Farmers New World Life Insurance Company v. Allen et al
Filing
34
MEMORANDUM DECISION that judgment shall be entered in favor of Brad Allen and against Heidi Allen on their claims to the interpleaded funds. Judgment shall be entered that Brad Allen is entitled to the entire remaining interpleaded funds. Signed by Judge Ted Stewart on 04/28/2011. (asp)
IN THE UNITED STATES COURT FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
FARMERS NEW WORLD LIFE INS.,
CO., a Washington Corporation,
MEMORANDUM DECISION AND
ORDER ON INTERPLEADED
FUNDS
vs.
HEIDI ALLEN and BRAD ALLEN,
Case No. 2:09-CV-6 TS
Defendants.
I. INTRODUCTION
Brad Allen, brother of insured Troy Allen, and Heidi Allen, the insured’s former wife,
assert competing claims to the life insurance benefits paid into the Court registry in this
interpleader case. The parties stipulated to submitting the issue on their briefs. The Court
finds and concludes that, as a matter of law, Brad is entitled to receive the interpleaded life
insurance policy because Utah’s Revocation Upon Divorce Statute1 revoked Heidi’s
designation as a beneficiary upon her divorce from the insured. Accordingly, the Court
1
Utah Code Ann. § 75-2-804.
1
grants judgment in favor of Brad entitling him to receive the interpleaded insurance
proceeds as the contingent beneficiary of the policy.
II. FINDINGS OF FACT
The following facts have been established through stipulation as well as the
stipulated exhibits attached to the pretrial order:
1.
On or about July 24, 1995, Farmers issued a life insurance policy to insured
Troy, which contained a death benefit amount of $100,000. Troy named Heidi as the
primary beneficiary, and his brother Brad as the contingent beneficiary. At the time, Heidi
was his fiancé, but the couple was not yet married. The policy also listed Heidi as an
additional insured and Heidi’s and Brad’s minor children were Riders on the policy. The
insurance policy is silent as to what effect a marriage or divorce would have on a
beneficiary’s rights.
2.
Subsequently, Troy and Heidi were married, and then divorced. A Decree of
Divorce was entered on February 23, 2000. The Decree made no reference to the
Farmers’ insurance policy.
3.
After the divorce, Troy did not take any action to remove or affirm Heidi as the
primary beneficiary of his life insurance policy.
4.
5.
On July 19, 2008, Troy passed away.
Following Troy’s death, both Heidi and Brad filed competing claims to the life
insurance proceeds from the Farmer’s policy. Accordingly, on January 7, 2009, Farmers
filed a Complaint for Interpleader in this case, naming both Heidi and Brad as Defendants.
2
6.
On August 10, 2009, this Court entered an order granting Farmer’s motion for
judgment on interpleader, allowing Farmers to deposit the $94,730.40 with the Court and
thereafter discharging Farmers from any future liability. The deposited amount equaled
the $100,000.00 policy amount, plus $9,397 in accumulated interest, minus $11,924.80 in
funeral expenses, $2,307 for Farmers’ attorneys’ fees, and $434.80 for costs. Farmers
deposited the money with the Court the same day.
III. DISCUSSION AND CONCLUSIONS
In this diversity case, the Court applies the substantive law of the state of Utah.2
“[A] 1998 amendment to Utah's Uniform Probate Code . . . revokes upon divorce a
pre-divorce designation of a spouse as the beneficiary of an annuity or similar asset.”3
Thus, the 1998 amendment changed Utah’s prior rule that “divorce alone does not
terminate a former spouse's rights as a survivor beneficiary of an insurance policy, IRA,
. . . unless a property settlement or divorce decree evidence[d] a clear intent to the
contrary.”4
Thus, there is now a presumption that a divorce revokes the designation
unless the property settlement or divorce decree states otherwise.5
2
Stillman v. Teachers Ins. and Annuity Ass'n Coll. Ret. Equities Fund, 343 F.3d 1311,
1312 (10th Cir. 2003).
3
Id. (citing Utah Code Ann. § 75-2-804(2)).
4
Id. (quoting Estate of Anello v. McQueen, 953 P.2d 1143, 1145 (Utah 1998) (internal
quotation marks omitted).
5
Id.
