Barton v. Liberty Nat'l Life Ins. Co. (Ex parte Liberty Nat'l Life Ins. Co.)

• Decision Date: 25 March 2016
• Docket Number: 1140612.
• Citation: 209 So.3d 486
• Parties: Ex parte LIBERTY NATIONAL LIFE INSURANCE COMPANY. (In re: Misty Ann Barton, as administratrix of the Estate of Benjamin H. Miller, Jr., deceased v. Liberty National Life Insurance Company).
• Court: Alabama Supreme Court

209 So.3d 486

Ex parte LIBERTY NATIONAL LIFE INSURANCE COMPANY.

(In re: Misty Ann Barton, as administratrix of the Estate of Benjamin H. Miller, Jr., deceased

v.Liberty National Life Insurance Company).

1140612.

Supreme Court of Alabama.

March 25, 2016.

Scott Burnett Smith of Bradley Arant Boult Cummings LLP, Huntsville; Michael R. Pennington of Bradley Arant Boult Cummings LLP, Birmingham; and Elizabeth W. McElroy of Baxley, Dillard, McKnight, James & McElroy, Birmingham, for petitioner.

Stan Brobston of Brobston & Brobston P.C., Bessemer, for respondent.

Matthew C. McDonald of Jones Walker LLP, Mobile, for amicus curiae Alfa Life Insurance Corporation, in support of the petitioner.

Drayton Nabers, Jr., Katharine A. Weber, and Kasdin E. Miller of Maynard, Cooper and Gale P.C., Birmingham, for amici curiae Business Council of Alabama, Association of Alabama Life Insurance Companies, and American Council of Life Insurers, in support of the petitioner.

BOLIN, Justice.

Liberty National Life Insurance Company ("Liberty National") petitioned this Court for a writ of certiorari to review the Court of Civil Appeals' decision (1) holding, as a matter of first impression, that § 27–14–3(f), Ala.Code 1975, a part of the Alabama Insurance Code, § 27–1–1 et seq., Ala.Code 1975 ("the Insurance Code"), requires an insurable interest in a life-insurance policy to exist at a point other than the time at which the policy becomes effective; and (2) reversing the trial court's dismissal of the complaint filed by Misty Ann Barton, as administratrix of the estate of Benjamin H. Miller, Jr. ("Benjamin Jr."), in which Barton alleged that Liberty National was negligent in allowing Leanne Jean Miller ("Leanne"), Benjamin Jr.'s stepmother, to substitute herself as beneficiary of an insurance policy insuring the life of Benjamin Jr. See Barton v. Liberty Nat'l Life Ins. Co., 209 So.3d 479 (Ala.2014). We granted Liberty National's petition, and, for the reasons discussed below, we affirm in part and reverse in part the judgment of the Court of Civil Appeals.

I. Facts and Procedural History

Liberty National issued a life-insurance policy ("the policy") to Benjamin H. Miller, Sr. ("Benjamin Sr."), on the life of his son, Benjamin Jr. The named beneficiary on the policy was Nona June Miller, the mother of Benjamin Sr. and grandmother of Benjamin Jr. Benjamin Sr. subsequently modified the policy to name himself as the beneficiary. On January 15, 2011, Benjamin Sr. died. On or about February 23, 2011, Leanne, Benjamin Sr.'s widow, was issued letters of administration for Benjamin Sr.'s estate. During the administration of Benjamin Sr.'s estate, Leanne contacted Liberty National and had herself substituted as the named beneficiary of the policy insuring Benjamin Jr.'s life.

On July 20, 2011, Benjamin Jr. died. Leanne, thereafter, made a claim for the life-insurance proceeds under the policy, which Liberty National paid. Barton, as administratrix of Benjamin Jr.'s estate, sued both Liberty National and Leanne. In the complaint, Barton alleged (1) that the policy was void because Leanne had no insurable interest in Benjamin Jr., her stepson; (2) that Liberty National was negligent in failing to determine at the time of the requested beneficiary change that Leanne had no insurable interest in Benjamin Jr.; and (3) that Liberty National's negligence caused Benjamin Jr.'s estate to be deprived of the policy benefits that were payable, under the terms of the policy, to Benjamin Jr.'s estate. Barton further alleged that Leanne had been unjustly enriched in an amount equal to the proceeds paid to her that were rightfully payable to Benjamin Jr.'s estate. Barton sought a judgment from Liberty National and Leanne in the amount of $25,000, plus interest and costs.

On October 15, 2013, Liberty National filed a motion, pursuant to Rule 12(b)(6), Ala. R. Civ. P., to dismiss Barton's complaint, in which it argued that, pursuant to § 27–14–3 of the Insurance Code, there was no requirement that Leanne have an insurable interest in the life of Benjamin Jr. at the time of the beneficiary change. Barton filed a motion in response, in which she argued that because Leanne never had an insurable interest in Benjamin Jr.'s life, Liberty National's actions in allowing Leanne to substitute herself as beneficiary was tantamount to the creation of a "wagering" policy, which, under Alabama law, is void.

On December 15, 2013, the trial court entered an order granting Liberty National's motion to dismiss Barton's complaint; it subsequently entered an order denying Barton's motion for reconsideration. On April 4, 2014, the trial court certified its December 15, 2013, order as final, pursuant to Rule 54(b), Ala. R. Civ. P. Barton appealed.

