Opinion
NO. 3-99-CV-2679-M
January 16, 2001
FINDINGS AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Defendant Margaret Seppamaki and Third-Party Defendant Seabury Smith, Inc. f/k/a Johnson Higgins/Kirke-Van Orsdel, Inc. ("Seabury") have filed dispositive motions in this interpleader action. Seppamaki seeks summary judgment on her counterclaim against Plaintiff Metropolitan Life Insurance Company ("MetLife"). Seabury moves to dismiss certain claims asserted by Defendant Diana Bialik in her third-party complaint. Both motions have been referred to United States Magistrate Judge Jeff Kaplan for recommendation pursuant to 28 U.S.C. § 636(b).
I.
James R. Bialik was a participant in a Group Universal Life Insurance Plan maintained by his employer, GTE Corporation. (Plf. Compl. ¶ 10). On November 4, 1987, James designated his wife, Marilyn R. Bialik, as the primary beneficiary under the policy and his sister-in-law, Margaret Seppamaki, as the contingent beneficiary. (Id. ¶ 12). James and Marilyn divorced on June 24, 1994. (Id. ¶ 13). Three years later, James married Diana Bialik. (Id. ¶ 15). However, he never filed a new beneficiary designation form with the Plan administrator. (Id.). When James died on April 13, 1999, Seppamaki and Diana asserted competing claims to the life insurance proceeds. (Id. ¶¶ 11, 16). This interpleader action was instituted by MetLife to resolve those claims.
MetLife originally named Diana Bialik, Marilyn Bialik, and Margaret Seppamaki as parties to the interpleader action. Marilyn has since disclaimed any interest in the insurance proceeds. (Jt. Status Rep., 12/1/00 at 1-2).
II.
Seppamaki has filed a motion for summary judgment. According to Seppamaki, she is entitled to all the insurance proceeds because James never changed his beneficiary designation after he married Diana. Seppamaki further maintains that MetLife should recover its attorney's fees from Diana rather than out of the disputed funds.A.
Summary judgment is proper when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. FED. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A dispute is "genuine" if the issue could be resolved in favor of either party. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). A fact is "material" if it might reasonably affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).
A movant who does not have the burden of proof at trial must point to the absence of a genuine fact issue. Duffy v. Leading Edge Products, Inc., 44 F.3d 308, 312 (5th Cir. 1995); Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995). The burden then shifts to the nonmovant to show that summary judgment is not proper. Duckett v. Cedar Park, 950 F.2d 272, 276 (5th Cir. 1992). The non-movant may satisfy this burden by endering depositions, affidavits, and other competent evidence. Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 113 S.Ct. 82 (1992). All evidence must be viewed in the light most favorable to the party opposing the motion. Rosado v. Deters, 5 F.3d 119, 122 (5th Cir. 1993); Reid v. State Farm Mutual Automobile Insurance Co., 784 F.2d 577, 578 (5th Cir. 1986). However, conclusory statements and testimony based merely on conjecture or subjective belief are not competent summary judgment evidence. Topalian, 954 F.2d at 1131.
Although this issue has not been briefed by the parties, it appears that Diana has the burden of proving that she was substituted as the sole beneficiary of the MetLife policy. See Follenfan; v. Rogers, 359 F.2d 30, 31 (5th Cir. 1966) (applying Texas law); 4 COUCH ON INSURANCE § 60:68 (3d ed. 1998).
B.
Seppamaki's claim of entitlement to the insurance proceeds is based on Section 9.301 of the Texas Family Code. This statute provides, in relevant part:
(a) If a decree of divorce or annulment is rendered after an insured has designated the insureds spouse as a beneficiary under a life insurance policy in force at the time of rendition, a provision in the policy in favor of the insured's former spouse is not effective unless:
(1) the decree designates the insured's former spouse as the beneficiary;
(2) the insured redesignates the former spouse as the beneficiary after rendition of the decree; or
(3) the former spouse is designated to receive the proceeds in trust for, on behalf of, or for the benefit of a child or a dependent of either spouse.
(b) If a designation is not effective under Subsection (a), the proceeds of the policy are payable to the named alternative beneficiary or, if there is not a named alternative beneficiary, to the estate of the insured.
TEX. FAM. CODE ANN. § 9.301(a) (b) (Vernon 1998). All parties agree that Marilyn Bialik was not redesignated as the primary beneficiary after her divorce and is not otherwise entitled to the insurance proceeds. Therefore, Seppamaki contends that the benefits are payable to her as "the named alternative beneficiary." Id. § 9.301(b).
