State Farm Life Insurance Company v. Davis et al

Filing 53

Order on Motion for Summary Judgment

UNITED STATES DISTRICT COURT
DISTRICT OF ALASKA

STATE FARM LIFE INSURANCE
COMPANY,
Plaintiff,
vs.
INDEE JANE DAVIS, HEATHER
ELIZABETH GREENHOUGH and
M. D., a minor,
Defendants.

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3:07-cv-00164 JWS
ORDER AND OPINION
[Re: Motion at Docket 24]

I. MOTION PRESENTED
At docket 24, plaintiff State Farm Life Insurance Company (“State Farm”) moved
for summary judgment seeking dismissal of Indee Jane Davis’s (“Jane”) counterclaim.
Jane filed a response at docket 39 to which State Farm replied at docket 43. Meantime,
at docket 28, defendant Heather Elizabeth Greenough (“Greenough”) had responded to
State Farm’s motion, and at docket 31, defendant M.D., a minor, joined Greenough’s
response. State Farm replied to these responses at docket 33. Oral argument was
heard on May 22, 2008.

II. BACKGROUND
This is an interpleader action in which jurisdiction is based on diversity of
citizenship pursuant to 28 U.S.C. § 1332 and relief is sought pursuant to Federal Rule of

Civil Procedure 22. The applicable substantive law is Alaska law. The salient facts are
not in dispute. John B. Davis, Jr. (“John”) married defendant Indee Jane Davis (“Jane”)
in 1975. In 1997, John purchased a life insurance policy issued by State Farm, and in
the paperwork designated his wife Jane as his primary beneficiary. John’s two children,
Heather Elizabeth Greenough and M.D. (a minor), were named as successor
beneficiaries. John and Jane divorced in 2003, however neither the state court’s
divorce decree nor any document related to the divorce referred to the life insurance
policy. John Davis died in 2007.
Pursuant to the life insurance policy, State Farm owes $200,000 plus interest to
whomever qualifies as a beneficiary under the policy. State Farm has paid that sum
into the court, because it became aware of conflicting claims to the insurance proceeds.
More specifically, a conflict has arisen between Jane and her children concerning the
effect of AS 13.12.804(a)(1)(A) on Jane’s status as the primary beneficiary under the
policy. This statutory provision, which is part of the Alaska Probate Code, has the effect
of revoking one spouse’s designation of the other as a beneficiary in a life insurance
policy upon divorce. Complicating what might otherwise be a straightforward application
of this “revocation-upon-divorce” statute to John’s designation of Jane as the beneficiary
is the fact that after the divorce John told the employee of an insurance agency from
whom he had purchased the State Farm policy that he continued to desire that Jane
remain as the primary beneficiary. The employee to whom John spoke was Jeannie R.
Campbell, an employee of the David J. Strike Insurance Agency. She assisted John
and Jane with several life insurance policies. In an affidavit, Ms. Campbell
acknowledged that because Jane was already named as the primary beneficiary in
John’s policy, Ms. Campbell did not understand that anything else might need to be
done to effectuate her status as the primary beneficiary.1
When Jane answered the complaint, she included a counterclaim against State
Farm based on alleged negligence and breach of contract resulting from Jeannie
Campbell’s failure to assure Jane’s status as the primary beneficiary under John’s

1

Doc. 25 at ¶ 4.

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policy. The counterclaim seeks to recover damages, attorney’s fees, and costs. The
day before oral argument on the pending motion, Jane and the children filed a notice of
settlement which was to be submitted to the state probate court for approval, because
of M.D.’s status as a minor. During oral argument defense counsel represented that the
settlement divided the proceeds of John’s life insurance policy three ways. Precisely
how the proceeds are divided was not stated.

III. STANDARD OF REVIEW
Pursuant to Rule 56, summary judgment should be granted when there is no
genuine dispute about material facts and when the moving party is entitled to judgment
as a matter of law. The moving party has the burden to show that material facts are not
genuinely disputed.2 To meet this burden, the moving party must point out the lack of
evidence supporting the nonmoving party's claim, but need not produce evidence
negating that claim.3 Once the moving party meets its burden, the nonmoving party
must demonstrate that a genuine issue exists by presenting evidence indicating that
certain facts are so disputed that a fact-finder must resolve the dispute at trial.4 The
court must view this evidence in the light most favorable to the nonmoving party, must
not assess its credibility, and must draw all justifiable inferences from it in favor of the
nonmoving party.5

IV. DISCUSSION
State Farm argues that because Jane is entitled to the proceeds of the policy on
John’s life she has suffered no damages, from which it follows that her counterclaims
must be dismissed. On the other hand, says State Farm, if Jane is not the primary

2

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

3

Id. at 325.

