Hogan v. Jackson National Life Insurance Company
Filing
26
MEMORANDUM AND ORDER granting 22 Motion to Dismiss; denying 22 Motion for Attorney Fees. So Ordered by Chief Judge William E. Smith on 10/30/2015. (Jackson, Ryan)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
)
)
Plaintiff and Counterclaim )
Defendant,
)
)
v.
)
)
JACKSON NATIONAL LIFE INSURANCE
)
COMPANY,
)
)
Defendant and Counterclaim )
Plaintiff,
)
)
v.
)
)
ESTATE OF WILLIAM HOGAN, by and
)
through its duly appointed legal
)
representative,
)
)
Counterclaim Defendant.
)
___________________________________)
ANNEMARIE HOGAN,
C.A. No. 14-340 S
MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief Judge.
Pending
before
the
Court
is
Defendant
and
Counterclaim
Plaintiff Jackson National Life Insurance Company’s (“Jackson”)
Motion
for
Discharge
Interpleader Relief.
from
Liability
(ECF No. 22.)
and
for
Additional
Jackson moves the Court to
dismiss it from this action with prejudice, discharge it from
liability pursuant to 28 U.S.C. § 2361, and grant it reasonable
attorney’s fees and costs.
Defendant
Annemarie
Hogan
(Id.)
(“Ms.
Plaintiff and Counterclaim
Hogan”)
assents
to
Jackson’s
dismissal and discharge requests, but objects to its motion for
fees and costs.
(ECF No. 23.)
For the reasons stated below,
the Court GRANTS Jackson’s Motion to be dismissed from this case
and discharged from liability, but DENIES Jackson’s request for
attorney’s fees and costs.
I.
Background
In the year 2000, William Hogan (“Mr. Hogan”) purchased a
life insurance policy (the “Policy”) from Jackson with a benefit
of $200,000.
(Am. Compl. ¶ 3, ECF No. 1-2.)
The Policy named
Mr. Hogan’s then spouse, Ms. Hogan, as the primary beneficiary.
(Jackson Memorandum of Law in Support of Motion (“Jackson Mem.”)
2, ECF No. 22-1.)
At some point after purchasing the life
insurance policy, Mr. and Ms. Hogan divorced.
(Id.)
Mr. Hogan
relocated to New York, while Ms. Hogan continued to reside in
Rhode Island.
Hogan,
(Id. at 2; Am. Compl. ¶8, ECF No. 1-2.)
nevertheless,
remained
the
primary
beneficiary
Policy for all times relevant to this action.
on
Ms.
the
(Jackson Mem. at
2.)
On December 23, 2013, Mr. Hogan died.
(Id.)
When Ms.
Hogan attempted to collect the Policy proceeds, Jackson denied
her claim, stating in an email from Jackson’s Associate General
Counsel:
Mr. Hogan died a resident of the state of New York.
New York Statute 5-1.4 provides that a divorce revokes
a beneficiary designation made to a former spouse.
2
It is our position that the statute disqualifies Ms.
Hogan from receiving the policy’s death benefit
proceeds.
We will make payment accordingly unless you present us
with a court order to the contrary within 30 days of
today’s date.
(Hogan Obj. Ex 2, ECF No. 23-2.)
When Ms. Hogan did not present
a court order within 30 days, Jackson notified her that it was
going to proceed as outlined in the email, i.e., it determined
that Ms. Hogan was disqualified from receiving the proceeds of
the Policy.
(Id.)
After receiving Jackson’s second denial letter, Ms. Hogan
commenced a declaratory action in Rhode Island Superior Court,
seeking, inter alia, a declaration that she was entitled to the
Policy proceeds.
No. 1-2.)
(Jackson Mem. 2, ECF No. 22-1; Am. Compl., ECF
Jackson removed the case to this Court, brought a
counterclaim
for
interpleader,
(the “Estate”) to the action.
Jackson
also
moved
to
and
joined
Mr.
Hogan’s
(Jackson Mem. 2-3, ECF No. 22-1.)
deposit
the
Policy
proceeds,
applicable interest, into the Registry of the Court.
3.)
Estate
plus
(Id. at
This Court granted Jackson’s motion and Jackson deposited
$219,377.40 with the Court on January 22, 2015.
Subsequently,
Ms.
Hogan
and
the
Estate
(Id.)
agreed
that
the
Estate would not make any claims to the Policy proceeds and
filed
a
consent
stipulation
with
3
the
Court
stating
as
such.
(Hogan
Obj.
3,
ECF
No.
23-1;
see
Stipulation,
ECF
No.
21.)
Shortly after Ms. Hogan and the Estate filed the stipulation,
Jackson brought the present motion.
II.
Dismissal and Discharge from Liability
Jackson first seeks to be dismissed from this action with
prejudice and discharged from liability pursuant to 28 U.S.C. §
2361.
Ms. Hogan assents to both of these forms of relief.
(Hogan Obj. 1, ECF No. 23.)