This argument ignores the fact that James attempted to change his beneficiary designation after he married Diana Bialik. On March 10, 1998, James sent a detailed letter to Seabury, the Plan administrator. This letter states, in relevant part:
First, please officially remove my x-wife Marilyn Bialik from my GTE Group Universal Life policy.
* * * *
Last year I was remarried and requested that my new wife be added to the policy. It is obviously easier to add someone that [sic] to take someone off. I received another coverage update from you and it still showed Marilyn and not my new wife Diana as being covered. This concerned me so I called you and asked if Diana was added and covered (yes) and why Marilyn had not been removed.
Finally someone from your office called me and requested that I submit in writing a request to have Marilyn removed. This letter fulfills that requirement. However, after two years, this was the first time anyone asked for anything in writing from me.
* * * *
In conclusion, please remove Marilyn from my policy. Please make sure Diana is NOT removed. And please provide a refund to me for 24 months of coverage for Marilyn due to your error in handling from the beginning.
Seppamaki does not object to the March 10, 1998 letter written by James Bialik. However, she raises numerous objections to Diana's testimony regarding oral statements made by her husband about his intent in preparing that letter. (Seppamaki Mot. to Strike at 3-10). The most salient objection is based on the Texas Dead Man's Act, TEX. R. EVID. 601(b). This rule, made applicable to federal diversity cases through Rule 601 or the Federal Rules of Evidence, provides in relevant part:
In civil actions by or against executors, administrators, or guardians, in which judgment may be rendered for or against them as such, neither party shall be allowed to testify against the others as to any oral statement by the testator, intestate or ward, unless that testimony to the oral statement is corroborated or unless the witness is called at the trial to testify thereto by the opposite party.
TEX. R. EVID. 601(b) (emphasis added). Diana has been sued both in her individual capacity and as legal representative of the Bialik Estate. Therefore, she is not competent to testify about oral statements made by her deceased husband. See Sawyer v. Lancaster, 719 S.W.2d 346, 349-50 (Tex.App.-Houston [1st Distil 1986, writ ref'd n.r.e) (testimony regarding intent of deceased to divide estate between his brothers and sisters inadmissible under Texas Dead Man's Act). The Court will not consider this evidence.
Under Texas law, a change in beneficiary is effective if the policyholder substantially complies with the policy requirements. Creighton v. Barnes, 257 S.W.2d 101, 103 (Tex. 1953); Nichols v. Nichols, 727 S.W.2d 303, 305 (Tex.App.-Beaumont 1987, writ ref'd n.r.e.); Todd v. Mutual Benefit Life Insurance Co., 483 S.W.2d 889, 891 (Tex.Civ.App.-Waco 1972, writ ref'd n.r.e.). Substantial compliance is achieved if the insured "has done all that reasonably he could have done to effect the change." Todd, 483 S.W.2d at 892, quoting Tips v. Security Life Accident Co., 191 S.W.2d 470, 471 (Tex. 1945). The MetLife policy requires a beneficiary designation to be made "in writing on a form approved by us." (Seppamaki Mot., Exh. A). The insured may change the beneficiary at any time "by filing a new form with the Administrator." (Id.) (emphasis in original). Although James never changed his beneficiary designation by filing an "approved" form with the Plan administrator, his March 10, 1998 letter to Seabury constitutes some evidence that he substantially complied with this policy requirement. The letter refers to a telephone conversation with a claims representative wherein James was told to make a written request to have his former spouse removed from the MetLife policy. While Seppamaki acknowledges that "[t]his letter makes numerous references to issues regarding coverage on the life of [Diana]," she emphasizes that James never specifically requested that Diana be substituted as his primary beneficiary. (Seppamaki Reply at 5-6). This distinction is too subtle for the Court to conclude as a matter of law that James did not intend to name Diana as his primary beneficiary and attempt to comply with the applicable policy requirements to effect that change. The letter is ambiguous enough to create a fact issue for trial. Accordingly, summary judgment is not proper.
Diana correctly notes that this exhibit is not properly authenticated. (D. Bialik Brief ¶ 26). However, she does not suggest that the document is something other than an excerpt from the MetLife policy. The Court will consider the evidence as the objection could be easily cured.
Seppamaki suggests that Texas law requires strict compliance with the policy requirement for changing beneficiaries. However, neither case cited in support of that argument involved a written document requesting a change of beneficiary. Sever v. Massachusetts Mutual Life Insurance Co., 944 S.W.2d 486, 490-91 (Tex.App.-Amarillo 1997, writ denied) (insured made verbal request to change beneficiary designation); In re Group Life Insurance Proceeds of Mallory, 872 S.W.2d 800, 803 (Tex.App. .— Amarillo 1994, no writ) (no written document evidencing intent of insured to change beneficiary).
