Life Insurance – Policy Language

Life Insurance Lawyers need to read this 2023 opinion from the Southern District of Texas, Houston Division. The opinion is styled, Adrianne Archer Graves v. Metropolitan Life Insurance Company, et al.

This is a dispute over proceeds of the life insurance policy of Decedent Timothy Howick. Plaintiff Adrianne Graves, the Dependent Administrator of Timothy Howick’s Estate contends that the Estate was entitled to the proceeds. Defendant and Cross Claimant Christopher McAtamney, the former spouse of Timothy Howick, contends that he was so entitled. Both Metlife and Marilyn Howick, Timothy Howick’s mother, contend that Ms. Howick is entitled to these benefits. Graves, McAtamney, Marilyn Howick, and MetLife are all parties to this suit.

This case has many motions in it and much discussion of issues. Here the focus will be on the Court’s interpretation of the policy language.

In 2014, Timothy Howick was employed by Delphi Automotive and held a life insurance policy through Delphi with Sun Life Financial. His then-spouse, Christopher McAtamney, was the designated beneficiary.

In 2015, MetLife bought Sun Life Financial. During the same year, Timothy Howick’s employment with Delphi was terminated, and the life insurance policy was automatically ported. When the policy was ported, he no longer had an active beneficiary designation on file with MetLife.

Timothy Howick and Christopher McAtamney divorced in 2021.

Timothy Howick died intestate on January 27, 2022. A year later, Adrianne Graves was appointed and qualified as Dependent Administrator of Timothy Howick’s estate.

McAtamney, the previous beneficiary, submitted a claim to MetLife for the life insurance proceeds. The claim was denied, and McAtamney appealed. Subsequently, on February 27, 2023, Graves submitted a claim to MetLife on behalf of the Estate.

On March 23, 2023, MetLife sent a letter to both Graves and McAtamney’s attorney explaining that both claims were denied because a third-party claimant instead was eligible to receive the proceeds of the police. In MetLife’s view, this accorded with the Plan’s provision that stated:

If there is no beneficiary at Your death for any amount of benefits payable because of Your death, that amount will be paid to one or more of the following persons who are related to You and who survive You:

(a) Spouse;

(b) child;

However, we may instead pay all or part of that amount to Your estate. Any payment will discharge Our liability for the amount so paid.

Further, MetLife reasoned that McAtamney did not qualify as a “Spouse” under this provision because of the Definition section, which stated: “‘Spouse’ means Your lawful Spouse.” Thus, the letter explained: “Since Christopher McAtamney is a former Spouse, and thus not a current lawful Spouse, he would not be eligible to receive benefits under the terms of the Plan.” Finally, the Letter explained that the Estate did not receive the benefits “since there is a party who is eligible prior to the Estate.”

MetLife has filed a Motion to Dismiss, arguing that the Estate is not entitled to the Plan’s benefits. The Court GRANTS this Motion.

As discussed above, the relevant Plan provision is as follows:

(a) Spouse;

(b) child;

However, we may instead pay all or part of that amount to Your estate. Any payment will discharge Our liability for the amount so paid.

Graves and MetLife focus on two different aspects of this provision’s language. MetLifefocuses on the “will” versus “may” distinction. The plan says that MetLife “will” pay the amount to one or more of the individual’s spouse, child, or parent, but “may” pay all or part of that amount to the Estate. In MetLife’s view, because the “will” language is mandatory, and the “may” language is merely permissive, MetLife must first pay the benefits to an individual in one of the listed categories if such an individual exists.

Graves disagrees. She focuses on two pieces of the provision. First, it states that MetLife “may instead” pay the proceeds to the Estate. Graves argues that the use of the word “instead” means that MetLife may alternatively or as a substitute pay the Estate rather than a listed individual. Second, Graves points to the language that states that MetLife can pay “all or part” of the benefits to the Estate. In Graves’s view, this language shows MetLife has discretion in how to appropriate the money—if MetLife must pay the money to a spouse, child, or parent if one existed, then there could not be a circumstance in which MetLife paid part of the money to the Estate.

There are two possible meanings of the provision. Under MetLife’s view, the first section means that, when there is no beneficiary, MetLife must pay the benefits to a spouse, child, or parent. If none of these options is possible, MetLife can pay the Estate. Under Graves’s view, MetLife may always choose to pay either the Estate or a spouse, child, or parent.

Even if the Court were to adopt Graves’s interpretation, Graves would still have no claim. Graves essentially argues that the Plan’s language is permissive. But, if this is true, then it would be up to MetLife who to pay (since “may” is discretionary). Because any payment will discharge MetLife’s liability, Graves would still lack any viable claim against MetLife.

But the Court remains unconvinced that Graves offers the better reading of the Plan’s language. True, the provision is poorly drafted. But MetLife’s is the only interpretation that offers any coherent principle about who MetLife pays. In contrast, Graves’s interpretation creates a free- for-all any time that a person has no designated beneficiary.

Under either interpretation, MetLife’s payment to Marilyn Howick discharges MetLife’s liability for the amount so paid. Other courts interpreting comparable plan language have found that such language imposes no qualifier on the insurer’s discretion and that any proper payment discharges the insurer’s liability. Put differently, no matter whether Graves is correct that the Plan language affords MetLife discretion or whether MetLife is correct that it must pay the listed beneficiaries in descending order, MetLife has nonetheless fulfilled its obligation under the plan. The payment to Marilyn Howick has discharged its liability.