4

Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 248-49 (1986).

5

Id. at 255; Soldano v. United States, 453 F.3d 1140, 1143 (9th Cir. 2006) (citation
omitted).

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beneficiary, State Farm would not be liable to her, because it owed her no duty which
was breached when Ms. Campbell failed to assist John in perfecting Jane’s status as a
primary beneficiary.
There are two propositions which must be established by anyone attempting to
show that Jane is the primary beneficiary. The first proposition is that contrary to the
seemingly plain language of AS 13.12.804(a)(1)(A), John and Jane’s divorce did not
necessarily revoke her status as the primary beneficiary, but rather–as State Farm
contends–merely created a rebuttable presumption that her status was revoked. The
second proposition is that the evidence available in the record rebuts the statutory
presumption.
There is no Alaska case law interpreting the revocation-upon-divorce provision in
the Alaska Probate Code, but State Farm points to AS 13.06.010(b)(2) which indicates
that a primary purpose of the Probate Code is to “discover and make effective the intent
of a decedent in distribution of the decedent’s property.” State Farm then reasons that
because the Alaska Probate Code is derived from the Uniform Probate Code (UPC),
decisions from other states which have adopted the UPC should be considered.
Although not noted by State Farm, it may be noted here that consideration of decisions
in other states is consistent with the Alaska Probate Code, because one of its purposes
is to “make uniform the law among the various jurisdictions.”6
Looking to other jurisdictions, State Farm cites an Arizona case, In Re Estate of
Rodriquez7 and a California case, Coughlin v. Board of Administration,8 for the
proposition that a revocation-upon-divorce provision rests upon the assumption that
following a divorce, a person holding the power to revoke a pre-divorce direction of
benefits to a prior spouse would wish to revoke that direction, but might fail to do so
from “inattentiveness.” Relying on Coughlin, and Stillman v. Teachers Ins. & Annuity

6

AS 13.06.010(b)(5).

7

160 P.3d 679 (Ariz. App. 2007).

8

152 Cal. App. 3d 70 (Cal. App. 1984).

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Ass’n College Retirment Equities Fund,9 State Farm goes on to assert that this
assumption is more compatible with the proposition that the statute creates a rebuttable
presumption of revocation than with a rigid rule of revocation.
In Rodriguez, the court considered an Arizona statute, A.R.S. § 14-2804(A)(1)(a),
which provided for revocation upon divorce or annulment of a marriage and is
substantively identical to AS 13.12.804(a)(1)(A). In Rodriguez, the provisions of a will
and trust executed by decedent Kathryn Rodriguez directed benefits to her putative
husband, Mauro Rodriguez. The Arizona court found the marriage was invalid, because
Mauro had been married to another woman at the time he married Kathryn.
Nevertheless, the Arizona court held that the revocation statute did not invalidate the
provisions in Kathryn’s will directing benefits to Mauro. It did so by holding that the
determination of marital invalidity took place after Kathryn died, by which time her
direction of benefits to Mauro had become irrevocable, not by finding that the statute
created a rebuttable presumption.10 Thus, while Rodriqguez does support the notion
that revocation-upon-divorce laws are intended to protect the inattentive, it sheds no
light on whether that protection is provided in the form of an absolute or a rebuttable
presumption.
In Coughlin, a California court addressed a dispute arising not under the probate
code, but under statutes governing the California Public Employees’ Retirement
System. Like the revocation-upon-divorce provision in the UPC, the relevant provision
of the California government code provided for the revocation of a beneficiary
designation upon dissolution of a marriage. The facts in Couglin were these: A man
named Taylor filed for divorce, and then executed a new beneficiary designation naming
his mother in place of the woman from whom he was seeking a divorce. Thereafter, the
divorce became final, but Taylor filed no additional designation. After Taylor died, an
administrative judge held that the divorce revoked his designation of the mother as his
beneficiary, and under California law applicable in the absence of a valid designation,

9

343 F. 3d 1311 (10th Cir. 2003) (applying Utah law).

10

Rodriguez at 160 P. 3d 686.

