The Prudential Insurance Company of America v. Santy et al

Filing 21

AMENDED ORDER granting 12 Motion to Dismiss for Failure to State a Claim. So Ordered by Magistrate Judge Andrea K. Johnstone. *ORDER amended to correct amount of Death Benefit.(vln)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE

The Prudential Insurance
Company of America
v.

Case No. 14-cv-288-AJ
Opinion No. 2014 DNH 263

Penny Santy, Solely as
Administratrix of the
Estate of Robert Santy;
and Debra Menard
AMENDED ORDER
The Prudential Insurance Company of America (“Prudential”)
brought this interpleader action to resolve competing claims to
the benefits of two Prudential life insurance policies.

The

defendants are Penny Santy, who was married to the decedent,
Robert Santy, at the time of his death, and Debra Menard,
Robert’s brother’s ex-wife.
the case.

Prudential has been dismissed from

Menard moves to dismiss the complaint.

Santy

objects.

Background
In 1988 and 1989, Prudential issued two life insurance
policies to Robert Santy.

Robert designated his brother,

Richard Santy, as the primary beneficiary of the death benefits

payable under the policies.

Robert and Richard “were partners

in a business, Santy Brothers Logging, and . . . the insurance
was . . . purchased for business protection.”

Compl. ¶ 8.

Robert designated Debra Menard, Richard’s then-wife, as the
contingent beneficiary of the policies.

Although Richard and

Menard got divorced in 2002, Menard remained the contingent
beneficiary of the policies.
Robert died on December 9, 2013.

Following Robert’s death,

Prudential was notified that Richard had predeceased Robert.
Menard, as the contingent beneficiary, submitted a claim for the
death benefits under the policies.

Penny Santy, Robert’s widow,

subsequently contacted Prudential contesting payment to Menard.
Prudential brought this interpleader action to determine which
of the claimants is entitled to Robert’s life insurance
proceeds.1

The court granted Prudential’s assented-to motion to

deposit funds into a court registry and to be dismissed from the
case.2

1

Although not explicitly stated in Prudential’s complaint, this
interpleader action appears to be brought pursuant to Federal
Rule of Civil Procedure 22 as opposed to 28 U.S.C. § 1335. The
complaint meets the requirements for a Rule 22 interpleader
action.
2

“[I]n an interpleader action in which the stakeholder does not
2

Menard moves to dismiss the complaint, arguing that Santy
does not have a valid claim to the death benefits under the
policies.

Santy objects.

Standard of Review
Federal Rule of Civil Procedure 12(b)(6) allows a defendant
to move to dismiss on the ground that the plaintiff=s complaint
fails to state a claim on which relief can be granted.

In

assessing a complaint for purposes of a motion to dismiss, the
court Aseparate[s] the factual allegations from the conclusory
statements in order to analyze whether the former, if taken as
true, set forth a plausible, not merely conceivable, case for
relief.@

Juarez v. Select Portfolio Servicing, Inc., 708 F.3d

269, 276 (1st Cir. 2013) (internal quotation marks omitted).

Discussion
Menard argues the case should be dismissed because there is

assert a claim to the stake, the stakeholder should be dismissed
immediately following its deposit of the stake into the registry
of the court. That dismissal should take place without awaiting
an adjudication of the defendants’ competing claims.” Hudson
Sav. Bank v. Austin, 479 F.3d 102, 107 (1st Cir. 2007) (internal
citations omitted).
3

no dispute that she is entitled to the death benefits as the
contingent beneficiary of the policies.

She argues that she had

an insurable interest at the time the policy was issued and,
therefore, her claim to the death benefits is valid.

She also

argues that her claim to the benefits became incontestable after
two years under RSA 408:10.
In response, Santy argues that Menard “has no insurable
interest in the life of the policyholder, Robert Santy, and
therefore no right to the policy proceeds.”
no. 14) at ¶ 22.

Santy Obj. (doc.

Santy contends that Menard relinquished any

interest in Robert’s life or the logging business when she and
Richard divorced.

She also argues that the court should impose

a constructive trust in Santy’s favor on the death benefits.
A.

