Rock, Lisa H. v. First Colony Life Insurance Co.

Opinion issued January 9, 2003 In The Court of Appeals For The First District of Texas NO. 01-02-00345-CV LISA H. ROCK, Appellant V. JENNIFER ROCK FUNK; KAREN BLOMSTROM, DEPENDENT ADMINISTRATRIX OF THE ESTATE OF JOHN ROCK JR., DECEASED; AND BANK OF TEXAS, N.A., Appellees On Appeal from the 280th District Court Harris County, Texas Trial Court Cause No. 2001-19109 MEMORANDUM OPINION Appellant, Lisa H. Rock, brought suit against First Colony Life Insurance Company (First Colony) to establish that she, as the owner and beneficiary of a life insurance policy (the Policy), was entitled to its proceeds. First Colony answered the lawsuit and filed a cross-claim for interpleader, naming Jennifer Rock Funk, and Citizens National Bank (Bank) as parties. Karen Blomstrom, Dependent aministratrix of the estate of John Rock, Jr. (Estate), intervened in the case, asserting that the Estate was entitled to the proceeds of the Policy. The trial court rendered summary judgment for the Estate against appellant, denied relief as to all other claims and parties, and held that the Estate was the lawful beneficiary under the Policy. Appellant argues, in three related points of error, that the trial court erred in modifying the terms of the insurance contract between John Rock, Jr. (Rock) and First Colony, and in failing to give effect to Rock’s change-of-beneficiary request. We affirm. Facts On February 25, 1985, First Colony issued the Policy to Rock, which insured his life in the amount of $150,000. The beneficiary at that time was Rock’s 401(k) plan administrator. See generally 26 U.S.C.S § 401(k) (LexisNexis 2001). The Policy contract stated, under a title of “Change of Owner and Beneficiary,” that, “[w]ritten notice of change must be filed at the home office in a form acceptable to the Company.” (Emphasis added.) The “policy change form,” provided by First Colony, stated that “[a] collateral assignee must sign for changes under Item 1, 3, 6, 7, and 8.” Item 1 was the section of the form used to change ownership of the policy. The form also provided that, “[a] Change of Owner will be processed before any other change unless clearly indicated otherwise.” On June 9, 1989, Rock collaterally assigned the Policy to the Bank for “any and all liabilities of [Rock] . . . either now existing or that may hereinafter arise . . . .” On June 17, 1997, First Colony notified Rock that the Policy had been transferred from his 401(k) plan to him, and that the beneficiary was “the estate of the insured.” In June 2000, Rock married appellant. Rock had one child, Jennifer Funk, from a previous marriage. On June 21, 2000, Rock completed a policy-change form to change the beneficiary and owner of the policy to appellant. First Colony received the request on June 26, and in a letter dated June 28, notified Rock that it could not process the request because the Policy had been collaterally assigned to the Bank and the signature of a senior officer at the Bank was needed to effectuate the change. The June 28 letter from First Colony included new policy-change forms. In December 2000, Rock filed for divorce. On December 7, 2000, Rock completed the policy-change forms to change the beneficiary and owner of the Policy to his daughter, Funk, and he sent the originals to her, but he again failed to have the Bank sign as a collateral assignee. Rock committed suicide on February 19, 2001. The records of First Colony showed that the Estate was the beneficiary of the policy at the time of Rock’s death. Standard of Review The standards for reviewing a traditional motion for summary judgment are as follows: (1) the movant for summary judgment has the burden of showing there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law; (2) in deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true; and (3) every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in the nonmovant’s favor. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). A defendant is entitled to summary judgment if at least one element of each of the plaintiff’s causes of action is negated as a matter of law. Doe v. Boys Clubs of Greater Dallas, Inc., 907 S.W.2d 472, 476-77 (Tex. 1995). A defendant may also prevail on a motion for summary judgment by conclusively proving all elements of an affirmative defense as a matter of law, such that there is no genuine issue of material fact. Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995) (per curiam). Discussion In his three related points of error, appellant argues that the trial court erred in modifying the contract between Rock and First Colony, and erred in failing to give effect to Rock’s request to make appellant the owner and irrevocable beneficiary of the policy. The trial court, in its summary judgment order naming the Estate as the lawful beneficiary, determined that Rock’s attempt to make appellant the owner and beneficiary of the Policy in June 2000 was not “in a form acceptable to the Company.” The trial court also stated that even if the Bank’s authorization was not required to make a beneficiary change, First Colony was still justified in not making the beneficiary change because First Colony required that ownership changes be made before beneficiary changes (as noted in the change-of-ownership form). The trial court explained that the policy made sense because the new owner could designate whoever the new owner wished to be the beneficiary. The Texas Supreme Court, in addressing the right of an insured to change the beneficiary under a policy, has held that, [W]hen the terms of the policy of insurance, or the constitution or bylaws of the fraternal insurance association, define the method by which the insured may change the beneficiary, a change is not accomplished unless the insured has substantially complied with the method designated . . . or unless he has done all that he could reasonably have done to perfect a change. Tips v. Sec. Life & Accident Co., 191 S.W.2d 470, 471 (Tex. 1945). While substantial compliance with the terms of the policy is required to effectuate a change of beneficiary, strict compliance is not. Todd v. Mut. Beneficiary. Life Ins. Co., 483 S.W.2d 889, 891 (Tex. Civ. App.