Country Life Ins. Co. v. Marks

• Decision Date: 14 October 2011
• Docket Number: Case No. 07-0386-CV-W-REL
• Parties: COUNTRY LIFE INSURANCE COMPANY, Plaintiff, v. JOHNO MARKS and DEBBIE MARKS, Defendants.
• Court: U.S. District Court — Western District of Missouri

COUNTRY LIFE INSURANCE COMPANY, Plaintiff,

v.JOHNO MARKS and DEBBIE MARKS, Defendants.

Case No. 07-0386-CV-W-REL

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MISSOURI WESTERN DIVISION

Dated: October 14, 2011

MEMORANDUM TO COUNSEL

Following is the legal authority for the wording of the substantive instructions and interrogatories discussed herein. Interrogatories will be used rather than a standard verdict form for several reasons.

1. The claim of Johno and Debbie Marks for monetary relief is contained in a counterclaim; however, defense counsel stated during the pretrial conference that he would not present that claim to the jury. Therefore, the award of money would occur should the plaintiff lose, rather than in the usual case where the award of money occurs when the plaintiff wins. This is a confusing set of circumstances for the jury.

2. Because there are multiple affirmative defenses involving multiple alleged misrepresentations, it would be very difficult to ensure that the jury's verdict is unanimous on not only the claim but on each affirmative defense.

3. Due to the multiple alleged misrepresentations and the multiple affirmative defenses, the verdict form would be difficult for the jury to understand. Separate interrogatories on each element of each affirmative defense will allow them to deliberate on each separately and make certain that they reach a unanimous decision on each essential element.

The federal court hearing a case based on diversity jurisdiction is not required to use the state's approved jury instructions. The judge is only required to instruct the jury correctly on the appropriate and relevant state law. Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 720-21 (8th Cir. 2008 (reversing in part on other grounds but acknowledging, in action arising from injuries allegedly caused by fireworks, that a federal court presiding over a diversity case is not bound to follow the language contained in a state's uniform jury instruction); Porchia v. Design Equipment Co., 113 F.3d 877, 882-83 (8th Cir. 1997); Kansas City Power & Light Co. v. Ford Motor Credit Co., 995 F.2d 1422, 1429-32 (8th Cir. 1993); Bersett v. K-Mart Corp., 869 F.2d 1131, 1134-35 (8th Cir. 1989); Scott v. Conroy, 577 F.2d 13, 16 (8th Cir. 1978).

As the sort of benefactor-type relationship between Romig and the Markses has not been the subject of a prior Missouri case, Country Life Insurance Co. v. Marks, 592 F.3d 896, 900 (8th Cir. 2010), the instruction listed below as well as the first interrogatory have been constructed using my prediction what the Missouri courts would hold were the question presented to them. Percival v. General Motors Corp., 539 F.2d 1126, 1130 (8th Cir. 1976).

INSTRUCTION NO. ___

A person cannot take out a valid and enforceable policy of insurance for his own benefit on the life of a person in which he has no insurable interest; such a policy or contract of insurance is void and unenforceable on the grounds of public policy, it being merely a wagering contract. For one to have an insurable interest in the life of another, there must be a reasonable ground founded upon the relations of the parties to each other, either pecuniary or of blood or marriage, to expect some benefit from or advantage from the continuance of the life of the insured. The parties agree in this case that Johno and Debbie Marks were not related to Connie Romig by blood or marriage.

To have an insurable interest under the pecuniary benefit classification, one must ask whether the beneficiary would regard himself as better off from the standpoint of money, would he enjoy more substantial economic returns should the insured continue to live; or would he have more, in the form of the proceeds of the policy should the insured die. If the beneficiary would profit by the insured's death, the policy contract is void since the public has a controlling concern that no person have an interest that may give rise to a temptation to destroy the insured's life. Therefore, when the disproportion between the insurance and the pecuniary benefit that thebeneficiary reasonably could have expected had the insured lived, is so great, taken with the other circumstances of the case, as to show a want of good faith in the beneficiary, the policy will be deemed a wager contract, and void.

Lakin v. Postal Life & Cas. Ins. Co., 316 S.W.2d 542, 549 (Mo. 1958)

Drane v. Jefferson Standard Life Insurance Co., 161 S.W.2d 1057, 1059 (Tex. 1942), cited by Country Life Insurance Co. v. Marks, 592 F.3d 386 (8th Cir. 2010)

Interrogatory Number 1

Does the difference between the amount of insurance Johno and Debbie Marks expected to receive from the Country Life policy and the amount Johno and Debbie Marks reasonably could have expected to receive had Connie Romig not died, taken with the other circumstances of the case, show a lack of insurable interest and deem the policy a wager on Connie Romig's life?