Insurable Interest
The court notes at the outset that “New Hampshire embraces

the majority rule that only the insurer can raise the
object[ion] of want of insurable interest.”

Rice v. Wal-Mart

Stores, Inc., No. Civ. 02-390-B, 2003 WL 22240349, at *1 (D.N.H.
Sept. 30, 2003) (internal quotation marks and citations
omitted).

Thus, “[b]ecause [Santy is] clearly not [an]

insurer[s], [she does] not have the ability to raise such a
4

challenge.”

Id.

Even if Santy could raise a challenge to Menard’s insurable
interest, that challenge would fail.3
[T]he almost universal rule of law in this country is
that if the insurable interest requirement is
satisfied at the time the policy is issued, the
proceeds of the policy must be paid upon the death of
the life insured without regard to whether the
beneficiary has an insurable interest at the time of
death.
In re Al Zuni Trading, Inc., 947 F.2d 1403, 1405 (9th Cir. 1991)
(internal citation omitted); see also W. Reserve Life Assur. Co.
of Ohio v. Conreal LLC, 715 F. Supp. 2d 270, 276 (1st Cir.
2010); In re Caron, 305 B.R. 614, 617 (Bankr. D. Mass. 2004)
(where an insurable interest existed “at the time the policy is
issued . . . no change in [the] relation [of the beneficiary and
the insured] will terminate [the beneficiary’s] right to the
fund derived from the policy”).

The requirement of an insurable

interest at the time the policy is issued is based on the idea

3

Although the parties appear to agree on the issue, it is not
clear that Menard’s right to recover the death benefits is
contingent on her having an insurable interest in Robert’s life.
See 4 Couch § 59:2 (“There is little, other than statutes, to
limit the eligibility of beneficiaries of a life policy when the
policy is obtained by the insured, since the general rule is
that beneficiaries need not have an insurable interest of their
own in such circumstances.”).
5

that policies lacking an insurable interest at their inception
are mere “wager policies” that are against public policy.
Prudential Ins. Co. of Am. v. Corriveau, 86 N.H. 326, 168 A.
569, 569 (1933); see also W. Reserve Life Assur. Co. of Ohio v.
ADM. 737 F.3d 135, 141 (1st Cir. 2013) (“By requiring owners of
life insurance policies to have an interest of some sort in the
insured life, courts could ensure that these contracts did not
become mere wager policies.”) (internal quotation marks and
citations omitted); Mechanics’ Nat. Bank v. Comins, 72 N.H. 12,
55 A. 191, 193 (1903).
Santy does not appear to argue that the insurable interest
requirement necessarily requires that the beneficiary have an
insurable interest at the time of the insured’s death.

Rather,

she contends that Menard has no insurable interest because she
“waived” or “freely contracted away” any interest in Robert’s
life or the logging business by divorcing Richard.
(doc. no. 14) at ¶ 22.

Santy Obj.

However, “‘a divorce decree or

stipulation which merely releases all claims of one party to the
property of the other does not, in the insurance policy context,
destroy the beneficiary status of the first party, because the
beneficiary interest is not a vested property right.’”
6

UBS Fin.

Servs., Inc. v. Brescia, No. 13-cv-4-JNL, 2014 WL 580142, at *3
(D.N.H. Feb. 12, 2014) (quoting Dubois v. Smith, 135 N.H. 50, 59
(1991)).

In other words, “a divorce decree must unambiguously

evidence an intent to remove a beneficiary in order to alter an
original designation under” a life insurance policy.

Id.

