Lundsford v. Western States Life Ins.
| Citation | 872 P.2d 1308 |
| Decision Date | 28 October 1993 |
| Docket Number | No. 92CA0323,92CA0323 |
| Parties | Tammi LUNDSFORD, Lori Hustwaite, Kathy Webster, Perry E. Nelson, III, a minor, and Brook Erin Nelson, a minor, by and through their legal guardian ad litem Ellen Trujillo, Plaintiffs-Appellees and Cross-Appellants, v. WESTERN STATES LIFE INSURANCE and North American Life & Casualty Company, Defendants-Appellants and Cross-Appellees. . IV |
| Court | Court of Appeals of Colorado |
Haddon, Morgan & Foreman, P.C., Harold A. Haddon, Rachel A. Bellis, Haines & Olsen, P.C., Susan G. Haines, Denver, for plaintiffs-appellees and cross-appellants.
Phelps, Singer & Dunn, Alan Gary Dunn, Joan M. Riordan, Denver, for defendants-appellants and cross-appellees.
Opinion by Judge VAN CISE. *
Defendants, Western States Life Insurance (Western States) and North American Life & Casualty Company (NALAC), appeal the judgment entered on a jury verdict in favor of plaintiffs, Tammi Lunsford, Lori Hustwaite, Kathy Webster, Perry Edison Nelson, III, and Brooke Erin Nelson. Plaintiffs cross-appeal the trial court's rulings dismissing their additional claims for recovery against defendants. We reverse.
This case concerns the proper disposition of life insurance proceeds upon the death of the insured, Perry Nelson, who disappeared on July 23, 1983, while on a road trip. Within weeks before Mr. Nelson's disappearance, he and his wife, Sharon Nelson, had purchased a series of life insurance policies with death benefits in excess of $200,000. In December 1983, before Mr. Nelson's body had been discovered, Sharon Nelson hired an attorney to open his estate, have him declared dead, and press her claims for the insurance proceeds.
Defendants jointly engaged a service to perform an exhaustive pre-payment investigation of the insured's disappearance. The investigator testified that he did not have any factual basis to believe that a homicide had occurred, that he had a concern, at the time the body was found, that someone might have killed Mr. Nelson, but that that concern did not rise to the level of what he called a "well-founded suspicion."
Thirteen months after Mr. Nelson's disappearance, in August 1984, his body was found in a creek bed alongside the highway where his abandoned car had previously been discovered. The coroner's office found that the crushed skull and condition of the body were consistent with accidental drowning. The sheriff's office concurred with this assessment and issued a final report indicating that there was no suspicion of foul play or of criminal activity with regard to Mr. Nelson's death.
Based upon the official findings as to cause of death, defendants paid the proceeds of the life insurance policies to the policies' designated beneficiaries. In October 1984, Sharon Nelson was paid $100,000 plus interest as the primary beneficiary of the NALAC policy. In February 1985, at the conclusion of an interpleader action, Sharon Nelson, as trustee of the Nelson Family Trust-A, and the Trinidad National Bank, as assignee, received the proceeds of the Western States insurance policy in the face amount of $100,000 plus interest.
Years later, in 1988, under questioning in connection with the murder of her then current husband, Sharon Nelson admitted Perry Nelson had been murdered at her insistence by her boyfriend. She pleaded guilty to first degree murder of Mr. Nelson on June 7, 1989.
This action was brought by plaintiffs, all natural children of Mr. Nelson, to recover the proceeds of the life insurance policies paid to Sharon Nelson. Plaintiffs claimed that because Sharon Nelson had murdered their father, they, as contingent beneficiaries to the policies, were entitled to the proceeds under Colorado's "slayer statute," § 15-11-803, C.R.S. (1987 Repl.Vol. 6B). Specifically, under the Western States policy, the contingent beneficiary of the Nelson Family Trust-A was the estate of the insured, and the contingent beneficiaries under the NALAC policy were the "Children, Perry E. Nelson, III and Brooke Erin Nelson," if both parents were deceased.
Plaintiffs' claim for bad faith breach of insurance contract was dismissed, and the case proceeded to a jury trial on plaintiffs' remaining claims for breach of contract, negligence, and exemplary damages. The jury found that defendants were negligent, and judgment was entered on the jury awards of damages in the total amount of $200,000, the face amount of both policies, plus interest from the date of the insured's death. These appeals followed.
Defendants contend that the trial court erred in declining to rule that plaintiffs' claims to the insurance proceeds are barred pursuant to the notice provision of Colorado's "slayer statute," § 15-11-803(6), C.R.S. (1987 Repl.Vol. 6B). They argue that the effect of the statute's notice provision is to relieve them of liability whenever notice of a competing claim has not been received prior to payment. We agree and conclude that § 15-11-803(6) absolves defendants of any liability to plaintiffs here.