C.
Seppamaki further argues that Diana should be responsible for any attorney's fees incurred by MetLife. Predictably, Diana counters that she should not be penalized for her participation in the interpleader action. The Court need not resolve the issue of attorney's fees at this stage of the litigation. Rather, this issue will be determined at the conclusion of the case in accordance with the procedures outlined in Rule 54(d)(2) of the Federal Rules of Civil Procedure.
Rule 54(d)(2) provides, in relevant part:
(A) Claims for attorney's fees and related non-taxable expenses shall be made by motion unless the substantive law governing the action provides for the recovery of such fees as an element of damages to be proved at trial.
(B) Unless otherwise provided by statute or order of the court, the motion must be filed and served no later than 14 days after entry of judgment; must specify the judgment and the statute, rule, or other grounds entitling the moving party to the award; and must state the amount or provide a fair estimate of the amount sought. If directed by the court, the motion shall also disclose the terms of any agreement with respect to fees to be paid for the services for which claim is made.
FED. R. Civ. P. 54(d)(2)(A) (B).
III.
Diana Bialik has asserted claims against Seabury for breach of the duty of good faith and fair dealing, negligence, and negligent misrepresentation. Seabury argues that these claims should be dismissed because a third-party administrator has no extra-contractual liability to an insured under Texas law.
Diana also sues for violations of the Texas Insurance Code, TEX. INS. CODE ANN. art. 21.21, § 16 (Vernon Supp. 2000). Seabury does not seek dismissal of these claims.
A.
A motion to dismiss under Rule 12(b)(6) "is viewed with disfavor and is rarely granted." Lowrey v. Texas AM University System, 117 F.3d 242, 247 (5th Cir. 1997), quoting Kaiser Aluminum Chemical Sales, Inc. v. Avondale Shipyards, 677 F.2d 1045, 1050 (5th Cir. 1982), cert. denied, 103 S.Ct. 729 (1983). A district court may dismiss a complaint for failure to state a claim if the plaintiff can prove no set of facts that would entitle it to relief. Benton v. United States, 960 F.2d 19, 21 (5th Cir. 1992). The complaint must be liberally construed in favor of the plaintiff and all facts pleaded therein must be taken as true. Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 164, 113 S.Ct. 1160, 1161, 122 L.Ed.2d 517 (1993); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). Dismissal is warranted only when "even the most sympathetic reading of [the] pleadings uncovers no theory and no facts that would subject the present defendants to liability." Jacquez v. Procunier, 801 F.2d 789, 791-92 (5th Cir. 1986).
B.
Under Texas law, a third-party claims administrator owes no duty of good faith and fair dealing to an insured. Natividad v. Alexsis, Inc., 875 S.W.2d 695, 697-98 (Tex. 1994). Such a duty arises only by virtue of the "special relationship" created by a contract of insurance. Id. at 697; see also HVAW v. American Motorists Insurance Co., 968 F. Supp. 1178, 1184 (N.D. Tex. 1997), aff'd, 149 F.3d 1175 (5th Cir. 1998). Since the Bialiks and Seabury were not in contractual privity with one another, Seabury did not owe them a duty of good faith and fair dealing in the performance of claims-handling services. Several intermediate Texas appellate courts have extended this rationale to negligence claims brought against independent adjusters. See Dagley v. Haag Engineering Co., 18 S.W.3d 787, 790-91 (Tex.App. .— Houston [14th Dist.] 2000. no pet.); Muniz v. State Farm Lloyds, 974 S.W.2d 229, 236-37 (Tex.App. — San Antonio 1998, no pet.); Dear v. Scottsdale Insurance Co., 947 S.W.2d 908, 916-17 (Tex.App.-Dallas 1997, writ denied). These cases hold that "the independent adjuster, having been hired by the insurer, ha[s] no relationship with the plaintiff and, therefore, d[oes] not owe the plaintiff a duty." Dagley, 18 S.W.3d at 791. Stated differently, an adjuster cannot be liable to an insured for performing duties owed only to the insurance company under the contract. Thus, to the extent that Diana's negligence claim arises out of duties created by the MetLife policy, such a claim would not be actionable.