If you answered "YES" to question 1, go to the end of this form and have your Jury Foreperson sign and date; your have completed your deliberations. If you answered "NO" to question 1, go to question 2.

Country Life has proposed the following instruction to which Johno and Debbie Marks object. "On the claim of Johno and Debbie Marks against Country Life, your verdict must be for Johno and Debbie Marks, if you believe that, at the time Connie Romig applied for the Country Life policy, Johno and Debbie Marks reasonably expected to receive a greater pecuniary benefit or advantage from the continued life of Connie Romig than the amount of the death benefits they could have expected to receive under the Country Life policy, in the event of her death." (emphasis added). Hence, Country Life's position is that the comparison is between

What the beneficiaries reasonably

could have expected to receive

financially had Romig lived

v.

How much life insurance they

expected to receive upon her

death

The Markses' interpretation of the law is that any reasonably expected pecuniary benefit from the continued life of the insured is enough to make the policy valid. Therefore, Johno and Debbie Marks believe that the comparison is between What the beneficiaries reasonably

could have expected to receive

financially had Romig lived

v.

The end of those pecuniary benefits

due to Romig's death

Under Country Life's interpretation, a comparison must be made between what the beneficiaries would get financially if (1) the insured continues to live and provide the financial assistance he or she has been providing in the past versus (2) the amount of the life insurance policy. If the amount of the life insurance is greater, then the policy is void. Under the Markses' interpretation, if the jury finds that Johno and Debbie Marks received ANY financial assistance from the insured and they have a reasonable expectation that the financial assistance would have continued had the insured not died, then the policy is valid and no further comparison is needed.

The legal analysis begins with the Eighth Circuit's opinion in this case; and although there is no Missouri case on point, other Missouri cases dealing with insurable interests are helpful. The Eighth Circuit's earlier opinion in this case, Country Life Insurance Co. v. Marks, 592 F.3d 896 (8th Cir. 2010), does not answer the question at issue here.

Because the Markses were both beneficiaries and owners of the Country Life policy, they had to prove they had an insurable interest in the life of the insured, otherwise the policy would be unenforceable. See Lakin v. Postal Life & Cas. Ins. Co., 316 S.W.2d 542, 550, 552 (Mo.1958). To establish an insurable interest under Missouri law, a party is required to show a benefit or advantage from the continuance of the life of the insured. Id. at 549. An insurable interest can be based upon three different types of relationships -- a pecuniary relationship, a blood relationship, or a relationship based upon affinity (i.e., marriage). Id.

The Markses did not have a blood or marriage relationship with Romig, so the existence of an insurable interest turned instead upon whether there was a pecuniary relationship between them. To establish an insurable interest based upon a pecuniary relationship, "there must be 'a reasonable probability that [the beneficiary] will gain by the [insured's] remaining alive or lose by [her] death.' " Hershberger v. Young, 59 S.W.3d 614, 622 (Mo. Ct. App. 2001) (quoting Poland v. Fisher's Estate, 329 S.W.2d 768, 772 (Mo.1959)). "Stated another way, 'any reasonable expectation of pecuniary benefit or advantage from the continued life of another creates an insurable interest in such life.' " Id. at 622-23 (quoting Alexander v. Griffith Brokerage Co., 228 Mo. App. 773, 73 S.W.2d 418, 423 (1934)). Whether a party has an insurable interest due to a pecuniary interest is a question of fact when the parties dispute (as they do here) thebasis for the pecuniary interest. See Vette Co. v. Aetna Cas. & Sur. Co., 612 F.2d 1076, 1078 (8th Cir. 1980) (applying Missouri law).

*****

Although the sort of benefactor-type relationship between Romig and the Markses has not been the subject of a prior Missouri case, other jurisdictions which follow the same common law rules as Missouri have recognized an insurable interest under analogous facts (discussed below). Thus, if the relationship between them satisfies the general test for creating an insurable interest (i.e., any reasonable expectation of pecuniary benefit or advantage from the continued life of another), we conclude Missouri courts would recognize it.

Id. at 899-900.

The Eighth Circuit discussed two Texas cases and one Pennsylvania case: Drane v. Jefferson Standard Life Ins. Co., 139 Tex. 101, 161 S.W.2d 1057 (1942); Reed v. Smith, 120 S.W.2d 302 (Tex. Civ. App.1938); and Clayton v. Industrial Life Ins. Co., 162 Pa. Super. 77, 56 A.2d 292 (1948).

Drane involved two life insurance policies totaling $10,510. The insured owned the policies and she named...