Smith v. Metropolitan Life Insurance Company

• Decision Date: 30 June 1956
• Docket Number: No. 34818.,34818.
• Parties: Christina H. SMITH, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, a corporation, Defendant. METROPOLITAN LIFE INSURANCE COMPANY, a corporation, Cross-Claimant, v. Christina H. SMITH and Husted N. Smith, Cross-defendants.
• Court: U.S. District Court — Northern District of California

142 F. Supp. 320

Christina H. SMITH, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, a corporation, Defendant.

METROPOLITAN LIFE INSURANCE COMPANY, a corporation, Cross-Claimant, v. Christina H. SMITH and Husted N. Smith, Cross-defendants.

No. 34818.

United States District Court N. D. California, S. D.

June 30, 1956.

Jacobsen & Tobin, San Francisco, Cal., for Christina Smith.

Hadsell, Murman & Bishop, San Francisco, Cal., for Husted Smith.

OLIVER J. CARTER, District Judge.

This dispute is between the father and a former wife of a deceased Government employee, both of whom claim the proceeds of a Federal Group Life Insurance Policy that covered the decedent. The former wife, Christina Smith, originated the action by restraining the Metropolitan Life Insurance Company from distributing the proceeds of the policy to the decedent's father, Husted Smith; the insurance company interpleaded Husted Smith, deposited the proceeds of the policy into the Registry of the Court, and was dismissed from the litigation.

The decedent, Harold Smith, was a Post Office employee. He originally designated Christina Smith the beneficiary of his Federal Group Life Insurance, and that was the only designation of a beneficiary he ever made. Harold Smith died from cancer, and the disease had drastically affected his mind for a period of time before his death. Twenty-one days before his death, and while Harold Smith was mentally incompetent, he was placed in a retired status by the Post Office Department. Section 11 of the Group Policy in question provides in part that any designation of beneficiary shall automatically cease to be effective on the date of retirement of the insured employee, and that section further provides:

"If, at the death of the Employee, there be no designated Beneficiary as to all or any part of the insurance, then the amount of the insurance payable for which there is no designated Beneficiary shall be payable to the person or persons listed below surviving at the date of the Employee's death, in the following order of precedence:

"(1) To the widow or widower of the Employee;

"(2) If neither of the above, to the child or children of such Employee * * *

"(3) If none of the above, to the parents of such Employee or the survivor of them * * *."

Husted Smith's claim is based on the fact that after Harold Smith was retired by the Post Office, no new designation of beneficiary was filed by him (since he was incompetent), and therefore Husted claims that there was no designated beneficiary at the time of Harold's death, and that Husted is entitled to the proceeds of the policy as the surviving parent of the decedent, there being no widow or children of the decedent.

Harold Smith and Christina Smith were married in 1930 and were divorced in 1950. Harold remarried and was divorced a second time in 1953. After his second divorce, Harold and his first wife, Christina, became friendly again. During his last illness, which extended over a period of several months, Christina visited Harold frequently in the hospital. He made her the beneficiary of his Government insurance and the primary beneficiary under his will, as well as the executrix of his estate. It is abundantly clear, and this Court finds as a matter of fact, that Harold intended Christina to be the beneficiary of his Government insurance.

The statutes creating Federal Employees' Group Life Insurance, 5 U.S. C.A. § 2091 et seq., have not yet been construed by any court; but guidance may be found in general principles of insurance law, and in cases involving National Service Life Insurance. With regard to the latter, it is noted that many courts have passed upon situations in which an insured under a National Service Life Insurance Policy attempted to change the designation of beneficiary under his policy, but failed to comply with the technical requirements set forth in the policy as the means to accomplish such a change. The universal rule of those cases is that the policy provisions specifying the method of changing the designated beneficiary are for the benefit of the insurer and not the insured, and that the clear intention of the insured should be given effect even though the method specified in the policy is not followed. In Gerstenlauer v. United States, D.C.E.D.N.Y., 108 F.Supp. 654, 657, the court said:

"The provision concerning the method to be followed in creating evidence that the right to change the beneficiary has been exercised, is in aid of administration, and does not affect the essential relationship between the insured and the insurer. Upon one occasion at least, that provision has been judicially declared to have been for the convenience of the Government to minimize the possibility of making payments to persons not entitled to receive the same. Murphy v. United States, D.C., 5 F. Supp. 583 * * *."

The court further said 108 F.Supp. at page 658:

"It is unnecessary to quote from the many cases in which the courts have looked to the substance rather than to the form in giving effect to a change in beneficiary named in Government life insurance policies, where the purpose is clear and all reasonable efforts have been made to effectuate it. The following have been consulted, among others: Burgess v. Murray, 5 Cir., 194 F.2d 131; Boring v. United States, 10 Cir., 181 F.2d 931; Senato v. United States, 2 Cir., 173 F.2d 493."

In McKewen v. McKewen, 5 Cir., 165 F.2d 761, 764, the court said:

"* * * the provisions for written notice of change of beneficiary in such insurance contracts are for the benefit of the insurer * * *."

And in Johnson v. White, 8 Cir., 39 F. 2d 793, 796, the court said:

"It is urged on behalf of appellee that the change of the beneficiary was not made in the manner required by the regulations, and that the change could only be made in the manner as provided. The regulations, however, were largely for the protection of the government * * *."

That the provisions for automatic cancellation of a designation of beneficiary in the policy in question were inserted purely for administrative convenience is shown by the Civil Service Commission "Life Insurance Manual," issued December, 1954, which has the following to say about the provisions relied upon here by Husted Smith (Chapter I-3-20 and I-3-21):

"Note that a designation of beneficiary is automatically canceled where an employee transfers from one agency to another, even though there is no break in service. This puts the employing office in a position of knowing at all times whether or not an employee has a valid designation on file. Similarly, the automatic cancellation in the case of

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