(quoting Est. of Tremaine ex rel. Tremaine v. Tremaine, 146 N.H.
674, 675 (2001)) (internal quotation mark omitted); see also 3
Couch 43:2 (“The fact that the divorce destroys the insurable
interest does not prevent recovery on a policy that was
previously valid.”).
Here, Santy does not contend that the divorce decree itself
specifically addresses Robert’s life insurance policy, let alone
Menard’s status as the contingent beneficiary of the policies.
Thus, her argument, that Menard’s divorce decree terminated her
right to collect under the policies, is without merit.4

4

Santy appears to suggest that Menard cannot collect the death
benefits for the additional reason that Richard’s insurable
interest in Robert’s life “lapsed upon the dissolution of the
business partnership and his decease in 2011.” Santy Obj. (doc.
no. 14) at 3. Even if Richard’s insurable interest in 2011 were
relevant, “the termination of the partnership prior to the death
of the insured does not effect [sic] the validity or
enforceability of the policy.” Herman v. Provident Mut. Life
Ins. Co. of Phil., 886 F.2d 529, 535 (2d Cir. 1989) (quoting
Insurable Interest of Partner or Partnership in the Life of
Partner, 70 A.L.R. 2d 577, 582 (1960) (internal quotation marks
7

B.

Constructive Trust
Santy also asks the court to impose a constructive trust on

the death benefits.

Parties seeking to show a constructive

trust “take upon themselves a heavy burden . . . .”

Salisbury

v. Lowe, 140 N.H. 82, 83 (1995) (internal quotation marks and
citation omitted).

To support a claim for a constructive trust

in this case, Santy must show that Menard “possessed the life
insurance proceeds at issue, that she and [Robert] had a
confidential relationship, and that she would be unjustly
enriched were she allowed to retain the proceeds.”

In re Estate

of Couture, 166 N.H. 101, 89 A.3d 541, 550 (2014).
Although Santy asserts that a constructive trust is
warranted and that Menard would be unjustly enriched if she
receives the insurance proceeds, she does not adequately explain
how the facts of this case meet the requirements of a
constructive trust.

Menard does not explain or even address the

issue of whether a confidential relationship existed between
Robert and Menard or how Menard is unjustly enriched.

She

argues simply that “equity requires the imposition of a
omitted)); see also Life Ins. Clearing Co. v. O’Neill, 106 F.
800, 805 (3d Cir. 1901); First Metlife Investors Ins. Co. v.
Zilkha, No. 08 CV 10113(HB), 2009 WL 2999607, at *5-*6 (S.D.N.Y.
Sept. 21, 2009).
8

constructive trust.”

Santy Obj. (doc. no. 14) at ¶ 24.

The First Circuit has “emphasized that judges are not
obligated to do a party's work for him, ‘searching sua sponte
for issues that may be lurking in the penumbra of the motion
papers.’”

Coons v. Industrial Knife Co., Inc., 620 F.3d 38,

44 (1st Cir. 2010) (quoting United States v. Slade, 980 F.2d 27,
31 (1st Cir. 1992)).

That is particularly true where the

argument defies an easy answer.

Id.

Mere “passing allusions”

to an argument are insufficient to address meaningfully a
disputed issue.

See United States v. Zannino, 895 F.2d 1, 17

(1st Cir. 1990) (“Judges are not expected to be mindreaders.
Consequently, a litigant has an obligation to spell out its
arguments squarely and distinctly . . . .”) (internal citations
and quotation marks omitted), cert. denied, 494 U.S. 1082
(1990).

In light of the brevity with which Santy addressed her

argument as to the necessity of a constructive trust, the court
is “free to disregard” the argument and the court declines to
consider it in determining Menard’s motion.

Higgins v. New

Balance Athletic Shoe, Inc., 194 F.3d 252, 260 (1st Cir. 1999).
Accordingly, Menard is entitled to the proceeds from
Robert’s life insurance policies.
9

Her motion to dismiss is

granted.5

Conclusion
For the foregoing reasons, Menard’s motion to dismiss
(document no. 12) is granted.
The clerk of court shall enter judgment in accordance with
this order and close the case.

The clerk shall provide the

Death Benefit plus interest totaling $197,001.03, which
Prudential had deposited with the clerk, to Menard by January 5,
2015.
SO ORDERED.

________________________
Andrea K. Johnstone
United States Magistrate Judge
December 30, 2014
cc:

Maureen Hingham, Esq.
William Parnell, Esq.
William Pandolph, Esq.

5

Because the court finds that Menard is entitled to the life
insurance proceeds, it does not address her argument that her
claim became incontestable after two years under RSA 408:10.
10