However, this does not mean that a third-party administrator can never be liable to the insured for negligence. A party who undertakes an affirmative course of action that affects another's interest assumes a duty to exercise reasonable care in the performance of that act. See Otis Engineering Corp. v. Clark, 668 S.W.2d 307, 309 (Tex. 1983); Walls v. Prudential Property Casualty Insurance Co., 2000 WL 805220 at *2 (Tex.App.-Dallas June 23, 2000), citing RESTATEMENT (SECOND) OF TORTS § 323 (1965); Bank One, Texas, N.A. v. Little, 978 S.W.2d 272. 276 (Tex.App.-Fort Worth 1998, pet. denied). In her First Amended Counterclaim and Third-Party Complaint, Diana alleges that her husband was told by GTE to direct all inquiries concerning the Group Universal Life policy to the Plan administrator. A document provided to James Bialik states:
[Seabury] is the program administrator and is responsible for answering your questions, giving you prompt access to accurate records, processing any claims and providing assistance for updating your coverage as your life insurance needs change.
* * * *
Call [Seabury] at 1-800-336-9427 if you have any questions.
(D. Bialik First Am. Counterclm. ¶ 3 Exh. A). Diana further alleges that James contacted Seabury about substituting her as the beneficiary of his policy. On March 10, 1998, James wrote Seabury a letter to that effect. This letter was received by Seabury and "at all times the Bialiks were led to believe that no further action was necessary on their part to effect such a change in beneficiary of the policy." (Id. ¶ 6). The absence of a contractual relationship does not immunize Seabury from liability for the negligence of its employees in their dealings with the Bialiks. To the extent that Seabury affirmatively misled the Bialiks about the status of their coverage, Diana has stated a claim for negligence and negligent misrepresentation.
RECOMMENDATION
Mary Seppamaki's motion for summary judgment should be denied in its entirety. Seabury's motion to dismiss should be granted with respect to Diana Bialik's claims for breach of the duty of good faith and fair dealing and negligence arising out of duties created by the MetLife policy. In all other respect, the motion should be denied.
INSTRUCTIONS FOR SERVICE AND NOTICE OF RIGHT TO OBJECT
On this date the United States magistrate judge made written findings and a recommended disposition of Defendant Margaret Seppamaki's motion for summary judgment and Third-Party Defendant Seabury Smith, Inc.'s motion to dismiss in the above styled and numbered cause. The United States district clerk shall serve a copy of these findings and recommendations on all parties by certified mail, return receipt requested. Pursuant to 28 U.S.C. § 636(b)(1), any party who desires to object to these findings and recommendations must file and serve written objections within ten (10) days after being served with a copy. A party filing objections must specifically identify those findings and recommendations to which objections are being made. The district court need not consider frivolous, conclusory or general objections. The failure to file such written objections to these proposed findings and recommendations shall bar that party from obtaining a de novo determination by the district court. Nettles v. Wainwright, 677 F.2d 404, 410 (5th Cir. 1982). See also Thomas v. Arn, 474 U.S. 140, 150 (1985). Additionally, the failure to file written objections to proposed findings and recommendations within ten (10) days after being served with a copy shall bar the aggrieved party from appealing the factual findings and legal conclusions of the magistrate judge that are accepted or adopted by the district court, except upon grounds of plain error or manifest injustice. Douglass v. United Services Automobile Ass'n, 79 F.3d 1415. 1417 (5th Cir. 1996).
ORDER
Plaintiff Metropolitan Life Insurance Company ("MetLife") has filed a motion for authorization to deposit the sum of $270,000, plus applicable interest, into the registry of the court pending the outcome of this interpleader action. Defendant Diana Bialik opposes the motion. Although Diana "does not necessarily object to the payment of the insurance proceeds and interest thereon into the registry of this Court," she maintains that MetLife is not an innocent stakeholder and therefore not entitled to any other relief customarily awarded in interpleader actions, such as attorney's fees. (D. Bialik Resp. ¶ 6).
The motion is unopposed by Defendarn Margaret Seppamaki and Third-Party Defendant Seabury Smith, Inc. f/k/a Johnson Higgins/Kirke-Van Orsdel, Inc.
The Court need not determine at this stage of the litigation whether to award interpleader relief to MetLife. The only issue raised by the motion is whether to authorize the deposit of certain insurance proceeds into the registry of the court. Absent an objection by any party, the motion is granted. MetLife is hereby authorized to deposit the proceeds from the life insurance policy issued to James R. Bialik in the sum of $270,000, plus applicable interest, into the registry of this court. The district clerk is directed to place these funds in an interest bearing account pending the outcome of this case.
SO ORDERED.