Free Order on Motion for Summary Judgment - District Court of Arizona - Arizona

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Pending before the Court are: (1) Plaintiff United of Omaha Life Insurance 18 Company's Motion for Summary Judgment (Doc. #27); and (2) Defendant Debrah Keys's 19 ("Ms. Keys") Motion for Summary Judgment (Doc. #39). United and Ms. Keys have each 20 filed Statements of Fact in support of their respective motions (Docs. #28 ("Defendant's 21 Statement of Facts"), #40 ("Plaintiff's Statement of Facts"). For the following reasons, the 22 Court will grant summary judgment in favor of United on Ms. Keys's Counterclaim, and will 23 grant summary judgment in favor of Ms. Keys's on her claim for payment of the insurance 24 benefits, subject to the deductions described below. 25 26 27 28
Case 2:04-cv-00461-JAT Document 46 Filed 08/19/2005 Page 1 of 12

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

United of Omaha Life Insurance) ) Company, a Nebraska corporation, ) ) Plaintiff, ) ) vs. ) ) Tanya Edmondson; Debrah Keys; Catholic) Cemeteries of the Diocese of Phoenix;) ) Falconer Funeral Home, ) ) Defendants. ) )

No. CV 04-0461-PHX-JAT ORDER

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I.

Legal Standard Rule 56(c) of the Federal Rules of Civil Procedure authorizes summary judgment if

there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). The moving party bears the initial burden of demonstrating the basis for the motion and identifying the portions of the pleadings, depositions, answers to interrogatories, affidavits, and admissions on file that establish the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets this initial burden, the burden then shifts to the non-moving party to present specific facts showing that there is a genuine issue for trial. Fed. R. Civ. P. 56(e); Celotex, 477 U.S. at 324; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). The non-movant's bare assertions, standing alone, are insufficient to create a material issue of fact and defeat a motion for summary judgment. Anderson, 477 U.S. at 247-48. Rather, the non-movant's response must set forth specific facts by affidavits or by other admissible evidence as provided in Rule 56, showing that there is a genuine issue for trial. Fed. R. Civ. P. 56(e); Anderson, 477 U.S. at 256. An issue of fact is material if, under the substantive law of the case, resolution of the factual dispute might affect the case's outcome. Anderson, 477 U.S. at 248. Factual disputes are genuine if they "properly can be resolved in favor of either party." Id. at 250. Thus, a genuine issue for trial exists if the non-movant presents evidence from which a reasonable jury, viewing the evidence in the light most favorable to the nonmovant, could resolve the material issue in its favor. Id. However, "[i]f the [non-movant's] evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Id. at 249-50 (internal citations omitted). II. Factual Background On January 4, 2001, decedent Allan Keys ("Mr. Keys") enrolled for group life insurance coverage with United under Master Policy No. GLUG-6D35 in the amount of $26,000. (PSOF at ¶1.) Additionally, Mr. Keys enrolled for group supplemental life insurance coverage under Master Policy No. GLG-XL10 in the amount of $40,000. (Id. at -2Case 2:04-cv-00461-JAT Document 46 Filed 08/19/2005 Page 2 of 12

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¶2.) Mr. Keys designated his daughter, Tanya Edmondson, as primary beneficiary, and his sister, Ms. Keys, as secondary beneficiary. (Id. at ¶3.) Mr. Keys died on January 28, 2003. (Id. at ¶4.) Subsequently, on August 6, 2003, Ms. Keys submitted a Proof of Death Form to United, wherein she claimed that she was entitled to the life insurance proceeds "as the new beneficiary of record." (Id. at ¶5.) Concurrently, Ms. Keys sent United a signed, notarized statement from Mr. Keys dated April 19, 2001, requesting that Ms. Keys be substituted as beneficiary on any insurance policy in which the designated beneficiary has not submitted a claim to the insurer within four months after Mr. Keys's death.1 (Id. at ¶6.) Mr. Keys did not submit this form to either United or his employer before his death. (Id. at ¶7.) Thereafter, in October 2003, United received two forms signed by Ms. Keys that purported to assign her rights to a portion of the insurance proceeds under Master Policy No. GLUG-6D35. (Id. at ¶8.) The form stated that Ms. Keys assigned $4,435.30 in proceeds to Defendant Falconer Funeral Home, and $1,239.63 to Queen of Heaven Cemetery, a division of Defendant Catholic Cemeteries. (Id. at ¶9.) On January 8, 2004, United received a letter from Ms. Keys disputing the amount of the assignment to Falconer Funeral Home and the validity of the assignment to Catholic Cemeteries. (Id. at ¶10.)