The Colorado slayer statute was first enacted in 1923. Prior to its adoption, the common law in Colorado did not preclude a murderer from inheriting the victim's property. Smith v. Greenburg, 121 Colo. 417, 218 P.2d 514 (1950).
Historically, Colorado has strictly construed the slayer statute and enforced it as written. At the time that Smith, supra, was decided, the slayer statute required a conviction before a murderer would be disqualified from inheriting. Thus, in Smith, our supreme court held that the killer there could inherit from his victim because he had not been convicted of murder.
In a similar vein, in Strickland v. Wysowatcky, 128 Colo. 221, 250 P.2d 199 (1952), the supreme court refused to engraft upon the slayer statute an exception which it did not contain. The issue in Strickland was whether a husband was disqualified from inheriting insurance proceeds from his wife's estate as a result of his pleading guilty to a charge of voluntary manslaughter in connection with her death. Since the statute in effect at that time did not preclude a person who was convicted of manslaughter, as opposed to convictions for first or second degree murder from recovering insurance proceeds or inheriting from the decedent, the husband was permitted to receive the policy proceeds. The court recognized that the General Assembly had preempted the field and displaced the common law. As a result, the court stated that "[a] statutory right cannot be defeated by the application of a common-law principle."
When this court decided Seidlitz v. Eames, 753 P.2d 775 (Colo.App.1987), the slayer statute was in effect in its present form. At that time, the statute provided (and still provides) that a named beneficiary of an insurance contract who is convicted of, pleads guilty to, enters a plea of nolo contendere to, or is found by a preponderance of the evidence in a civil action as having committed first or second degree murder or manslaughter is not entitled to any benefit under the policy. In Seidlitz, the murderer's children were the contingent beneficiaries of the policy. The plaintiff argued that, on the grounds of public policy, the children of the murderer should not recover the proceeds of the insurance policies as this would result in a "benefit" to the murderer. Relying on precedent, this court strictly construed the slayer statute, refused to rewrite or ignore its provisions, and held for the children. See also People v. McCormick, 784 P.2d 808 (Colo.App.1989).
The last sentence of § 15-11-803(6) of the slayer statute (the notice provision) provides:
Any insurance company, bank, or other obligor making payment according to the terms of its policy or obligation is not liable by reason of this section unless prior to payment it has received at its home office or principal address written notice of a claim under this section.
Prior to this case, no Colorado appellate court has addressed this notice provision. However, other jurisdictions which have considered a notice requirement similar to the one at issue here have held that if, as here, the insurers have performed their contracts according to their terms and in accord with the notice provision of the statute, they are "exonerated from further liability thereon and that [plaintiffs], having failed to give timely notice of [their] claim[s] to [insurers], must be relegated to [their] remedy against the named beneficiary who received the proceeds." Miller v. Paul Revere Life Insurance Co., 81 Wash.2d 302, 501 P.2d 1063 (1972). To the same effect, see Rogers v. Union Mutual Stock Life Insurance Co., 782 F.2d 1214 (4th Cir.1986) and Leonard v. Occidental Life Insurance Co., 31 Cal.App.3d 117, 106 Cal.Rptr. 899 (1973).
The language of the notice provision is clear and unambiguous. Therefore, it is not subject to interpretation and must be enforced and applied as written. The death benefits were properly paid in accordance with the terms of the insurance policies. The notice provision requires that defendants be relieved from liability to the plaintiffs, as defendants did not receive written notice, or any notice, of a competing claim prior to payment of the proceeds to the named beneficiary of the policies.
In view of our resolution of this issue, it is unnecessary to address defendants' other contentions for reversal or the contentions of plaintiffs on their cross-appeal.
The judgment is reversed, and the cause is remanded for the entry of judgment in defendants' favor and for further proceedings on the issue of costs.
The purpose of the Colorado "slayer" statute is plainly to deny to one who kills an insured the benefits which accrue from an insurance policy on the decedent's life. Section 15-11-803(1), C.R.S. (1987 Repl.Vol. 6B). For the statute to be applicable, the policy beneficiary must plead...
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Lunsford v. Western States Life Ins., 93SC764
...for disbursing policy proceeds to one who is later determined to be guilty of murdering the insured. Lundsford v. Western States Life Ins., 872 P.2d 1308, 1311 (Colo.App.1993). 1 We granted certiorari to review the court of appeals' resolution of this issue and now reverse and remand to tha......
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