North American Company for Life and Health Insurance v. Kinard et al

Filing 115

ORDER. Plaintiff Lu Celia Kinard's 35 Motion for Summary Judgment and defendant Cynthia Rothrock Kinard's 68 cross motion for summary judgment are deemed moot. Plaintiff Lu Celia Kinard's 77 motion for summary judgment is denied . Defendant Cynthia Rothrock Kinard's 81 cross motion for summary judgment is granted in part and denied in part. Defendant's 101 motion to strike plaintiff's response to defendant's cross motion for summary judgment and plaintiff's 105 motion for leave to resubmit her response to defendant's cross motion for summary judgment are denied as moot. By Judge Philip A. Brimmer on 9/26/11.(mnfsl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer
Civil Action No. 10-cv-01960-PAB-KMT
LU CELIA KINARD,
Plaintiff,
v.
CYNTHIA ROTHROCK KINARD, individually and
as Administratrix of the Estate of Walter A. Kinard,
Defendant.
_____________________________________________________________________
ORDER
_____________________________________________________________________
This matter is before the Court on plaintiff Lu Celia Kinard’s motion for summary
judgment [Docket Nos. 35, 77] and defendant Cynthia Rothrock Kinard’s cross motion
for summary judgment [Docket Nos. 68, 81].1 The motions are fully briefed and ripe for
disposition.
I. BACKGROUND
Pursuant to 28 U.S.C. § 1335(a)(1), North American Company for Life and
Health Insurance (“North American”) filed an interpleader complaint August 17, 2010,
naming plaintiff and defendant as defendants because they had filed conflicting claims
to a life insurance policy issued by North American. On August 18, 2010, the Court
granted [Docket No. 4] North American’s motion to deposit the disputed amount of
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Each motion appears twice in this case’s docket because, due to the parties’
violations of Federal Rule of Civil Procedure 5.2(a), the Court ordered that the original
motions be sealed and that the parties resubmit complying motions. See Docket No.
76. In light of the parties re-filing of the motions, the original motions will be deemed
moot.

$409,926.19, including accrued interest, into the Registry of the Court [Docket No. 3].
By order dated April 21, 2011 [Docket No. 61], the Court dismissed North American
from this action and realigned the parties.
The life insurance policy at issue in this case was issued to Walter Alan Kinard
(“Kinard”). Plaintiff Lu Celia Kinard married Kinard in 1974. They divorced on October
24, 2002 pursuant to a Decree of Dissolution of Marriage (the “divorce decree”) issued
by the District Court of Jefferson County, Colorado. See Docket No. 77-1. The divorce
decree incorporated by reference a Separation Agreement, see Docket No. 77-2,
between plaintiff and Kinard. The Separation Agreement provided, among other things,
that
[Kinard] shall continue [plaintiff] as sole beneficiary under his North
American Life Insurance Company level term life insurance policy and will
continue to pay the premium thereon. This policy is intended to provide the
approximate equivalent of the amount of maintenance and child support to
[plaintiff] that would be lost in the event of [Kinard’s] death. [Kinard] shall
have the option of substituting a decreasing amount of life insurance under
another plan of life insurance on his life at his option. [Kinard’s] obligation
to continue [plaintiff] as beneficiary of this life insurance policy shall
terminate when [Kinard] shall no longer be obligated to pay child support
and maintenance under this agreement.
Docket No. 77-2 at 8. In June 2003, Kinard signed a Beneficiary and Owner Change
Request Form making defendant the beneficiary of the North American policy. As of
June 2003, Kinard’s child support and maintenance obligations had yet to terminate.
By the time of his death on September 12, 2009, Kinard’s child support obligation had
already been fulfilled. Had he lived, he would have been required to pay maintenance
to plaintiff for an additional fourteen months.
In her motion for summary judgment, plaintiff argues that, because Kinard’s
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change of the beneficiary of the North American policy violated the Separation
Agreement, his attempt to do so had no legal effect. Consequently, plaintiff argues that
she is entitled to all of the life insurance proceeds. Defendant, in her cross-motion,
agrees that Kinard was not permitted to change the beneficiary in the manner he did.
However, defendant contends that the policy was intended as security for Kinard’s
maintenance and child support obligations. Therefore, agues defendant, plaintiff
should receive the total amount of maintenance plaintiff lost on account of Kinard’s
death, with defendant receiving the remainder.
II. STANDARD OF REVIEW
Summary judgment is warranted under Federal Rule of Civil Procedure 56 when
the “movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986); Concrete Works, Inc. v. City &
County of Denver, 36 F.3d 1513, 1517 (10th Cir. 1994); see also Ross v. The Board of
Regents of the University of New Mexico, 599 F.3d 1114, 1116 (10th Cir. 2010). A
disputed fact is “material” if under the relevant substantive law it is essential to proper
disposition of the claim. Wright v. Abbott Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir.
2001). Only disputes over material facts can create a genuine issue for trial and
preclude summary judgment. Faustin v. City & County of Denver, 423 F.3d 1192, 1198
(10th Cir. 2005). An issue is “genuine” if the evidence is such that it might lead a
reasonable jury to return a verdict for the nonmoving party. Allen v. Muskogee, 119
F.3d 837, 839 (10th Cir. 1997). When reviewing a motion for summary judgment, a

