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Davis v. State Farm Life Insurance Co.

United States District Court, E.D. North Carolina, Southern Division

April 7, 2017

DEBRA J. DAVIS, Plaintiff,
v.
STATE FARM LIFE INSURANCE COMPANY, Defendant.

          ORDER

          LOUISE W. FLANAGAN United States District Judge.

         This matter is before the court on the parties' cross-motions for summary judgment, made pursuant to Federal Rule of Civil Procedure 56. (DE 55, 61). In this posture, the issues raised are ripe for ruling. For the reasons that follow, plaintiff's motion is granted in part and denied in part and defendant's motion is granted in part and denied in part.

         BACKGROUND

         Plaintiff is the alleged owner and beneficiary of a life insurance policy (the “policy”) issued by defendant on Brad Davis (the “insured”). Plaintiff initiated this action in Superior Court of New Hanover County, North Carolina on January 6, 2015, asserting claims against defendant arising from defendant's management of the policy. Specifically, plaintiff alleged that defendant engaged in unfair and deceptive trade practices, in violation of N.C. Gen. Stat. § 58-63-15(11) (“UDTPA”). Plaintiff also sought declaratory judgment “that the [p]olicy [o]wner and beneficiary may not be changed except upon request from the [p]olicy [o]wner.” (DE 1-1 at 9).

         Defendant removed the case on February 11, 2015, invoking this court's diversity jurisdiction under 28 U.S.C. §§ 1332 and 1446. Defendant then answered the complaint and moved to dismiss plaintiff's claims pursuant to Rule12(b)(6). In response, plaintiff filed her first amended complaint, causing this court to deny defendant's motion to dismiss as moot. Plaintiff's amended complaint reiterated her prior claims and asserted a breach of contract claim against defendant.

         On April 16, 2015, defendant answered plaintiff's amended complaint and moved for judgment on the pleadings on plaintiff's breach of contract and UDTPA claims. Before the court could address defendant's motion, plaintiff moved for leave to file a second amended complaint, which the court granted over defendant's objection. At that time, the court also denied defendant's motion for judgment on the pleadings as moot.

         On August 24, 2015, plaintiff filed the instant second amended complaint. The second amended complaint reasserts plaintiff's UDTPA and breach of contract claims and clarifies certain relevant facts, and amends her claim for declaratory judgment. Plaintiff now seeks declaratory judgment that she “is the [o]wner and beneficiary of the [p]olicy, that [she] must be immediately restored as the beneficiary of the [p]olicy, and that [she] may not be removed as beneficiary of the [p]olicy without [her] consent.” (DE 33 at 9).[1] Plaintiff also seeks monetary and compensatory damages, as well as trial by jury.

         Defendant then renewed its motion for judgment on the pleadings, seeking dismissal of plaintiff's breach of contract and UDTPA claims. The court granted defendant's motion on February 18, 2016, leaving plaintiff's claim for declaratory judgment the sole remaining claim.

         Following a period of discovery, defendant filed the instant motion for summary judgment, accompanied by a memorandum of law in support thereof and a statement of material facts.[2] (DE 55-57). In support of summary judgment, defendant relies upon the policy, the marital dissolution agreement between the insured and his former spouse, the deposition of plaintiff, defendant's internal policies, and correspondence between plaintiff and defendant regarding the policy. Defendant contends that because the insured failed to obtain consent of the policy's original irremovable beneficiary, any subsequent change naming plaintiff as owner and beneficiary are void. Defendant requests that the court declare that Payton is the irrevocable beneficiary of the policy and that the insured is the owner.

         In response, plaintiff filed a cross-motion for summary judgment, accompanied by a memorandum of law in support thereof and a statement of material facts. (DE 61-63). Plaintiff relies on the policy to support summary judgment in her favor. Plaintiff contends that because the insured followed the procedure for changing the owner and beneficiary as set forth in the policy, defendant had no authority to remove her as such without her prior consent.

         STATEMENT OF UNDISPUTED FACTS

         On March 16, 1998, the insured was ordered by the Circuit Court of Shelby County, Tennessee, pursuant to a marital dissolution agreement (“MDA”) between the insured and his former spouse, Jennifer Davis, to obtain a life insurance policy on himself with their daughter, Payton Davis (“Payton”) listed as irrevocable beneficiary.[3] (DE 56 ¶ 1; DE 63 ¶ 1). Pursuant to that order and the MDA, the insured obtained the policy from defendant on March 28, 1999. (DE 33 ¶ 6). The issued policy and accompanying endorsement designated the insured as owner and Payton as the irrevocable beneficiary. (DE 56 ¶ 2; DE 63 ¶ 2). Payton was a minor at that time, so her grandmother, Nancy Davis (the “trustee”), was designated as trustee. (DE 56 ¶ 23; DE 63 ¶ 2). The policy reserves in the owner the right to change the owner and/or beneficiary. (DE 33-1 at 8).

         On January 14, 2010, the insured, while owner of the policy, changed the policy's beneficiary from Payton to Jackson Davis, the insured's son from his second wife. Neither Payton nor the trustee consented to this change. (DE 56 ¶ 6; DE 63 ¶ 5). After receiving the request, defendant listed Jackson Davis as beneficiary of the policy.[4] (DE 56 ¶ 7). Thereafter, on May 9, 2011, the insured changed the policy's beneficiary from Jackson Davis to plaintiff, his third wife. (DE 33 ¶ 10).[5] Defendant then listed plaintiff as beneficiary of the policy. (DE 56 ¶ 5, 9; DE 63 ¶ 8, 12). In late 2012, the insured changed the policy's owner from himself to plaintiff, which defendant honored by listing plaintiff as such on policy documents. (DE 33 ¶ 12). Neither Payton nor the trustee consented to the ownership change. (DE 56 ¶ 14; DE 63 ¶ 15).

         Sometime in May 2014, defendant initiated internal review of the policy and the insured's change of beneficiary requests. (DE 56 ¶ 14; DE 63 ¶ 15-16). Defendant determined that the change requests did not comport with its own internal policies[6] since the trustee did not consent to the changes. (DE 56 ¶ 14; DE 63 ¶ 15-16). On its own initiative, and without plaintiff's consent, defendant took steps to revert the policy's beneficiary designation back to Payton. (DE 56 ¶ 15-16; DE 63 ¶ 18-21). At that time, defendant also ...


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