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the benefits would go to the adult children of Taylor’s marriage rather than to his
mother, Mrs. Coughlin. On appeal, the court framed the controlling question to be
“whether his intent [as expressed in the designation filed after the divorce proceeding
was initiated] must be subverted simply because he filed too soon.”11 The court had
little trouble providing a negative answer, because Taylor’s true intent was so clear from
the facts. Although it did not explicitly discuss the proposition that the statutory
revocation provision created a rebuttable presumption, the court’s holding is consistent
with that concept and inconsistent with the notion of a rigid rule.
In Stillman, the Eleventh Circuit confronted the question whether Utah’s
revocation-upon-divorce provision in its probate code could be applied retroactively to a
divorce which took place many years prior to enactment of the provision. In the course
of a lengthy discourse on retroactivity, the court concluded that under Utah law, the
revocation provision, which is substantively identical to the Alaska provision at issue
here, should be viewed as a rule of construction, something explaining how to construe
legal materials. Viewed as a rule of construction, the court found that the revocationupon-divorce provision could properly be applied retroactively. The court wrote that in
the probate context a provision such as the revocation-upon-divorce statute is meant to
follow the modern approach to donative transfers whose object is to accomplish what
the donor intended. The Eleventh Circuit explained that in some circumstances this
would mean that the donor’s intention would be considered the equivalent of what most
people would intend under circumstances such as a divorce: “In the absence of
evidence that establishes by a preponderance of the evidence that the particular
donor’s intention differs from common intention, ambiguities are resolved to the extent
possible by construing the document to accord with common intention.”12
Unsurprisingly, Jane has not asserted that State Farm errs when it contends that
she is the beneficiary. Unsurprisingly, the other defendants have. They cite no case
law, but contend that State Farm’s position fails because it is based on some sort of
11

Coughlin, 152 Cal. App. 3d at 73.

12

Stillman, 343 F. 3d at 1317 (quoting from Restatement (Third) of Property: Wills &
Other Donative Transfers).

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verbal agreement between John and Jane relating to their overall estate planning which
required John to make Jane his beneficiary. Such an agreement would be
unenforceable under the pertinent portion of Alaska’s Statute of Frauds,
AS 09.25.010(a)(2). The court agrees that an agreement between John and Jane or a
promise or undertaking given by John to Jane to name her as beneficiary would fall
within the Statute of Frauds. However, State Farm’s primary argument is that
regardless of whether John and Jane had any sort of agreement, John actually did
express his intention to Ms. Campbell that Jane was the primary beneficiary. The
designation of a beneficiary, as contrasted with an “agreement, promise or undertaking”
to do so, does not fall within the Statute of Frauds.
Greenough and M.D.’s other argument is that the rebuttable presumption
construction of AS 13.12.804 (a)(1)(A) is incompatible with AS 13.06.010. They rely
specifically on AS 13.06.010(b)(1) which says that one of the purposes of the Alaska
Probate Code is “to clarify and simplify the law concerning the affairs of decedents.”
Suffice it to say that when AS 13.06.010 (b) is read as a whole, the parsing by
Greenough and M.D. which relies on subsection (b)(1) is less convincing than the
parsing by State Farm which relies on subsection (b)(2). That is so for two reasons.
First, among the five identified purposes expressed in subsections (b)(1) through (b)(5),
it is (b)(2) which is directly in point on the issue of intent. Second, adopting a
construction of the revocation-on-divorce statute, which holds that it creates a rebuttable
presumption, does not amount to mean that the law is any less clear or less simple than
it would be if the rigid rule construction were adopted. Either is clear and simply
understood.13
This court concludes that based on AS 13.06.010(b)(2), and in light of the
reasoning in the California and Utah cases discussed above, the Alaska Supreme Court
would construe the revocation-upon-divorce provision of the Alaska Probate Code to
create a rebuttable presumption, not a strict and inflexible rule. The Alaska court would
13

It is true that the rebuttable presumption construction may render application of a clear
and simple statement of law to the facts in particular case more difficult than application of a
rigid rule, but that does not render the rebuttable presumption construction any less clear or
simple a statement of the law.

