured," in the space for the assignee's primary beneficiary designation. Id. Bradley also executed a last will and testament that named his sister, Sharri Kamrath Rocca, as personal representative of his estate and trustee of the testamentary trust. Williams testified that Bradley left the completed assignment form with Williams and that Williams gave the form to his secretary to mail. Williams also testified that he advised Bradley to watch for an endorsement confirmation from Aon. In a letter to Aon dated April 4, 2003, Williams wrote, "Enclosed please find a change of beneficiary form for the above policy of insurance. Please endorse this change on your records and confirm the endorsement to the insured." Id. at 15. Williams had no further contact with Bradley or Aon before Bradley's death.

Thomas Fremont, an Aon manager, testified that Aon never received the assignment form and that even if it had received this form, Aon would not have accepted it as an effective change of beneficiary. Fremont testified that the assignment form typically came with two pages of instructions that explained the effect of transferring ownership of the policy. Fremont also testified that Aon received Williams's March 31 letter requesting a change-of-beneficiary form and that Aon sent Bradley the form on April 7, 2003. Aon never received a completed change-of-beneficiary form from Bradley.

Bradley's mother, Rose Kamrath, testified that in February 2003, Bradley told her that he was going to change the beneficiary of his life insurance policy to his children. Rose also stated that in April 2003, Bradley told her, "I changed my insurance policy over to the children." Rose Kamrath Dep. at 17-18.

Mary Beth testified that she approached Bradley in July 2003 to inquire about changing the beneficiary on her life insurance policy. Bradley told Mary Beth that neither spouse could change a beneficiary until after the divorce was complete.

Bradley committed suicide on September 27, 2003. Bradley left four typed letters to family members, including one to Mary Beth, in which he wrote, "I'm not sure how the disbursement of life insurance will work; my intent is that it all goes into the trust that will be managed by Sharri, for the benefit of [the children]. If it cannot go into the trust directly, pay off all the debt ... PLEASE place that money in the trust." App. at 138. Bradley left an additional note to Mary Beth concerning his estate, in which he wrote, "My life insurance policies . . . are to go into a trust for the benefit of my children." Id. at 144. Bradley wrote to his parents, grandparents, and Sharri, "There should be about 520K in insurance, all of it is supposed to go into the trust that is for the kids. Mary Beth may have to pay some debts off before the money can go into the trust. Please make sure the remainder gets there." Id. at 141.

On October 9, 2003, Williams sent a letter claiming the policy proceeds on behalf of Bradley's estate. Aon responded that Mary Beth was the beneficiary and that it had not received a form designating the estate as the beneficiary. On October 27, 2003, Williams faxed Aon a copy of the April 3 letter and assignment form. Meanwhile, Mary Beth had filed a claim for the policy proceeds on October 20, 2003. This interpleader action followed.

The District Court found that Bradley "failed to do all within his power to substantially comply with the policy requirements for changing his beneficiary," and therefore, it would "not exercise its equitable power to change the beneficiary of Mr. Kamrath's Prudential insurance policy." Mem. of Feb. 26, 2006, at 24. We review the District Court's findings of fact for clear error, giving "due regard" to the court's credibility determinations. Fed. R.Civ.P. 52(a). We review the District Court's conclusions of law de novo. Tadlock v. Powell, 291 F.3d 541, 546 (8th Cir.2002).

Before addressing the merits of this case, we note there is a question of whether Missouri or New York law applies to this action. The District Court held that a policy provision designating New York as the "governing jurisdiction" was inapplicable because this case does not involve the interpretation of any policy provision. Mem. of Feb. 26, 2006, at 18. The District Court then determined that Missouri law should apply because Missouri has the most significant relationship to this case. Id.; see Sheehan v. Nw. Mut. Life Ins. Co., 44 S.W.3d 389, 396 (Mo.Ct.App.2000) (stating that Missouri applies the "most significant relationship" test when resolving choice-of-law issues in contract cases).

A district court sitting in diversity applies the law, including the choice-of-law rules, of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Before applying the forum state's choice-of-law rules, however, a trial court must first determine whether a conflict exists. Surgidev Corp. v. Eye Tech., Inc., 648 F.Supp. 661, 679-80 (D.Minn.1986), aff'd, 828 F.2d 452 (8th Cir.1987). We need not decide whether Missouri law or New York law applies in this case because the outcome would be the same under either law. See, e.g., McCarthy v. Aetna Life Ins. Co., 92 N.Y.2d 436, 681 N.Y.S.2d 790, 704 N.E.2d 557, 560 (1998).

By filing an interpleader action to resolve competing claims, an insurer waives strict compliance with policy terms directing how to change a beneficiary. John Hancock Mut. Life Ins. Co. v. Dawson, 278 S.W.2d 57, 61 (Mo.Ct.App.1955); McCarthy, 681 N.Y.S.2d 790, 704 N.E.2d at 561. Under both Missouri and New York law, a court may apply the equitable doctrine of substantial compliance to carry out the insured's intent where the insured has not strictly complied with the policy terms prescribing how to change a beneficiary. Anglen v. Heimburger, 803 S.W.2d 109, 112 (Mo.Ct.App.1990); McCarthy, 681 N.Y.S.2d 790, 704 N.E.2d at 560. As a general rule, this doctrine makes an incomplete change of beneficiary effective against the original beneficiary. Anglen, 803 S.W.2d at 112 (citing Capitol Life Ins. Co. v. Porter, 719 S.W.2d 908, 910 (Mo.Ct. App.1986)); see McCarthy, 681 N.Y.S.2d 790, 704 N.E.2d at 560-61.

In order to apply the doctrine in Missouri, the insured's intent must be established "beyond question." Porter, 719 S.W.2d at 910. Additionally, "the insured must have done everything possible under the circumstances to effectuate his intent." Id. Stated another way, the insured must have done "all within his power to exercise his right to change the beneficiary." Id. (citing Woodman Accident & Life Co. v. Puricelli, 669 S.W.2d 64, 65 (Mo.Ct.App. 1984)). Accordingly, in Metropolitan Life Insurance Co. v. Barnes, 770 F.Supp. 1393, 1397 (E.D.Mo.1991), the court stated that Missouri's substantial-compliance test contains two elements: (1) the insured's intent to change the beneficiary must be "established beyond question," and (2) the "insured has done everything possible under [the] circumstances."

Under New York law, the "paramount factor" in determining whether application of the substantial-compliance doctrine is warranted is the insured's intent. McCarthy, 681 N.Y.S.2d 790, 704 N.E.2d at 560 (quoting Cable v. Prudential Ins. Co. of Am., 89 A.D.2d 636, 453 N.Y.S.2d 86, 88 (N.Y.App.Div.1982) (mem.op.)). "Mere intent" alone, however, will not support application of the doctrine. Cable, 453 N.Y.S.2d at 88. Rather...