—Waco 1972, writ ref’d n.r.e.); see also Tips, 144 Tex. at 464, 191 S.W.2d at 471; Gladding v. Prudential Ins. Co. of Am., 521 S.W.2d 736, 739 (Tex. Civ. App.—Houston [1st Dist.] 1975, writ ref’d n.r.e.). Even if an insured has the absolute right to change the beneficiary under the policy, the insurer can make reasonable regulations that define the method by which the insured can make a change. Scherer v. Wahlstrom, 318 S.W.2d 456, 458 (Tex. Civ. App.—Fort Worth 1958, writ ref’d); Gladding, 521 S.W.2d at 739. The insurance policy in Gladding contained the following provision: Any Employee insured hereunder may designate a new beneficiary at any time by filing with the Employer a written request for such change on forms satisfactory to the Company, but such change shall become effective upon receipt of such request at the Office of the Employer where the records of the Employee’s insurance under this policy are maintained. Gladding, 521 S.W.2d at 737 (emphasis added). The insured in Gladding had filled out and sent in a form that had been furnished to the insured by “the company.” Id. at 738. The policy-change form instructed that the names of the beneficiaries be printed in full, such as “Mary Ann Doe, not Mrs. John A. Doe.” Id. The insured, however, named the beneficiaries as “Mr. And Mrs. B. V. Torres,” and as such, was not in complete compliance with the instructions on the form. Id. The Gladding court held that the attempted change was effective because it was undisputed that the form used by the insured, which was provided by the company, was satisfactory to the company. Id. The court noted that the form was not required to be filled out “in a manner that is satisfactory to the company,” because the policy language only required that the forms be filled out “on forms satisfactory to the company.” Id. (emphasis added). The policy in this case did not merely require that the request be sent in on a form satisfactory to First Colony. Rather, Rock’s policy states that the notice of change must be filed “in a form acceptable to the Company.” The Gladding court took pains to distinguish language stating, “on forms satisfactory to the company,” from language indicating that the forms needed to be filled out “in a manner that is satisfactory to the company.” Accordingly, we will focus our query on whether Rock completed the First Colony policy-change forms in substantial compliance with the provision of his Policy which required notices of change to be sent “in a form” acceptable to First Colony. The policy-change form provided by First Colony required the signature of the “collateral assignee” in order to effectuate a change in the ownership of the Policy. Rock had collaterally assigned the Policy to the Bank in June 1989 for “any and all liabilities of [Rock] . . . either now existing or that may hereinafter arise . . . .” Rock sent in the policy-change form in June 2000 without the signature of a Bank representative, and First Colony rejected it two days later for that reason. After Rock was notified of the rejection, he took no action to complete another policy-change form until about six months later, in December 2000, when he completed another form, again without the signature of a Bank representative, to change the ownership to his daughter, Funk. The summary-judgment evidence conclusively shows that Rock made little or no effort to send written notice of an ownership change to First Colony in a form acceptable to it. Accordingly, we hold that Rock did not substantially comply with the Policy terms, and the trial court did not err in holding, as a matter of law, that Rock did not successfully change the ownership of the Policy to appellant. Appellant also argues that, even if First Colony was justified in ignoring Rock’s request to make appellant the owner of the Policy, First Colony should have made appellant the irrevocable beneficiary of the Policy. Rock had requested, under Item 4, that appellant be named as the beneficiary of the policy. The Policy did not require the signature of a collateral assignee for a change in Item 4. But the policy change form stated that, “A Change of Owner will be processed before any other change unless clearly indicated otherwise.” Rock’s request for a change in beneficiary and in ownership was on a single policy-change form. Rock did not indicate on the form that the beneficiary change be processed before the change in ownership. First Colony rejected the policy-change form in its entirety, and, after receiving the letter notifying him of the rejection, Rock took no action to fill out the new forms provided for him to indicate that he wanted a change in beneficiary to be processed before a change in ownership. Accordingly, we hold that Rock did not substantially comply with the terms of the Policy, and the trial court did not err in holding as a matter of law that Rock did not successfully change the beneficiary of the Policy to appellant. We overrule points of error one through three. Conclusion We affirm the trial court’s judgment. Sherry Radack Chief Justice Panel consists of Chief Justice Radack and Justices Nuchia and Jennings.