This document states: I Allen Keys being of sound mind, memory and understanding, and acting freely, do declare to my employer, any/all insurance companies, this written request. In the event of my death, all life insurance policies in my name, which carry the name(s) of any beneficiaries, who have not put in a claim for said policies[] by[] four months after the date of my death, that those beneficiaries name(s) be removed from said policies, and policies changed to the name of Debrah Keys, my sister, as beneficiary. Also, any employee plans or benefits which are due me, shall be given to Debrah Keys. (Doc. # 20, ex. 4.) -3Case 2:04-cv-00461-JAT Document 46 Filed 08/19/2005 Page 3 of 12

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To date, Ms. Edmondson has not submitted a claim to United for the insurance proceeds. (Id. at ¶11.) Following Ms. Keys's death, United attempted to locate Ms. Edmondson, but was unsuccessful. (Id.) On March 8, 2004, United initiated this interpleader action2 to resolve claims to the $66,000 in proceeds due under the policies. (Doc. #1.) On July 2, 2004, Ms. Keys filed her Answer and asserted a Counterclaim against United for breach of contract. (Doc. #15.) Thereafter, on July 20, 2004, United moved to deposit the insurance proceeds with the Clerk of the Court. (Doc. #20.) In light of Ms. Keys's Counterclaim, the Court denied United's Motion to Deposit Insurance Proceeds without prejudice. (Doc. #21.) III. Discussion A. United's Motion for Summary Judgment

In her Counterclaim for breach of contract, Ms. Keys alleges that she is entitled to the entire $66,000 in insurance proceeds, and that United breached its obligations under the policies by filing this interpleader action. Specifically, she alleges that United "has had reasonable time to investigate the existence of the named primary beneficiary and can reasonably come to the conclusion, without the aid of the court, that the primary beneficiary does not exist entitling the secondary beneficiary to the proceeds." (Doc. #15 at ¶10.) Ms. Keys therefore seeks a judgment for $66,500 against United. In its Motion, United contends that because multiple parties are claiming entitlement to some or all of the insurance proceeds, it could not pay out the funds without determining which claimant had the best claim and exposing itself to multiple litigation and liability.

In its Complaint, United indicates that it brings this action pursuant to Rule 22 of the Federal Rules of Civil Procedure. (Doc. #1 at ¶¶1, 2.) However, in its statement of jurisdiction, United indicates that this Court has jurisdiction pursuant to 28 U.S.C. § 1335. On the face of the Complaint, the life insurance proceeds at issue amount to $66,000, which is insufficient to meet the "more than $75,000" amount in controversy requirement necessary to sustain a Rule 22 interpleader action. However, because the amount exceeds $500, and Ms. Keys, who is a citizen of New York, and Defendants Catholic Cemeteries and Falconer Funeral Home, which are citizens of Arizona, are diverse, this case meets the jurisdictional requirements under § 1335. -4Case 2:04-cv-00461-JAT Document 46 Filed 08/19/2005 Page 4 of 12

