Harper v. Prudential Ins. Co. of America

• Decision Date: 29 April 1983
• Docket Number: No. 54707,54707
• Citation: 233 Kan. 358,662 P.2d 1264
• Parties: Steven L. HARPER and Nancy Harper, as Guardians, Adoptive parents and next of friends of Eric Harper, formerly Eric Fenton, for and on his behalf as next of friend, Plaintiffs-Appellees, v. PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant-Appellant.
• Court: Kansas Supreme Court

Page 1264

662 P.2d 1264

233 Kan. 358

Steven L. HARPER and Nancy Harper, as Guardians, Adoptive

parents and next of friends of Eric Harper,

formerly Eric Fenton, for and on his

behalf as next of friend, Plaintiffs-Appellees, v. PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant-Appellant.

No. 54707.

Supreme Court of Kansas.

April 29, 1983.

Syllabus by the Court

1. If a person who is designated as beneficiary in a policy of life insurance feloniously kills the insured, he will be barred from recovering under the policy whether or not he is actually convicted for the killing.

2. K.S.A. 59-513 does not preclude judicial application of the common-law rule in cases where the beneficiary killed the insured but has not been convicted of the crime.

3. An insurance company which pays the proceeds of a life insurance policy to the primary beneficiary is discharged from liability on the policy if it acted in good faith. The obligation of good faith requires a reasonable and prudent prepayment investigation when the company is aware of suspicious circumstances involving the beneficiary in the death of the insured.

4. An insurance company is to be relieved from liability to the contingent beneficiary only if it paid the insurance proceeds to the primary beneficiary in good faith and without knowledge of facts which may defeat the primary beneficiary's claim.

Brian G. Grace of Curfman, Harris, Stallings, Grace & Snow, Wichita, argued the cause, and Susan K. McKee, Wichita, of the same firm, was with him on the briefs for defendant-appellant.

John V. Black of John V. Black, Chartered, Pratt, argued the cause, and Russell L. Mills, Platt, of the same firm, was with him on the brief for plaintiffs-appellees.

PRAGER, Justice:

This is an action on a life insurance policy brought against the defendant, Prudential Insurance Company of America, by the contingent beneficiary after the insurance company had previously paid the designated primary beneficiary. The named insured was Jan E. Fenton, wife of Norman R. Fenton, who was the primary beneficiary under the policy. The contingent beneficiary was the plaintiff, Eric Harper, the infant child of Jan E. Fenton.

The facts in the case are undisputed. The trial court made findings of fact which were stipulated by the parties to be as follows:

(1) Defendant, Prudential Insurance Company of America, issued its Policy No. 38 236 507 on or about October 14, 1975, insuring the life of Jan E. Fenton in the face amount of $20,000 with additional accidental death benefits in the amount of $40,000. The policy became due and payable upon receipt at the home office of due proof that the insured's death occurred while the policy was in force. The policy provided that upon request and due proof that the insured's death resulted directly and independently of all other causes from accidental bodily injury, Prudential would pay the accidental death benefit specified above. The policy listed "beneficiaries in order of priority" as "Class 1--Norman R. Fenton" and "Class 2--Children of the Insured."

(2) The sole Class 2 beneficiary of the insured is Eric Harper who was eight (8) weeks old at the time of the murder of the insured.

(3) On November 28, 1975, Jan Fenton was found dead in the bathroom of her home, located in Barber County. This was after her husband had reported her death to the authorities, claiming he had found her there.

(4) Jan Fenton had been shot in the head some time between 9:00 and 10:00 p.m. The murder weapon was a .22 Savage automatic rifle. Norman Fenton, her husband and the primary beneficiary of the insurance policy, owned the rifle.

(5) The primary beneficiary, Fenton, kept the .22 rifle in a corner of a room near the dining room area of the home. There were spent casings found in the dining room area, adjacent to the bathroom where Jan Fenton's body was found. The murder weapon could not be located at the time of the report but was subsequently recovered approximately 2 1/2 years later from the Barber County State Lake where Fenton had thrown it.

(6) There was no evidence of attempted rape, burglary, robbery, or other crime, and there was no sign of a struggle. Jan Fenton's clothes had not been disturbed and the house was undamaged.

(7) The primary suspect in the murder was Norman Fenton. Jan Fenton kept the doors locked, but there was no evidence of forced entry.

(8) Everyone connected with the investigation of the murder agreed that it was not a suicide.

