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Union Central Life Insurance Company v. Heather A. Berger

September 20, 2012

UNION CENTRAL LIFE INSURANCE COMPANY,
PLAINTIFF,
v.
HEATHER A. BERGER, RISE K. CROSS, AND CYNTHIA STEINMETZ,
DEFENDANTS.



The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.:

MEMORANDUM OPINION & ORDER

In this interpleader action, Union Central Life Insurance Company ("Union Central") asks this Court to determine the proper beneficiary or beneficiaries of a $700,000 Union Central life insurance policy (the "Policy"), following the death of the policy holder, Wayne Cross ("Decedent"). (See Second Amended Complaint ("SAC")) Decedent obtained the Policy as part of a divorce settlement agreement ("Settlement Agreement") between himself and his first wife, Rise K. Cross ("Cross"). In accordance with the Settlement Agreement, Decedent named as irrevocable Policy beneficiaries Cross and Heather A. Berger, Decedent's daughter.

Decedent later changed the beneficiaries of the Policy, however, substituting his second wife, Cynthia Steinmetz, for Cross and Berger. In contravention of the Policy's terms, which require that consent to any change in beneficiary must be obtained from irrevocable beneficiaries such as Cross and Berger, Union Central accepted Decedent's change in beneficiary without confirming Cross and Berger's consent. After Decedent's death, Steinmetz attempted to collect as the beneficiary under the Policy, but was told that there had been an error in changing the beneficiary. Cross and Berger argue that they did not consent to the change in beneficiary, and claim that they remain the rightful beneficiaries under the Policy. In light of this dispute, Union Central initiated this interpleader action.

All parties have now moved for summary judgment. Union Central moves for summary judgment against Cross, Berger, and Steinmetz, individually and as executrix of Decedent's estate, asking this Court to, inter alia, determine the rightful beneficiary under the Policy. (Dkt. No. 72; Union Central Notice of Motion) Cross and Berger move for partial summary judgment on, inter alia, Cross's claim to $700,000 in death benefits due under the Policy, and also seek dismissal of all affirmative defenses and cross-claims asserted against them. (Dkt. No. 53; Cross/Berger Notice of Motion) Cynthia Steinmetz, individually and as executrix of Decedent's estate, moves for summary judgment on all her claims and defenses. (Dkt. No. 56; Steinmetz Notice of Motion)

BACKGROUND

Union Central is an insurance company with its principal place of business in Ohio. (Cross/Berger Rule 56.1 Stmt. ¶ 1)*fn1 Cross and Berger are residents of New York. (SAC ¶¶ 3, 4) At all relevant times Decedent and Steinmetz were residents of Connecticut. (Cross/Berger Rule 56.1 Stmt. ¶ 2; SAC ¶¶ 2, 5)

On August 18, 2000, Cross and Decedent entered into a Settlement Agreement pursuant to their divorce. (Cross/Berger Rule 56.1 Stmt. ¶ 8) The Settlement Agreement required Decedent to purchase $2.2 million in life insurance, to name Cross and Berger as irrevocable beneficiaries, and to maintain this policy until he reached age 62. (Id. ¶ 9; Del Mauro Cert., Ex. 15 at 16) After age 62, Decedent was to maintain $1 million of life insurance, with Cross and Berger as irrevocable beneficiaries, until he reached age 75. (Id. ¶ 10; Del Mauro Cert., Ex. 15 at 16)*fn2

The Settlement Agreement's "Releases" section reads, in relevant part, as follows:

1. Except as otherwise provided for herein, and except grounds for divorce, [Cross] agrees to release, and hereby does release, any and all claims of [Cross] to or upon the property of the [Decedent], whether real or personal and whether now owned or hereafter acquired, to the end that he shall have free and unrestricted right to dispose of his property now owned or hereafter acquired, free from any claim or demand of [Cross] and so that his estate and all income therefrom derived or to be derived shall go and belong to the person or persons who become entitled thereto by gift, devise, bequest, intestacy, administration or otherwise, as if [Cross] had died during the lifetime of the [Decedent] and, without in any manner limiting the foregoing, [Cross] expressly relinquishes any and all rights in the estate of the [Decedent]. . . and renounces and disclaims, and covenants to renounce and disclaim . . . all interest . . . under any . . . death benefit . . . plan, with respect to which [Decedent] was a participant. . . .

2. [Cross] further agrees to execute any and all documents which shall be required, at any time, and from time to time, by any or all jurisdictions in order that such renunciation and disclaimer shall be effective as though the Plaintiff has predeceased the Decedent, including, without limiting the generality of the foregoing, the renunciation and affidavit of renouncing party referred to in Section 2-1.11 of the EPTL, and any documents necessary to permit redesignation of beneficiaries under any of the [Decedent's] pension, profit sharing, 401K and/or individual retirement accounts. . . . In the event that, notwithstanding the renunciation and disclaimer referred to in paragraph 1 of this Article, [Cross] receives any right, title or interest in any property so renounced or disclaimed for any reason whatsoever, then, the Plaintiff shall immediately transfer all such right, title or interest to the estate of the Decedent. (Del Mauro Cert., Ex. 15 at 27-28)