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court must view the evidence in the light most favorable to the non-moving party. Id.;
see McBeth v. Himes, 598 F.3d 708, 715 (10th Cir. 2010). However, where, as here,
there are cross motions for summary judgment, the reasonable inferences drawn from
affidavits, attached exhibits, and depositions are rendered in the light most favorable to
the non-prevailing party. Jacklovich v. Simmons, 392 F.3d 420, 425 (10th Cir. 2004).
Furthermore, “[w]hen the parties file cross motions for summary judgment, we are
entitled to assume that no evidence needs to be considered other than that filed by the
parties, but summary judgment is nevertheless inappropriate if disputes remain as to
material facts.” Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138,
1148 (10th Cir. 2000) (internal quotation marks omitted).
III. DISCUSSION
The parties dispute the implication of the Separation Agreement on their
respective entitlement to the life insurance proceeds. The Court exercises jurisdiction
over this matter pursuant to 28 U.S.C. § 1335 and, therefore, will apply state law to the
parties’ dispute over the insurance proceeds. See 7 Wright, Miller, et al., Federal
Practice & Procedure: Civil § 1713 (3d ed. 2001) (“[S]tate law governs in . . .
statutory-interpleader cases since the basis of the court’s jurisdiction is diversity of
citizenship[.]”); see generally Great Falls Transfer & Storage Co. v. Pan Am. Petroleum
Corp., 353 F.2d 348 (10th Cir. 1965). The Separation Agreement provides that it “shall
be construed in accordance with the laws of the State of Colorado.” Docket No. 81-3 at
13, § 19.11.
Under Colorado law, “[i]nterpretation of a written contract is a question of law for

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the court.” In re Marriage of Thomason, 802 P.2d 1189, 1190 (Colo. App. 1990) (citing
Pepcol Manufacturing Co. v. Denver Union Corp., 687 P.2d 1310 (Colo. 1984)). The
Court must “ascertain the parties’ intent at the time of execution, and that intent is
determined primarily from the instrument itself.” In re Marriage of Sinkovich, 830 P.2d
1101, 1102 (Colo. App. 1992) (citing Hefley Ranch, Inc. v. Stewart, 764 P.2d 415 (Colo.
App. 1988)). “Parol evidence of intent is generally admissible only if the contract terms
are ambiguous.” Id. (citing In re Marriage of Piper, 820 P.2d 1198 (Colo. App. 1991)).
Here, the parties have not submitted any parol evidence and, having filed cross motions
for summary judgment, both contend that the Court can determine entitlement to the
proceeds as a matter of law from examination of the instrument itself. See Atlantic
Richfield Co., 226 F.3d at 1148 (“When the parties file cross motions for summary
judgment, we are entitled to assume that no evidence needs to be considered other
than that filed by the parties . . .”) (internal quotation marks omitted). “The sole fact that
the parties disagree as to the meaning of the terms of a contract does not itself create
an ambiguity.” In re Marriage of Thomason, 802 P.2d at 1190.
Plaintiff contends that she is entitled to the entirety of the life insurance proceeds
because Kinard, as of the time of his death, was obligated to maintain her as the
policy’s beneficiary. Defendant argues that the insurance policy served only as security
for Kinard’s child support and maintenance obligations and, therefore, plaintiff’s interest
in the policy is limited to the amount of maintenance plaintiff did not receive due to
Kinard’s death.
The parties have not cited a Colorado case on the precise issue presented here.