On December 12, 2014, the Court of Civil Appeals issued an opinion holding that, when "[v]iewing the Insurance Code as a whole, we agree with Barton that § 27–14–3(f) does not allow for the change of a beneficiary on the life-insurance policy of another when the proposed new beneficiary does not possess an insurable interest in the insured." Barton v. Liberty Nat'l Life Ins. Co., 209 So.3d at 484. Based on its interpretation of § 27–24–3(f), the Court of Civil Appeals concluded that Leanne, Benjamin Jr.'s stepmother, did not have an insurable interest in Benjamin Jr. either when the policy was issued or at any time thereafter. The Court of Civil Appeals further concluded that the trial court had erred in dismissing Barton's complaint in light of the fact that it appeared that she could, under certain circumstances, maintain a cause of action against Liberty National for negligence. For these reasons, the Court of Civil Appeals reversed the trial court's judgment of dismissal of Barton's negligence claim against Liberty National and remanded the cause to the trial court for further proceedings. On March 13, 2015, Liberty National filed its petition for writ of certiorari; this Court granted the writ and has heard oral arguments from the parties.

II. Standard of Review

"On certiorari review, this Court accords no presumption of correctness to the legal conclusions of the intermediate appellate court. Therefore, we must apply de novo the standard of review [for a Rule 12(b)(6), Ala. R. Civ. P., dismissal] that was applicable in the Court of Civil Appeals."

Ex parte Toyota Motor Corp., 684 So.2d 132, 135 (Ala.1996).

The Court of Civil Appeals stated the following standard of review:

" ‘The applicable standard of review for a Rule 12(b)(6), Ala. R. Civ. P., dismissal is set forth in Nance v. Matthews, 622 So.2d 297, 299 (Ala.1993) :

" ‘ "On appeal, a dismissal is not entitled to a presumption of correctness. Jones v. Lee County Commission, 394 So.2d 928, 930 (Ala.1981) ; Allen v. Johnny Baker Hauling, Inc., 545 So.2d 771, 772 (Ala.Civ.App.1989). The appropriate standard of review under Rule 12(b)(6) [, Ala. R. Civ. P.,] is whether, when the allegations of the complaint are viewed most strongly in the pleader's favor, it appears that the pleader could prove any set of circumstances that would entitle her to relief. Raley v. Citibanc of Alabama/Andalusia, 474 So.2d 640, 641 (Ala.1985) ; Hill v. Falletta, 589 So.2d 746 (Ala.Civ.App.1991). In making this determination, this Court does not consider whether the plaintiff will ultimately prevail, but only whether she may possibly prevail. Fontenot v. Bramlett, 470 So.2d 669, 671 (Ala.1985) ; Rice v. United Ins. Co. of America, 465 So.2d 1100, 1101 (Ala.1984). We note that a Rule 12(b)(6) dismissal is proper only when it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim that would entitle the plaintiff to relief. Garrett v. Hadden, 495 So.2d 616, 617 (Ala.1986) ; Hill v. Kraft, Inc., 496 So.2d 768, 769 (Ala.1986)."

" ‘(Emphasis added.)’

" Smith v. Smith, 865 So.2d 1221, 1223–24 (Ala.Civ.App.2003) (footnote omitted)."

209 So.3d at 481–82. Further, this Court also reviews de novo questions of law concerning statutory construction. Continental Nat'l Indem. Co. v. Fields, 926 So.2d 1033 (Ala.2005).

III. Analysis

A. Insurable Interest

Section 27–14–3(a) of the Insurance Code, regarding "personal insurance," defines "insurable interest" as

"an interest based upon a reasonable expectation of pecuniary advantage through the continued life, health, or bodily safety of another person and consequent loss by reason of his or her death or disability or a substantial interest engendered by love and affection in the case of individuals closely related by blood or by law."

It has long been established under Alabama's common law and statutory law that a life-insurance policy issued to a person not having an insurable interest in the life of the insured is considered a "wager" on the life of another and is therefore void as against public policy. Helmetag's Adm'x v. Miller, 76 Ala. 183 (1884) ; see also Commonwealth Life Ins. Co. v. George, 248 Ala. 649, 28 So.2d 910 (1947). In Mutual Savings Life Insurance Co. v. Noah, 291 Ala. 444, 448–49, 282 So.2d 271, 273–74 (1973), this Court expounded on the long-established rule requiring an insurable interest in the life of the insured:

"[T]he long-established rule that [a policy of life insurance procured or taken out by a beneficiary on the life of another] is invalid unless the beneficiary has an ‘insurable interest’ in the life of the insured applies. This rule is to the effect that a person has an unlimited insurable interest in his own life and may designate any person as his beneficiary so long as the insurance was procured or taken out by the insured and the premiums paid by him, but one taking out a policy of insurance for his own benefit, on the life of another person, must have an insurable interest in the continuance of the life of such insured. National Life & Accident Ins. Co. v. Alexander, 226 Ala. 325, 147 So. 173 [ (1933) ]; Tit. 28A, § 316, Code of Alabama, 1940 (Recomp. 1958).

"Several reasons have been assigned as the basis for the insurable

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