The Estate did not respond to
Jackson’s motion, but has expressly assigned its interest in the
Policy proceeds to Ms. Hogan.
(Stipulation ¶ 2, ECF No. 21.)
Accordingly, the motion as to both requests is granted without
objection.
III. Attorney’s Fees and Costs
Jackson also seeks to recover its attorney’s fees and costs
of $11,750.50 and $631.75 from the Policy proceeds.
objects to this request.
Ms. Hogan
The parties agree that this Court “has
discretion to award costs and counsel fees to the stakeholder in
an interpleader action . . . whenever it is fair and equitable
to do so.”
8
(1st
omitted).
Sun Life Assur. Co. of Can. v. Sampson, 556 F.3d 6,
Cir.
2009)
They,
(internal
however,
quotation
disagree
marks
whether
it
and
is
citation
fair
and
equitable to do so here.
Generally,
courts
award
fees
in
interpleader
actions
to
“compensate a totally disinterested stakeholder who [has] been
4
. . . subjected to conflicting claims through no fault of his
own.”
Id. (quoting Ferber Co. v. Ondrick, 310 F.2d 462, 467
(1st Cir. 1962)).
typical
equitable
determine
whether
“The test for awarding fees and costs is a
one
. . .
similar
interpleader
to
relief
the
standard
ought
to
be
used
to
granted
–
should the interpleading party be required to assume the risk of
multiplicity of actions and erroneous election.”
Id. (quoting 7
Charles
and
Alan
Wright
et
al.,
Federal
Practice
Procedure
§ 1719, at 682 (3d ed. 2001) (“Wright & Miller”)).
The
First
Circuit
allows
insurance
fees and costs in interpleader actions.
at 8, 10.
and
costs
companies
to
receive
See Sun Life, 556 F.3d
However, insurance companies are not entitled to fees
as
a
matter
of
course.
Id.
(affirming
the
discretionary nature of fee and costs awards in interpleader
suits); Travelers Indem. Co. v. Israel, 354 F.2d 488, 490 (2d
Cir. 1965) (“We are not impressed with the notion that whenever
a minor problem arises in the payment of insurance policies,
insurers may, as a matter of course, transfer a part of their
ordinary cost of doing business of their insureds by bringing an
action
for
interpleader.”);
Minnesota
Mut.
Life
Ins.
Co.
v.
Gustafson, 415 F. Supp. 615, 618 (N.D. Ill. 1976) (“[A]ttorneys’
fees should not be granted to the stakeholder as a matter of
course
in
interpleader
actions
insurance policies.”).
5
concerning
the
proceeds
of
Indeed, a number of courts, including this one, have held
that courts should more closely scrutinize an insurer’s request
for fees and costs.
See New York Life Ins. Co. v. Ortiz, No.
C.A. 14-74 S, 2015 WL 5793701, at *21 (D.R.I. Sept. 30, 2015)
(Smith, C.J. affirming Report and Recommendation); Am. Gen. Life
Ins. Co. v. Churchill, No. CV-06-61-B-W, 2006 WL 2948086, at *1
(D. Me. Oct. 16, 2006).
this extra scrutiny.
There are two primary reasons behind
First, insurers enter into policy disputes
as an ordinary and expected course of doing business.
Insurers,
thus, can plan for interpleader actions as a regular business
expense and work the cost of interpleader actions into their
policy premiums.
Chase Manhattan Bank v. Mandalay Shores Co-op.
Hous. Ass’n, Inc. (In re Mandalay Shores Co-op. Hous. Ass’n,
Inc.), 21 F.3d 380, 383 (11th Cir. 1994); Midland Nat’l Life
Ins. Co. v. Ingersoll, No. 13-C-1081, 2014 WL 7240268, at *3
(E.D. Wis. Dec. 18, 2014); see also Aaron v. Mahl, 550 F.3d 659,
667 (7th Cir. 2008) (“[A] court may award attorneys’ fees and
costs to a prevailing stakeholder in an interpleader action if
the costs are determined to be reasonable and the stakeholder’s
efforts
are
not
part
of
its
normal
1
course
of
business.”). 1
Jackson urges this Court to reject this so-called cost-ofbusiness exception because a leading treatise cited in Sun Life
Assur. Co. of Can. v. Sampson expresses some reservations about
it. (Jackson Reply n.2, ECF No. 24.) The treatise states “the
cost-of-business
rationale
fails
to
recognize
that
other
equitable concerns should be consulted in determining whether
6
Second, insurance
companies
are
not
traditional
disinterested
stakeholders who come into disputed moneys through no fault of
their
own;
they
entered
the
insurance
business benefits from interpleader actions.
business
and
their
See, e.g. Am. Gen.
Life, 2006 WL 2948086, at *2 (listing examples of benefits and
collecting cases); Midland Nat’l Life, 2014 WL 7240268, at *3
(Insurers are “relieved of the risk of distributing the policy
benefits to the wrong claimant and the risk of becoming the
target of multiple suits.”). 2
fees or costs are warranted.”