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(Motion at 3.) Particularly, United points out that it was unable to locate Ms. Edmondson, who is the primary beneficiary under both policies. It also points out that it received two Insurance Assignment forms signed by Ms. Keys and dated January 28, 2004, purporting to assign $1,239.63 of the GLUG-6D35 proceeds to Catholic Cemeteries and $4,4435.30 from the GLUG-6D35 policy to Falconer Funeral Home. United further proffers that it received a letter from Ms. Keys on January 8, 2004, wherein she disputed the amount and validity of the assignments. Based on this evidence, United asserts that there were rival claims to the insurance proceeds, necessitating an interpleader action.3 In her Response, Ms. Keys asserts that United's Motion "has been rendered moot in that there are no longer any adverse claimants to the funds being held by [United][.]" (Resp. at 1.) Particularly, Ms. Keys points out that Catholic Cemeteries has agreed to accept $974.31 in full settlement of its claim against the proceeds, and Falconer Funeral Home has agreed to accept $4,250 in settlement of its claim against the proceeds.4 Additionally, Ms. Keys states that she "has agreed to accept in full settlement of her claims against the sum of $20,775.70, remaining in the hands of [United] under Master Policy GLUG-6D35 after the aforesaid distributions . . . as well as the sum of $40,000 being held by [United] under Master Policy No. GLG-XL10, together with interest thereon, but without her costs and legal fees, and to give a release to [United]." (Id. at 4 (emphasis in original).) Ms. Keys further states that, "[i]n view of the foregoing, an interpleader is not necessary to protect the rights of [United] and all of the adverse claimants, nor to determine the proper party to receive the proceeds." (Id. at 4.) Accordingly, Ms. Keys contends that United's Motion for Summary Judgment and this interpleader action are moot. (Id. at 6.) Additionally, United contends that a proper interpleader action cannot serve as the basis for a breach of contract claim. Consistent with Ms. Keys's representations in her Response, Falconer Funeral Home has filed a Response indicating that it will accept $4,250 in settlement of its claims against Mr. Keys's insurance policy. (Doc. #38.) Likewise, Catholic Cemeteries has filed a Response indicating that it will accept $974.31 in settlement of its claim against the proceeds. (Doc. #37.) -5Case 2:04-cv-00461-JAT Document 46 Filed 08/19/2005 Page 5 of 12
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Considering the foregoing arguments, the Court agrees with United that Ms. Keys has failed to identify a legal basis and come forward with sufficient evidence to sustain her Counterclaim. To prevail on her breach of contract claim, Ms. Keys must show that United acted contrary to some material term of the insurance policies. While her position is that the terms of the policies require United to pay the proceeds to her, United has established that at the time it filed this interpleader action, there were several parties asserting that they were entitled to a portion of the proceeds. Thus, Ms. Keys's claim that United's initiation of this interpleader action is unjustified lacks any evidentiary support in the record. Moreover, Ms. Keys's arguments in her Response focus on events occurring after the initiation of this interpleader action. Particularly, she proffers that the interpleader action is "inappropriate and moot" because she has worked out settlements with both Falconer Funeral Homes and Catholic Cemeteries. While this may be true, Ms. Keys ignores the fact that these settlements occurred months after United filed the interpleader action, and until that point, Ms. Keys was challenging Falconer Funeral Home and Catholic Cemeteries' right to payment from the proceeds. Thus, by arguing that the interpleader action has been rendered moot by the settlement agreements, Ms. Keys implicitly recognizes that prior to the settlements, competing claims to the funds existed. More importantly, federal law expressly provides interpleader as a mechanism whereby a stakeholder, such as United, may join all parties claiming an entitlement to proceeds of a common fund in a single action so that the parties may litigate their claims. See 28 U.S.C. § 1335(a)-(b). United's initiation of an interpleader action to compel the Defendants to litigate their claims to the insurance proceeds was therefore authorized under federal law and completely consistent with its responsibility to pay benefits under the policy. In sum, Ms. Keys has failed to identify any legal or factual basis supporting her breach of contract Counterclaim against United. Rather, the undisputed facts show that United properly initiated this action to resolve the competing claims to the proceeds payable under Mr. Keys's life insurance policies. The Court will therefore grant summary judgment in favor of United on Ms. Keys's Counterclaim. Additionally, because the Court has now -6Case 2:04-cv-00461-JAT Document 46 Filed 08/19/2005 Page 6 of 12

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resolved Ms. Keys's Counterclaim, the Court will grant United's previous request to deposit the insurance proceeds with the Clerk of the Court pursuant to 28 U.S.C. § 2041. (See Doc. #20.) B. Ms. Keys's Motion for Summary Judgment

Having determined that United properly filed this interpleader action, the pivotal question becomes which of the Defendants is entitled to payment of the proceeds. In her Motion for Summary Judgment, Ms. Keys urges the Court to grant judgment in her favor "on the grounds that no conflicting claims have been shown in the Complaint to have been made by the Defendants to [United] concerning the life insurance proceeds being held by it; that no adverse claims exist[;] and that there is no genuine issue as to any material fact." (DMSJ at 1.) In support, Ms. Keys argues that Ms. Edmondson waived any claim to insurance benefits because she failed to submit a claim within the deadlines set forth in the insurance policies. Accordingly, Ms. Keys contends that as the secondary beneficiary, she is entitled to payment of the proceeds.5 As to Falconer Funeral Home and Catholic Cemeteries, Ms. Keys submits that she has entered into settlement agreements with both Defendants, for $4,250 and $974.31, respectively. With respect to her own claim, Ms. Keys explains: Defendant Debrah Keys agreed to accept in full settlement of her claims the remaining balance of $20,775.70, in the hand of [United] under Master Policy GLUG-6D35, after the above agreed distributions are made to defendants Catholic Cemeteries of the Diocese of Phoenix and Falconer Funeral Home, as well as the payment to her of the sum of $40,000 being held by [United] under Master Policy No. GLG-XL10, together with interest on each said amounts, but without her costs and legal fees, and to give a release therefor to [United]." Distributions under the Policies in accordance with the foregoing would settle all issues asserted by [United], concerning possible adverse claims, and would bring this matter to a close.