The "General Provisions" section of the Settlement Agreement states, in part: Each of the parties hereto, without cost to the other, shall at any time and from time to time hereafter execute and deliver any and all further instruments and assurances and perform any acts that the other party may reasonably request for the purpose of giving full force and effect to the provisions of this Agreement. (Id. ¶ 56; Del Mauro Cert., Ex. 15 at 36)

In August 2000, as part of his obligation to obtain $2.2 million in life insurance, Decedent applied for a $700,000 life insurance policy with Union Central, designating Cross as the primary beneficiary of the policy. (Cross/Berger Rule 56.1 Stmt. ¶ 11) In September 2000, Union Central issued Decedent the Policy (No. T000018940), which insured Decedent's life for $700,000, with Cross designated as the primary beneficiary. (Id. ¶ 12; Del Mauro Cert., Ex. 2) The Policy provided in part:

OWNERSHIP

The owner's rights will be subject to . . . the rights of any irrevocable beneficiary.*fn3

BENEFICIARY

Unless the beneficiary designation provides otherwise, the Company will follow these rules . . . (3) An irrevocable beneficiary cannot be changed without his or her consent. . . .

The owner may change the beneficiary at any time before the insured dies by notice to the Company.

(Del Mauro Cert., Ex. 2 at 5-6) (emphasis omitted).

The designation of Cross as "primary beneficiary" did not fully comply with the Settlement Agreement, however, and on October 31, 2000, Decedent executed a "Policyowner's Change and Service Request," updating the beneficiary designations of the Policy to name Cross as the irrevocable primary beneficiary and Berger as the irrevocable contingent beneficiary. (Cross/Berger Rule 56.1 Stmt. ¶ 14; Del Mauro Cert., Ex. 4) On January 8, 2001, Union Central sent Decedent written notice confirming that Cross and Berger were irrevocable primary and contingent beneficiaries under the Policy. (Cross/Berger Rule 56.1 Stmt. ¶ 17; Del Mauro Cert., Ex. 5) In satisfaction of his remaining insurance obligations under the Settlement Agreement, Decedent named Cross and Berger as irrevocable beneficiaries under two other life insurance policies: a $1 million Union Central policy and a $500,000 policy issued by Mass Mutual. (Cross/Berger Rule 56.1 Stmt. ¶ 18)

On April 13, 2001, Decedent attempted to make Cross the "owner" of the Policy. (Id. ¶ 19) In an April 26, 2001 letter, Union Central informed Cross of the change of ownership, and Cross promptly informed Union Central that she would not accept this change. (Id. ¶¶ 20-21) In a May 7, 2001 letter, Union Central sent Cross a copy of the ownership change form signed by Decedent, and Cross again informed Union Central that she would not accept the change. (Id. ¶¶ 22-23) In a May 24, 2001 letter to Decedent, Union Central returned the change of ownership form and informed him that he was unable to make this change, or any other changes on this Policy without the authorization of Rise K. Cross. This is due to the fact that she is the Irrevocable Beneficiary and although she does not own the policy, this gives her ownership rights. (Id.; Del Mauro Cert., Ex. 11)

After Decedent's divorce from Cross, Decedent married Steinmetz. (Cross/Berger Rule 56.1 Stmt. ¶ 25) On October 3, 2007, having reached age 62, Decedent completed a Union Central form -- a "Policy Owner's Change and Service Request" -- substituting Steinmetz as the beneficiary under the Policy, and his insurance broker, Debra Slavutin, submitted the form to Union Central. (Id. ¶ 26; Steinmetz Rule 56.1 Stmt. ¶ 70; Union Central Rule 56.1 Stmt. ¶ 229) A Union Central customer service representative reviewed Decedent's Change and Service Request form and asked Decedent to sign page 2 of the form and confirm the spelling of Steinmetz's name. Union Central did not inform Decedent of any other deficiencies in the change form. (Steinmetz Rule 56.1 Stmt. ¶¶ 73-74) On October 19, 2007, Decedent added the requested signature and Slavutin re-submitted the change request to Union Central. (Id. ¶ 75; Del Mauro Cert., Ex. 12) On October 22, 2007, Decedent confirmed the spelling of Steinmetz's name and again signed and re-submitted the change request. (Id. ¶ 76; Steinmetz Rule 56.1 Appx., Ex. 21)

Neither Decedent nor Union Central informed Cross or Berger in 2007 that Decedent had executed the change request, and neither Cross nor Berger was asked to, or did, consent to the beneficiary change at that time.*fn4 (Cross/Berger Rule 56.1 Stmt. ¶¶ 27-29). Union Central accepted the Decedent's change request and confirmed that fact in writing to Decedent,*fn5 but did not notify Cross or Berger of the change. (Id. ¶ 30) After confirming the change, Union Central never informed Decedent that there was any deficiency with respect to the change, or that it was otherwise ineffective or unenforceable.*fn6 (Steinmetz Rule 56.1 Stmt. ¶ 84)

Decedent died on August 25, 2010, at age 65. (Steinmetz Rule 56.1 Appx., Ex. 17) At the time of his death, the Policy was in full force and effect. (Cross/Berger Rule 56.1 Stmt. ΒΆ 32) Steinmetz notified Slavutin of Decedent's death that same day, and Slavutin ...


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