3
The Utah statute now provides:
Except as provided by the express terms of a governing instrument, a court
order, or a contract relating to the division of the marital estate made
between the divorced individuals before or after the marriage, divorce, or
annulment, the divorce or annulment of a marriage: (a) revokes any
revocable: (i) disposition or appointment of property made by a divorced
individual to his former spouse in a governing instrument . . . .6
“‘Disposition or appointment of property’ includes a transfer of an item of property
or any other benefit to a beneficiary designated in a governing instrument.”7 “‘Governing
instrument’ means a governing instrument executed by the divorced individual before the
divorce or annulment of his marriage to his former spouse,”8 and includes an insurance
policy.9
In Stillman v. Teachers Insurance, the Tenth Circuit held that the revocation-upondivorce provision added to § 75-2-804(2) in 1998 applies to the designation of a former
spouse as the primary beneficiary of a governing instrument regardless of when the
beneficiary designation or divorce occurred. In Stillman, the purchase and designation
occurred in 1965, the divorce occurred in 1970, the insured remarried in 1971, and the
insured passed away in 1999, shortly after the effective date of the 1998 amendment.
After the insured’s death, his former wife and his widow—both of whom had children with
the decedent—filed competing claims to the annuity proceeds.
On appeal, the Tenth Circuit held that § 75-2-804(2) is a rule of construction that
applies regardless of the dates of the beneficiary designation or the parties’ divorce. It
6
Utah Code Ann. § 75-2-804(2).
7
Id. § 75-2-804(1)(a).
8
Id. § 75-2-804(1)(d).
9
Id. § 75-1-201(19).
4
noted that the change made by the 1998 amendment is modeled after the identical change
made to the Uniform Probate Code. As the Tenth Circuit explained, “there is no unfairness
in presuming that [the insured’s] desires (if he had stopped to consider then) regarding the
beneficiaries changed when he was divorced.”10
Heidi attempts to distinguish Stillman because Troy did not remarry after their
divorce. Heidi argues that the presumption discussed in Stillman regarding an insured’s
intent upon divorce is rebutted where she remained on friendly terms with Troy, he never
remarried, there was no current spouse or other children with competing claims to the
proceeds, and the proceeds are for child support. However, the rule announced in Stillman
did not depend on the insured’s remarriage. Stillman followed the plain language of the
statute wherein it is a divorce that revokes the pre-divorce designation unless the
requirement for an exception were met. That requirement is not met in the present case
as explained below.
Heidi also argues that she and Troy divorced “with the understanding that the life
insurance policy would continue for the benefit of the parties’ two minor children.”11
However, the statute provides that the revocation is automatic upon divorce unless a
contrary intent is stated in one of the following documents or orders: “a governing
instrument [the insurance policy], a court order, or a contract relating to the division of the
marital estate made between the divorced individuals before or after the marriage, divorce,
or annulment, the divorce or annulment of a marriage.”12 Pursuant to the stipulated facts,
10
Stillman, 343 F.3d at 1318 (emphasis added).
11
Pl.’s Trial Brief at 1-2.
12
Utah Code Ann. § 75-2-804(2).
5
there was no such provision made in any of the types of documents or orders as required
by the statute. Therefore, the statutory exception has not been met.13
Heidi also attempts to distinguish Stillman because she was Troy’s fiancé, not his
wife, when she was designated as beneficiary. However, the definition of the type of
governing instruments covered by §75-2-804(2)’s revocation-upon-divorce clause specifies
that it includes any governing instruments “executed by the divorced individual before the
divorce.”14 It does not limit the governing instruments to those executed only during the
marriage. Where the Utah Legislature chose not to limit the provision to only those
governing instruments executed during the marriage, the Court will not read such a
limitation into the statute.
Finally, as to Heidi’s argument that she was also an insured under the policy and
had listed Troy as the beneficiary, the same rule applies.15
13
See also Buholz v. Storsve, 740 N.W.2d 107, 110-11 (S.D. 2007) (interpreting South
Dakota’s version of the Uniform Probate Code and rejecting argument that testimony as
to the decedent former spouse’s intention could be used to “circumvent the automatic
revocation effected” by the revocation-upon-divorce provision) (quoting and following
Estate of Lamparella, 109 P.3d 959, 966 (Ariz. Ct. App. 2005))
14
Utah Code Ann. § 75-2-804(1)(d).
15
See In re Estate of DeWitt, 54 P.2d 849, 853-54 (Colo. 2002) (applying Colorado’s
version of the Uniform Probate Code’s revocation-upon-divorce statute to former
spouse even though policy covered both former spouses).
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IV. ORDER
Based on the foregoing, it is
ORDERED that judgment shall be entered in favor of Brad Allen and against Heidi
Allen on their claims to the interpleaded funds. Judgment shall be entered that Brad Allen
is entitled to the entire remaining interpleaded funds.
DATED April 28, 2011.
BY THE COURT:
______________________________
TED STEWART
Chief United States District Judge
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