Ms. Keys contends that she was entitled to payment at the point when she submitted the Proof of Death Form to United pursuant to Arizona Revised Statutes ("A.R.S.") § 20-1215. -7Case 2:04-cv-00461-JAT Document 46 Filed 08/19/2005 Page 7 of 12

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(DMSJ at 8-9.) United, however, urges the Court to deny Ms. Keys's Motion. First, despite the fact that United has been unable to locate Ms. Edmondson and despite the fact that she has failed to make an appearance in this action, United argues that Ms. Edmondson still has a valid claim to payment of the proceeds. Specifically, United contends: After Allan Keys died, United was unable to locate Tanya Edmondson. But United was also unable to ascertain that Ms. Edmondson had died. Contrary to what Ms. Keys suggests in her [M]otion, Ms. Edmondson's time to demand the proceeds has not necessarily lapsed. The $40,000 policy requires only that she make the request "as soon as reasonably possible." And the $26,000 policy has no definite time limit for a claimant who "is not legally capable." The possibility exists that Ms. Edmondson has not yet demanded the proceeds because she is suffering from a legal disability. This uncertainty prevented United from paying proceeds to Debrah Keys, the alternative beneficiary. Otherwise there would have been the possibility that Ms. Edmondson could someday appear and demand insurance proceeds. (Resp. at 2.) Next, United argues that because Mr. Keys never submitted his written request that Ms. Keys be substituted as the beneficiary on any insurance policy when the primary beneficiary has not submitted a claim within four months after his death to his employer or to United, as required by the insurance policies, the document's validity may be "call[ed] . . . into doubt." (Id. at 3.) Finally, United contends that because both Falconer Funeral Home and Catholic Cemeteries have indicated that they have a right to payment from the proceeds, simply paying the proceeds to Ms. Keys would expose it to a risk a lawsuits by Falconer Funeral Home and Catholic Cemeteries. As indicated above, the Court finds that United appropriately filed this interpleader action given the uncertainty over which of the Defendants are entitled to payment of the insurance proceeds. However, based on the undisputed facts occurring after the initiation of this action, the Court finds as follows.

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First, the Court agrees with Ms. Keys that there are no longer any competing claims to the insurance proceeds. Both Falconer Funeral Home and Catholic Cemeteries have indicated that they have agreed to accept certain amounts in settlement of their claims, and Ms. Keys no longer disputes these payments. With respect to Ms. Edmondson, the Court understands United's position that language in the policies potentially allows Ms. Edmondson to file a claim anytime in the future if she can establish that she was under a legal disability during the claim limitations periods. However, United apparently is suggesting that, based on this language in the policies, the proceeds cannot be distributed until it can be ruled out that Ms. Edmondson is not suffering from a legal disability. This result is inequitable for several reasons. Most notably, Ms. Edmondson has not made an appearance in this matter. Although United posits that Ms. Edmondson may be homeless or under a disability and thus unable to respond, at this point, United's statement is merely speculative. Further, while the language in United's policies may expose United to open-ended liability by omitting any firm cut-off date for filing a claim, it appears that Mr. Keys attempted to remedy this scenario by executing a document that imposed his own filing deadline on the primary beneficiaries. Although United contends that Mr. Keys did not properly submit this document to either his employer or United as required by the policies, under the present circumstances, the Court finds this to be an unpersuasive reason for not giving effect to the document. Particularly, there is no evidence undermining the document's authenticity or suggesting that it does not express Mr. Keys's true intent. Moreover, the document is consistent with Mr. Keys's beneficiary designations in both policies. As detailed above, Mr. Keys designated Ms. Edmondson as primary beneficiary and Ms. Keys as secondary beneficiary on both insurance policies. Mr. Keys's signed, written document does not alter Ms. Edmondson's status as primary beneficiary. Rather, Ms. Keys is to be substituted only if the named beneficiary, in this case Ms. Edmondson, fails to make a claim within four months after Mr. Keys' death. Thus, this writing ensures that United will timely pay out benefits, as opposed to withholding them, in the event a beneficiary fails to assert a -9Case 2:04-cv-00461-JAT Document 46 Filed 08/19/2005 Page 9 of 12