(9) Even the prime suspect, Norman Fenton, said his wife had been murdered, but no one saw anyone enter or leave the home. Fenton was known to have a drinking problem and also to use drugs. He was also a known thief, pimp, snitch, and habitual liar. On or about December 4, 1975, Norman Fenton completed, signed, and caused to be forwarded to defendant a "Request for Life Insurance Policy Benefits" under the policy and provided due proof that Jan Fenton had been killed on November 28, 1975. The same was received at Prudential's home office together with a newspaper report indicating foul play was involved in the insured's death.

(10) Upon review of the proofs of death submitted, including the newspaper article, defendant made the decision on December 10, 1975, to investigate the circumstances of the insured's death and the status of any criminal investigation relative thereto. The defendant's investigation was conducted on January 20 and 21, 1976, by defendant's investigator, James C. King.

(11) Pursuant to this decision, King, a home office representative of defendant, interviewed law enforcement personnel with the following results:

(a) Judge McDaniel, a judge of the Barber County court, in a conversation with King, let it be known that he had a pretty good idea that the beneficiary, Norman Fenton, was involved in the killing of the insured.

(b) Sheriff John K. Blunk of Barber County, Kansas, stated that it was his opinion that the primary beneficiary, Norman Fenton, had killed the insured, Jan E. Fenton.

(c) Richard Raleigh, county attorney, Barber County, Kansas, stated that it was his opinion that the primary beneficiary, Norman Fenton, had killed the insured, Jan E. Fenton. Raleigh also stated that all the circumstantial evidence points toward the beneficiary, Norman Fenton, and that they had no other suspect. Raleigh did indicate that he did not have enough evidence to make an arrest, but he felt that the primary beneficiary, Fenton, would stub his toe.

(d) Tom Lyons, of the Kansas Bureau of Investigation, when asked by King if the beneficiary killed the insured, stated, "Of course, he killed his wife. No one else was involved." Lyons also asked Prudential's investigator, King, if it would be possible for Prudential to be slow in making the payment of the proceeds. Lyons felt that it would be to the State's advantage for the beneficiary to stew before receiving payment from Prudential. Lyons indicated to Prudential's investigator that the KBI was still working on the case, and that the KBI was waiting for the beneficiary to make a mistake. Lyons hoped that it might be possible for Prudential to delay payment of the insurance proceeds.

(e) The primary beneficiary, Norman Fenton, in his interview with King, threatened King by making, "some type of vulgar, unspecific threat against me in the event I didn't handle the case in the manner he felt proper. He said had I not appeared he was going to call the state's insurance commissioner."

(12) Pursuant to this decision, James C. King, interviewed law enforcement personnel with the following results:

(a) Sheriff John K. Blunk of Barber County, Kansas, on January 20, 1976, informed King that "he has no proof or sufficient evidence to charge the beneficiary with murder."

(b) Richard Raleigh, county attorney, Barber County, Kansas, on January 20 and 21, 1976, informed King that "he hasn't enough proof to make an arrest."

(c) Tom Lyons of the Kansas Bureau of Investigation on January 26, 1976, informed King that "they don't have enough evidence to make an arrest."

(d) On January 20, 1976, the beneficiary, Norman R. Fenton, advised the defendant's home office representative that "he hasn't done anything wrong, he passed four polygraphs. He's been cleared by the KBI."

(13) Defendant's investigator, King, submitted a report dated February 3, 1976, to defendant's home office for evaluation. Within his report, King concluded as follows:

"It is quite easy for anyone to rule out suicide. I am probably over 99% certain that the beneficiary either planned or in an act of passion shot and killed the insured. The physical evidence is quite strong. If one listens to the beneficiary's story it is easy to be convinced that he is not telling the truth .... A five foot eight inch subject holding a rifle looking through the scope would fire approximately 51 inches at a slight downward angle. The downward trajectory between the insured and the window pretty well check out. I am convinced the beneficiary fired both shots .... I believe that there is enough doubt that we could with justification delay payment." (Emphasis supplied.)

(14) The remedy of interpleader is available to parties who might be in peril in cases such as this. The defendant totally failed to avail itself of the protection of the remedy.

(15) On February 13, 1976, approximately 10 days following the receipt of its investigator's report, defendant Prudential paid the proceeds of the policy to the primary beneficiary, Norman R. Fenton.

(16) The primary beneficiary, Fenton, was indicted for the killing of the insured in 1978.

(17) The primary beneficiary, Fenton, was convicted on April 13, 1979, of murdering Jan Fenton. When the insurance policy proceeds were paid to Norman Fenton, the KBI investigation and the Barber County sheriff's office investigation into the murder were still focused on the primary beneficiary, Norman Fenton.

(18) Shortly after the primary beneficiary, Norman R. Fenton, was...