Dallas Fort Worth Insurance Lawyer Blog
Life Insurance Attorneys need to understand that an employer cannot make itself the beneficiary of an employees life insurance policy. This is discussed in a 1998, opinion from the 14th District Court of Appeals. The opinion is styled, Tamez, et al v. Certain Underwriters at Lloyd’s, London, International Accident Facilities, Inc., et al.
In 1991, National Convenience Stores (NCS) purchased an accidental death insurance policy from Lloyd’s. The policy provided that Lloyd’s would pay NCS $250,000 upon the accidental death of any NCS Texas employee killed during the course and scope of employment with NCS. NCS did not have workers’ compensation insurance.
Ramon Tamez and Cheryl McCarthy were both killed while employed by NCS, although it was disputed whether McCarthy was in course and scope. NCS filed a claim for proceeds under the policy as a result of the death of both individuals. NCS was paid by Lloyd’s, but NCS later returned the benefits paid as a result of McCarry’s death stating McCarty was not in course and scope at the time of her death. The representatives of both Tamez and McCarty sued Lloyd’s and NCS in an attempt to recover the benefits under the policy. The primary issue in dispute is whether NCS had an insurable interest in the life of its employees. The causes of action asserted against Lloyd’s included breach of contract, breach of the duty of good faith and fair dealing, conspiracy, conversion, and violations of the Texas Insurance Code. As to NCS, the representatives alleged that NCS held the insurance benefits in a constructive trust for their benefit.
The trial court granted summary judgment in favor of NCS, and the representatives appealed.
The 14th District Court of Appeals affirmed in part, and reversed in part.
The representatives of the estates of Tamez and McCarty have standing to raise the issue of whether NCS had an insurable interest in the life of another, the beneficiary must be: (1) one so closely related by blood or affinity that he wants the other to continue to live, irrespective of monetary considerations, (2) a creditor, and (3) one having a reasonable expectation of pecuniary benefit or advantage from the continued life of another. The only classification even potentially applicable to NCS is the third.In Texas, an employer does not have a pecuniary interest in the continued life of an employee unless that employee is crucial to the operation of the business. Tamez and McCarty were not employees within this category. NCS argues that since it had no workers’ compensation coverage, it incurs substantial pecuniary losses upon the death of an employee in the form of funds paid to the family and expenses for potential liability in litigation. As a result, NCS argues that it does not profit or benefit from receiving the proceeds of the policy upon the death of the employee. However, NCS does profit since it would receive the benefits whether or not it is liable for damages and regardless of the amount of the loss.Under the circumstances, NCS did not have an insurable interest in the life of Tamez or McCarty. The trial court’s summary judgment in favor of Lloyd’s on the causes of action for breach of contract, conspiracy and conversion is reversed. The representatives of the estates of Tamez and McCarty also sued Lloyd’s for breach of the duty of good faith and fair dealing and violations of the Texas Insurance Code. Even though NCS is not a proper beneficiary under the policies of insurance, this does not change the legal status of the representatives. They do not have a contractual relationship with Lloyd’s. As third parties to the contract, even if they are considered to be third-party beneficiaries, they have no standing to pursue these causes of action against Lloyd’s. Therefore, the trial court’s summary judgment in favor of Lloyd’s on these causes of action is affirmed.