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claim. Furthermore, the document imposed a four-month time limit for a beneficiary to act. Mr. Keys died on January 28, 2003. Thus, ample time has passed to allow Ms. Edmondson to appear to make a claim. Indeed, the four-month timeline that Mr. Keys requested has long since expired. For these reasons, the Court finds Mr. Keys's written statement persuasive evidence supporting distribution of the insurance proceeds to Ms. Keys, less the amounts due to Falconer Funeral Home and Catholic Cemeteries. Second, United's argument that Ms. Keys is not entitled to the proceeds because Falconer Funeral Homes and Catholic Cemeteries have competing claims to a portion of the funds under the supplemental policy is moot in light of the notices of settlement that both parties have filed. Taken together, based on the beneficiary designations in the insurance policies and Mr. Keys's written document directing that Ms. Keys be substituted for any beneficiary who fails to make a claim within four months of his death, the Court finds that Ms. Keys is entitled to the proceeds under both policies, subject to the deductions described in this Order. C. Interest on the Proceeds

In her Motion, Ms. Keys also contends that United is responsible for interest that accrued on the $66,000 since the time of Mr. Keys's death. In response, United argues that it attempted to deposit the insurance proceeds in an interest-bearing account with the Clerk of the Court, but the Court denied the Motion due to Ms. Keys's Counterclaim. Thus, United asserts that because Ms. Keys prevented it from depositing the funds in the interest-bearing account, United should not be liable for interest on the funds. Additionally, United argues that under Arizona law it is not responsible for interest on the proceeds during the period in which it was attempting to ascertain the proper beneficiary. Specifically, United points out that A.R.S. § 20-462(c)(3) provides: The payment of a claim shall not be overdue during any period in which the insurer is unable to pay such claim because there is no recipient who is legally able to give a valid release for such payment, or in which the insurer is unable to determine who is entitled to receive such payment, if the insurer has promptly notified the claimant of such inability and has offered in good - 10 Case 2:04-cv-00461-JAT Document 46 Filed 08/19/2005 Page 10 of 12

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faith to promptly pay said claim upon determination of who is entitled to receive such payment. The Court agrees with United. Pursuant to A.R.S. § 20-462(c)(3), because United was

3 unable to pay the proceeds because of the uncertainty regarding which beneficiaries had valid 4 claims, it is not liable for interest on the funds. 5 D. 6 United requests an award of its attorneys' fees and costs incurred in bringing this 7 interpleader action and defending against Ms. Keys's Counterclaim. Ms. Keys, however, 8 objects to any award of fees to United, arguing that the interpleader action was unnecessary. 9 As previously discussed, the Court finds that United's filing of this action was consistent 10 with its obligations under the insurance policies and authorized under federal law. 11 Accordingly, the Court will grant United's request, subject to its compliance with Local Rule 12 of Civil Procedure 54.2. 13 IV. 14 Based on the foregoing, 15 IT IS ORDERED that United Motion for Summary Judgment on Debrah Keys's 16 Counterclaim for breach of contract (Doc. #27) is GRANTED. 17 IT IS FURTHER ORDERED that Debrah Keys's Motion for Summary Judgment 18 is GRANTED as follows: 19 IT IS ORDERED that United shall deposit the $66,000 in death benefits proceeds 20 with the Clerk of the Court into an interest bearing account pursuant to 28 U.S.C. § 2041; 21 IT IS ORDERED that the Clerk of the Court shall hold the interpled funds until a 22 subsequent order is issued by this Court directing distribution of the funds consistent with 23 this Order; 24 IT IS ORDERED discharging United from any and all liability under United of 25 Omaha Master Group Policy Nos. GLUG-6D35 and GLG-XL10, pursuant to 28 U.S.C. § 26 2361; 27 28 - 11 Case 2:04-cv-00461-JAT Document 46 Filed 08/19/2005 Page 11 of 12

Attorneys' Fees

Conclusion

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IT IS ORDERED permanently enjoining all parties from commencing or prosecuting any action in any court, federal or state, against United of Omaha for or on account of Master Group Policy Nos. GLUG-6D35 and GLG-XL10. IT IS FURTHER ORDERED awarding United of Omaha its reasonable attorneys' fees and costs in an amount to be determined at a later date and to be paid from the interpled funds. IT IS FURTHER ORDERED that United of Omaha shall file any Motion for Attorneys' Fees within 14 days of the filing date of this Order. DATED this 18th day of August, 2005.

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