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In Konczyk v. Konczyk, 843 A.2d 1190, 1195 (N.J. Super. 2003), the court similarly
noted that, “[u]nfortunately, there are no cases in New Jersey that squarely address the
issue . . . where the obligor died, alimony is to be paid for a specified timeframe and the
insurance policy considerably exceeds the remaining obligation.” In this case, the
parties do not dispute that plaintiff, as a “person who is required to be named as the
beneficiary of life insurance under a divorce decree[,] has a vested equitable interest in
such life insurance.” Konczyk, 343 A.2d at 1196 (citing 22 Causes of Action § 463,
Sec. 2). The parties disagree, however, as to “the amount of that equitable interest.”
Konczyk, 843 A.2d at 1196.
“[I]n cases where the insurance obligation functions as security for the support
obligation, courts in other states have shown a willingness to limit payment of insurance
proceeds to conform with the underlying obligation and avoid a windfall to the supported
spouse or his/her estate.” Id.; see 22 Causes of Action § 463, Sec. 2 (“The
characterization of life insurance as security for other obligations under a divorce
decree may affect the availability or extent of recovery. Generally, an obligation to
maintain insurance and the entitlement of the insured’s former spouse or child to the
proceeds will not survive the satisfaction of the obligation the insurance was intended to
secure. Similarly, if the underlying obligation survives, recovery of proceeds may be
limited to the extent of any unpaid support, alimony, or property obligation existing at
the time of insured’s death.”). Plaintiff does not dispute this statement of the law, i.e.,
that, if it was the clear intent of the parties that the North American policy functioned as
security for the maintenance obligation, her equitable interest would be determined by
reference to that obligation. Rather, plaintiff argues that the “Separation Agreement
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does not state that the life insurance is security.” Docket No. 103 at 16. This assertion
ignores the Separation Agreement’s clear statement that the North American “policy is
intended to provide the approximate equivalent of the amount of maintenance and child
support to [plaintiff] that would be lost in the event of Husband’s death.” Docket No. 813 at 7, ¶ 14. Plaintiff does not claim that the amount of the policy is now approximately
equivalent to the amount of maintenance that was lost.
Instead, plaintiff contends, like the plaintiff in Konczyk, that “if the parties had
wanted to further reduce the face amount of the insurance, they could have done so.”
Konczyk, 843 A.2d at 1196. But the parties did provide a means for the insurance
policy to be reduced over time as the remaining maintenance obligation decreased.
Pursuant to the Separation Agreement, Kinard retained the “option of substituting a
decreasing amount of life insurance under another plan of life insurance on his life at
his option.” Docket No. 81-3 at 7, ¶ 14; see Head v. Metropolitan Life Ins. Co., 449
N.W.2d 449, 453 (Minn. Ct. App. 1989) (affirming decision to grant former wife full
amount of policy which was meant to be security for spousal maintenance in part
because, as the trial court recognized, “it would have said so if it had meant that [the
decedent] need only maintain only so much insurance as he unilaterally determined
was necessary to fund” the spousal support obligations).2 While plaintiff acknowledges
2