7 Charles Alan Wright et al.,
Federal Practice and Procedure § 1719, at 682 (3d ed. 2001)
(“Wright & Miller”).
As an initial matter, the First Circuit
did not adopt the treatise’s interpretation of the cost-ofbusiness exception. See Sun Life Assur. Co. of Can. v. Sampson,
556 F.3d 6, 8 (1st Cir. 2009). Yet, even if it had, the Court
uses the exception in accordance with the treatise.
Insurers
are not automatically disqualified from receiving fees in
interpleader actions; courts merely more closely scrutinize an
insurer’s request, and use the cost-of-business exception as a
factor, among other equitable concerns, when deciding an
insurer’s fee request.
2
Wright & Miller also disagrees with courts that deny
insurers fees on the basis that they are not disinterested
stakeholders. It notes
[i]nsofar as these decisions rest on the notion that
the stakeholder benefits by being discharged, they are
wrongly decided because all stakeholders benefit by
being able to use interpleader and that alone does not
negate the equitable considerations supporting an
award of attorney fees.
Wright & Miller § 1719, at 681-82. Again, the First Circuit has
not adopted this view.
And “it does not follow that insurance
companies should be treated the same as other interpleader
plaintiffs.” Midland Nat’l Life Ins. Co. v. Ingersoll, No. 137
Here, under the extra scrutiny given to insurers, equity
warrants denial of Jackson’s fee request.
First, there is no
reason to overlook that Jackson is an insurer.
It ostensibly
uses interpleader actions in the regular course of its business,
gains a benefit from the actions, and can pass the expense of
the benefit onto its policy holders.
Second, the facts in this
case weigh against awarding fees.
Jackson argues that, even as an insurer, it is entitled to
fees because it brought the interpleader action in the face of
“extreme
the
uncertainty”
Policy.
surrounding
(Jackson
Reply
4,
the
ECF
proper
No.
beneficiaries
24.)
It
of
claims
“irrespective of its status as a life insurer, [it] would have
only promoted uncertainty, if not future claims and litigation,
concerning the life insurance proceeds at issue had it attempted
to disburse the stake without judicial intervention.”
(Id.)
The problem with this argument is that the “extreme uncertainty”
and risk of competing claims did not initially motivate Jackson
to file an interpleader action.
the dispute.
Instead, Jackson took sides in
It denied Ms. Hogan’s claim to the Policy proceeds
C-1081, 2014 WL 7240268, at *3 (E.D. Wis. Dec. 18, 2014).
As
noted
above,
unlike
traditional
interpleaders,
insurance
companies have a business interest in interpleader protection
and can account for the costs of availing themselves to this
benefit.
Thus,
they
are
different
from
traditional
interpleaders who innocently come into control of disputed
funds.
This Court sees no reason not to consider this
distinction in weighing whether to grant an insurer its fees and
costs.
8
and indicated that it would distribute the proceeds according to
its determination that she was not entitled to them.
(See Hogan
Obj. Ex 2, ECF No. 23-2.)
Only after Ms. Hogan initiated her
declaratory
Jackson
counterclaim.
action
did
file
its
interpleader
(Answer & Countercl., ECF No. 6.)
While Jackson
is certainly entitled to interpleader protection, it did not act
as the typical disinterested interpleader entitled to its fees
and costs.
The facts in Sun Life, the case on which Jackson heavily
relies, support this conclusion.
company
tried
beneficiaries
to
by
resolve
Sun
beneficiaries
repeatedly
commenced
an
uncertainty
seeking
beneficiaries.
Life,
interpleader
In Sun Life, a life insurance
surrounding
releases
556
from
F.3d
at
a
policy’s
the
potential
7.
failed
to
respond,
suit.
Id.
Then,
After
the
even
the
insurer
after
the
insurer brought the action against them, the beneficiaries still
waited ten months to respond to it.
are present here.
Id.
None of these facts
Jackson did not seek to resolve the dispute
out of court, and did not, on its own accord, seek interpleader
protection to protect its interests.
was
not
entitled
to
the
Policy
It decided that Ms. Hogan
proceeds
and
only
sought
interpleader protection after Ms. Hogan asked a court to resolve
her dispute with Jackson.
Based on these facts, taken together
9
with Jackson’s identity as an insurer, the Court declines to
exercise its discretion in awarding fees and costs.
IV.
Conclusion
For the foregoing reasons, Jackson’s Motion for Discharge
from Liability and for Additional Interpleader Relief is GRANTED
in part and DENIED in part.
Specifically, Jackson’s motion to
be dismissed with prejudice and for discharge from liability
pursuant to 28 U.S.C. § 2361 is GRANTED; Jackson’s motion for
fees and costs is DENIED.
IT IS SO ORDERED.
William E. Smith
Chief Judge
Date: October 30, 2015
10
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