Prudential Ins. Co. of America v. Cooper

• Decision Date: 18 August 1987
• Docket Number: Civ. No. 86-1349.
• Citation: 666 F. Supp. 190
• Parties: The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff, v. Virginia F. COOPER; and Patricia L. Cooper, individually and as Personal Representative of the Estate of Melvin J. Cooper, deceased, Defendants.
• Court: U.S. District Court — District of Idaho

666 F. Supp. 190

The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff, v. Virginia F. COOPER; and Patricia L. Cooper, individually and as Personal Representative of the Estate of Melvin J. Cooper, deceased, Defendants.

Civ. No. 86-1349.

United States District Court, D. Idaho.

August 18, 1987.

M. Allyn Dingel, Jr., Kaye L. O'Riordan, Elam, Burke and Boyd, Boise, Idaho, for plaintiff.

Stanley W. Welsh, Sara M. Thorpe, Clemons, Cosho & Humphrey, P.A., Boise, Idaho, for defendant Virginia Cooper.

C.H. Higer, Richard K. Linville, Higer & Linville, Emmett, Idaho, Glenn A. Coughlan, Coughlan, Coughlan & Korn, Boise, Idaho, for defendant Patricia Cooper.

ORDER

RYAN, District Judge.

I. INTRODUCTION

On November 7, 1966, Melvin J. Cooper purchased a life insurance policy from The Prudential Insurance Company of America (Prudential) in the face amount of $13,000.00. Included within the policy was Mr. Cooper's application for insurance dated November 1, 1962, which provided that insurance was to be payable upon his death to Virginia Cooper, Melvin's wife at the time of the issuance of the policy. On that same page of the policy, Mr. Cooper designated his children as "secondary beneficiaries."

Melvin and Virginia Cooper were divorced on August 17, 1984. Incorporated into the judgment and decree of divorce was a property settlement agreement. As part of the agreement Melvin was awarded the cash value of the Prudential policy in the amount of $2,960.00. Melvin also assumed the debt under the policy in the amount of $2,500.00.

On October 19, 1985, Melvin Cooper married Patricia Cooper. In late November of 1985, Melvin phoned Prudential employee Idell Reeder to request change of beneficiary forms for the Prudential policy. Based upon this request, Prudential mailed to Mr. Cooper the change of beneficiary form. The change of beneficiary form provided spaces for the insured to designate a class one (primary) beneficiary and a class two (secondary) beneficiary. Mailed with the change form was a document entitled Beneficiary Data Form. This form provided a space for indicating the name, relationship to the insured, and full mailing address of the individual listed in the beneficiary change form.

On approximately December 7, 1985, Melvin Cooper placed Patricia Cooper's name and address on the beneficiary data form. The following Monday, on December 9th, Patricia Cooper, at the direction of Melvin Cooper, filled out the change of beneficiary form. Patricia placed her name in the space designated for the class two beneficiary. Melvin did not sign or complete any part of the change of beneficiary form. Mr. Cooper died on December 11, 1985.

The beneficiary change form was received by Prudential employee Jody Billups, whose job description during December 1985 included working on beneficiary change forms. The change form was subsequently sent back to the Coopers. Attached to the change form was a letter from Ms. Billups directed to Melvin Cooper and dated December 18, 1985. The letter directed Mr. Cooper to place his signature at the bottom of the document and to designate a class one beneficiary. Ms. Billups indicated that if Patricia Cooper was intended to be the class one beneficiary, that her name should be placed in that space and crossed out and initialed in the class two space. Prudential never received a response to the December 18th letter.

Virginia and Patricia Cooper now claim entitlement to the proceeds of Melvin Cooper's life insurance policy. Faced with these conflicting claims, Prudential filed a complaint in interpleader and for declaratory relief on March 9, 1987, depositing the subject insurance proceeds with the clerk of the court. Prudential has deposited with the clerk of the court the sum of $14,966.59, which constitutes the insurance proceeds of $13,570.15, together with interest at the rate of eight and one-fourth percent (8¼) from the date of death until the date of deposit with the clerk of this court. Cross-motions for summary judgment have been filed by Patricia and Virginia. All parties seek attorney's fees. The court conducted a hearing on all pending motions on July 28, 1987.

II. ANALYSIS

Patricia Cooper argues, in support of her motion for summary judgment, that the divorce and property settlement agreement that Melvin and Virginia Cooper entered into divested Virginia of her interest as a beneficiary to the insurance proceeds. Patricia further asserts that she was effectively made the new beneficiary under the insurance policy because Melvin did all he could do to effect a change of beneficiary.

A. Property Settlement Agreement

It is well established that divorce does not automatically divest a former wife of the proceeds of a life insurance policy to which she is the named beneficiary. Beneficial Life Ins. Co. v. Stoddard, 95 Idaho 628, 516 P.2d 187 (1973). However, a beneficiary's interest in a life insurance policy "may be terminated by a property settlement agreement which may reasonably be construed as a relinquishment of the spouse's rights to the insurance." Id. at 629, 516 P.2d 187.

In the Stoddard decision, the Idaho Supreme Court found that a property settlement stipulation entered into between the parties terminated the former wife's rights as a named beneficiary to the proceeds of the policy. This stipulation provided that all life insurance would be awarded to Earl Stoddard. As part of the stipulation, the parties further agreed to waive "any and all further demand against the other party of every kind and nature." Id. at 628, 516 P.2d 187.

Relying on the holding in Stoddard, Patricia Cooper asserts that the property settlement agreement in this case waives Virginia Cooper's rights to the insurance proceeds. The court does not agree. The property settlement agreement in this case awarded Melvin Cooper the cash value of the insurance policy and provided that he was to assume the debt on the policy of $2,500.00. These provisions of the agreement, as properly noted by Patricia, do evidence ownership of the policy in Melvin Cooper. However, where a property settlement agreement merely grants ownership of the insurance policy to one spouse, without specifically divesting the other spouse's rights as a beneficiary under the policy, the rights of the beneficiary are not extinguished. In re Estate of Schleis, 97 N.M. 561, 642 P.2d 164 (1982); Redd v. Brooke, 96 Nev. 9, 604 P.2d 360 (1980); Culbertson v. Continental Assurance Co., 631 P.2d 906 (Utah 1981).

The settlement agreement in this case, unlike the stipulation in Stoddard, does not contain language of a waiver of all rights to the insurance and also fails to contain the standard clause waiving all future rights of any kind to the property of the other spouse. Absent such language in the agreement, the court cannot find that Virginia was divested of her interest as a beneficiary to the life insurance proceeds.

B. Compliance with Change of Beneficiary Forms

Patricia asserts that even if the settlement agreement does not terminate Virginia's claim to the life insurance proceeds, such claim was terminated because Melvin effectively changed the beneficiary of this policy to Patricia.

In determining whether there was an effective change of beneficiary in this case, the court is guided by the recent Idaho Supreme Court opinion of IDS Life Insurance v. Groshong, 112 Idaho 847, 736 P.2d 1301 (1987). In that case, Timothy Groshong entered into a contract with his employer (IDS) for a career distribution retirement plan which designated his wife Ruby as the beneficiary. A second retirement plan was entered into in 1982 with Ruby Groshong also being designated as the sole beneficiary.

The Groshongs were divorced in 1983. Shortly thereafter, Mr. Groshong married his second wife, Joanne. On June 23, 1983, a week after the marriage, Mr. Groshong executed two IDS change of beneficiary forms in the presence of Joanne and an employee of IDS. These forms designated Joanne as the sole beneficiary under both retirement...