The Head court also noted “the following special circumstances”:
[The decedent] left the trial court with no choice other than awarding [the
former wife] the entire insurance because [the decedent] did not fully inform
the court about the insurance; the $1,000 per month maintenance award
was interim because of uncertainty about [the decedent’s] income at his
new job and [the former wife’s] earning capacity; the $1,000 was
substantially below the $2,400 found to be [the former wife’s] reasonable
monthly expenses; and [the former wife’s] health problems and absence
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that the Separation Agreement permitted the reductions, she argues that, because
Kinard did not exercise the option, she is entitled to the entirety of the insurance
proceeds. The Separation Agreement permitted Kinard to “maintain only so much
insurance as he unilaterally determined was necessary to fund” his remaining
obligations, creating the possibility that plaintiff would have recovered the entire amount
of the policy if he had never changed the beneficiary. That fact, however, does not
require that plaintiff recover an amount far exceeding her equitable interest in the policy
simply because the decedent did not comply with the Separation Agreement.3
Furthermore, as support for interpreting the insurance policy as security, the

from the workplace for 25 years. These facts indicate this was an
“exceptional case.”
449 N.W.2d at 454. The parties here rely solely upon the plain terms of the Separation
Agreement and present no special circumstances warranting an award far exceeding
the remaining amount of support secured by the policy. To the extent Head can be
read to require full payment to plaintiff under the circumstances presented in this case,
the Court does not believe that Colorado courts would agree. Cf. Head, 449 N.W.2d at
456 (“Courts in other jurisdictions when faced with similar situations have held that an
obligee spouse is entitled to receive only as much of the proceeds of an insurance
policy as is necessary to properly secure the future maintenance or support obligations
in issue. These courts reason that the purpose for which the obligor is required to
maintain insurance governs the determination of how much of the proceeds the obligee
receives.”) (citations omitted) (Randall, J., dissenting).
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Plaintiff attempts to distinguish Konczyk on its facts by noting that, in Konczyk,
the “divorce decree did not contain any provisions in it . . . that allowed ex-husband [sic]
to reduce the amount of the life insurance to the amount of support owed as time
passed.” Docket No. 103 at 15. While that is a factual difference, it is one that
supports defendant’s position in this case. Plaintiff makes no effort to explain how
providing Kinard with the ability to substitute a lower-value policy commensurate with
his outstanding obligations somehow calls into question whether the policy was
intended as security for those obligations. Cf. In re: Estate of Hodges, 807 So.2d 438,
446 (Miss. 2002) (“The amount was to be reduced by each subsequent alimony
payment made by Jeff. The instrument undisputably manifested the parties’ intention to
provide a minimum amount of alimony payments to [the wife] and established a death
provision which was tied to the alimony obligation.”).
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Konczyk court noted that the “obligation ended when the alimony was no longer due.”
843 A.2d at 1196-97. The same is true here. See Docket No. 81-3 at 7, ¶ 14
(providing that the obligation to maintain the policy terminated at such time as Kinard
“shall no longer be obligated to pay child support and maintenance”). In sum, as in
Konczyk, Kinard had “no independent duty – aside from securing the alimony obligation
– to provide life insurance for the plaintiff.” Konczyk, 843 A.2d at 1196-97.
Plaintiff relies upon McLeod v. Provident Mut. Life Ins. Co., 526 P.2d 1318 (Colo.
1974), Great American Reserve Ins. Co. v. Maxwell, 555 P.2d 988 (Colo. App. 1976),
and Newton v. Newton, 472 P.2d 718 (Colo. App. 1970), to support her arguments.
However, nothing in these cases calls the Court’s conclusion into question.
McLeod v. Provident Mut. Life Ins. Co. involved an interpleader action between
the widow and former wife of a policyholder. During the divorce action from his former
wife, the court ordered the husband to maintain his minor children as primary
beneficiaries. The husband, however, later named his new wife as the primary
beneficiary and his children as secondary beneficiaries. After his death, the life
insurance company filed an interpleader action when the widow refused to release her
rights under the policy in favor of the former spouse and children. Plaintiff here claims
that the court in McLeod “ordered the life insurance policy be used to protect the child
support payments of the five children of the marriage.” Docket No. 103 at 13. Plaintiff
misreads McLeod. The only issue in McLeod was whether the divorce court’s order
requiring the husband to maintain his children as primary beneficiaries was void.
McLeod held that it was not. The court did not discuss the relationship between the life