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do so in order to achieve the fundamental goal of honoring the decedent’s actual
intention. Drawing that conclusion brings the court to the second proposition.
As noted by the Eleventh Circuit, to avoid a statutory imposition of the “common
intention,” there must be proof by a preponderance of the evidence that the deceased
actually intended to designate the otherwise revoked beneficiary in spite of the divorce.
In cases like Coughlin and Stillman there were undisputed facts disclosed in written
documents which evidenced the actual intent. In the case at bar, the evidence consists
solely of Ms. Campbell’s report of John’s statements of intent made to her.
A preliminary concern with using this evidence is that it consists of statements
made by John who will not actually give testimony on the subject which would be
offered to prove the truth of the proposition that John was naming Jane as the
beneficiary even after the divorce. Ms. Campbell’s testimony is hearsay, which
ordinarily would be excluded under Rule 802 of the Federal Rules of Evidence. State
Farm contends that the evidence is admissible under an exception to the hearsay rule.
The court agrees: Rule 803(3) as pertinent here provides that “a statement of the
declarant’s then existing state of mind . . . (such as intent . . .)” is not excluded by
Rule 802.
The next question is whether Ms. Campbell’s testimony recounting John’s verbal
designation of Jane establishes by a preponderance of the evidence that it was John’s
intent to keep Jane as the primary beneficiary. It does. The other parties had a chance
to present contrary evidence and did not do so. The record discloses no other evidence
of John’s intent. Under the principles that apply to motions for summary judgment,
State Farm has established as a matter of law that Jane is the primary beneficiary.
In sub-part IV of its memorandum supporting its motion to dismiss the
counterclaims, State Farm argues that Jane is the beneficiary and that if Jane is
recognized as the beneficiary, she has no damages and so her counterclaims must be
dismissed. Recognizing the possibility that State Farm would succeed in showing that
she was the beneficiary, but wishing to preserve her counterclaims, Jane argues that
she has damages flowing from State Farm’s refusal to simply pay her the benefits. She
puts it this way in her response: “Indee Jane Davis also generally agrees with sub-part
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IV of State Farm’s motion with the qualification that even if the court agrees with State
Farm [sic] analysis on sub-part IV, there are still damages that Indee Jane Davis has
suffered. In particular, State Farm . . . created a dispute where no dispute needed to
exist between Indee Jane Davis and her daughters.”14
Finding the above explication of damages vague, the court examined Jane’s
counterclaims to see what relief she demands and discovered that she seeks to recover
“all damages” flowing from State Farm’s actions, “all attorney’s fees, costs and interest
allowable under the law” and “any other relief the court deems appropriate.”15 The
damage to Jane flowing from State Farm’s actions is the failure to pay her the insurance
proceeds. State Farm deposited the insurance proceeds with the court when it filed the
interpleader action, and because the court has ruled that she is entitled to those
proceeds, it could easily be contended, as State Farm has contended, that State Farm
has not damaged Jane and therefore is entitled to summary judgment. However, the
settlement reached between Jane and her children may alter the analysis of that
argument, for the settlement means Jane will receive less than all of the insurance
proceeds.
As State Farm tacitly acknowledges in its briefing, if Jane is the beneficiary, then
Jane is entitled to enforce the insurance contract. Here, Jane’s position is that the
contract was breached either because State Farm’s agent, Ms. Campbell, failed to take
the steps necessary to foreclose application of the revocation-upon-divorce statute or
because State Farm commenced an interpleader action when the undisputed facts
show that Jane was the beneficiary and so “created a dispute where no dispute needed
to exist.”
Neither State Farm nor Jane has yet briefed the extent of the duty owed by State
Farm to Jane in the context created by the settlement and whether her decision to settle
is an independent act for which State Farm is not responsible. Resolution of these
issues, and perhaps others which might bear upon whether State Farm breached a duty

14

Doc. 39 at p. 5.

15

Doc. 4 at p. 7.

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to Jane which damaged her, is impossible on the existing record. Because State
Farm’s motion for summary judgment depends on showing the non-existence of any
damages to Jane, it follows that State Farm is not entitled to summary judgment at this
time.

V. CONCLUSION
For the reasons set out above, the motion for summary judgment at docket 24 is
DENIED.
DATED at Anchorage, Alaska, this 3rd day of June 2008.

/s/ JOHN W. SEDWICK
UNITED STATES DISTRICT JUDGE

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