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insurance obligation and any separate child support obligation which might limit the
children’s interest in the policy. Moreover, the court noted that, although the divorce
court’s order regarding the beneficiaries was a valid judgment since no one had
challenged it when it entered, it was nevertheless improper. Id. at 239. Thus, McLeod
is neither “exactly on point” as plaintiff claims, nor does it provide any support for
plaintiff.
In Great American Reserve Ins. Co. v. Maxwell, the “language employed in the
divorce stipulation compel[led] the conclusion that decedent obligated himself to
maintain the policy for the benefit of his three children and for no other person.”
Maxwell, 555 P.2d at 990. The decree “provided that . . . the decedent would ‘make no
further changes as to beneficiaries.’” Id. at 989. Here, by contrast, Mr. Kinard’s
obligation was explicitly tied to his maintenance obligations. He had the option of
substituting a decreasing amount of life insurance and had no obligation to maintain the
policy after complying with his support obligations.4 Plaintiff’s interest in the policy,
therefore, is not comparable to the interest held by the beneficiaries in Maxwell. Cf.
Newton, 472 P.2d at 719 (affirming trial court’s decision that decedent could not change
the beneficiary of a life insurance policy in light of the parties’ clear “intent that the
beneficiaries as of the date of the agreement be made irrevocable”). Instead, plaintiff’s
interest is limited to the maintenance amount lost due to Kinard’s death.

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In fact, the change in beneficiary was not strictly prohibited by the Separation
Agreement. Kinard could have switched beneficiaries on the North American policy so
long as he also substituted “another plan of life insurance.” Docket No. 81-3 at 7, ¶ 14.
It was decedent’s failure to replace that policy with one sufficient to secure his
outstanding obligations that was impermissible.
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The issue that remains is the calculation of the amount of lost maintenance.
Had Kinard lived, his maintenance obligation would have ceased on November 14,
2010. Defendant asserts that Kinard would have been required to pay $1,576.00 per
month for fourteen additional months, resulting in a total loss of maintenance of
$22,064.00. See Docket No. 81 at 6, ¶¶ 9, 11. Plaintiff contends that the Separation
Agreement provided monthly maintenance in the amount of $2,208.00, see Docket No.
81-3 at 8, ¶ 15, and that Kinard’s later reduction of that amount was improper. See
Docket No. 103 at 2, ¶¶ 7, 9. Using that amount, plaintiff would have been entitled to
receive an additional $30,912.00 in maintenance had Kinard survived until November
14, 2010. The Court finds that this constitutes a material dispute which cannot be
resolved upon the present record.
For the foregoing reasons, it is
ORDERED that plaintiff Lu Celia Kinard’s motion for summary judgment [Docket
No. 35] and defendant Cynthia Rothrock Kinard’s cross motion for summary judgment
[Docket No. 68] are deemed moot. It is further
ORDERED that plaintiff Lu Celia Kinard’s motion for summary judgment [Docket
No. 77] is DENIED. It is further
ORDERED that defendant Cynthia Rothrock Kinard’s cross motion for summary
judgment [Docket No. 81] is GRANTED in part and DENIED in part. It is further
ORDERED that defendant’s motion to strike plaintiff’s response to defendant’s
cross motion for summary judgment [Docket No. 101] and plaintiff’s motion for leave to
resubmit her response to defendant’s cross motion for summary judgment [Docket No.

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105] are DENIED as moot.

DATED September 26, 2011.
BY THE COURT:

s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge

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