Prudential Insurance v. Brock

Mr. Justice Van Orsdel delivered the opinion of the Court: Briefly, the charge of fraud is based upon the fact that after the insured came to Washington she wrote defendant company at Pittsburg, requesting that plaintiff be designated as the beneficiary in the policies. After some correspondence and investigation by the company this request was refused. The ground of refusal stated in a letter to the attorney of the insured, under date of April 27, 1914, was that the company did not name beneficiaries in the class of policies to which the ones in question belonged, and that it could not guarantee in advance to whom payment should ultimately be made. Fraud is also assumed from the alleged failure of the company to investigate whether the funeral expenses, doctor bills, and other expenses incurred in Washington had been j)aid; and also from the fact that the proceeds of the policies had been bequeathed to plaintiff under the will of the insured. It is not contended, however, that plaintiff, before payment, had notice of such bequest; the only notice being of the existence of a will in which plaintiff-was named as executrix. The designation of a beneficiary could in no way change the terms of the contracts. The rights of a beneficiary would be subject to the conditions of the policies as to payment, and the -right conferred upon the company to make selection of the person equitably entitled to receive the proceeds of the policies could not be limited by the designation of a beneficiary. Metropolitan L. Ins. Co. v. O’Farrell, 64 Kan. 278, 67 Pac. 835. [9] Tn Thomas v. Prudential Ins. Co. 148 Pa. 594, 24 Atl. 82, tlie policy was similar to those here involved. The insured was unable to pay the premiums, and a contract was made with the company whereby, on condition of the wife of the assured paying the premiums, the policy would be assigned to her and the company would pay the insurance to the wife. She paid the premiums, but, on the death of the assured, the company paid the insurance to the mother of the assured. The court, upholding the action of the company, said: “The company paid this money to the person appearing to it to he equitably entitled thereto, and produced a receipt signed by her for the same. This was a complete defense, under the very terms of the policy. It is for the company to judge who is the person to be equitably entitled to the money. This discretion is vested in it by the contract between the parties. The contract itself does not offend against any rule of law or public policy, and we cannot hold that the administrator is entitled to recover without making a new contract for the parties. It appears from the evidence that the assured boarded witb Laura Evans up to the time of his death; that he owed her $20 for hoard, and that she advanced $8 for funeral expenses. This may, or may not, he the reason why the defendant company regarded her as equitably entitled to the insurance money. It was sufficient for tbe purpose's of this case that she appeared to said company to be so entitled.” Nor was the company estopped from making* distribuí ion and payment, under the. 2d article of the conditions of the policies, by notice of the existence of a will and the designation therein of plaintiff as executrix. In American Secur. & T. Co. v. Prudential Ins. Co. 16 App. D. C. 319, where this exact question was presented, Chief Justice Alvey, speaking for the court, said: “Doubtless, the executor or administrator of the deceased would he primarily entitled to receive the fund, as provided in the 1st article or clause of the policy; but it was competent to the parties to the contract of insurance to stipulate that such primary obligation to pay to the executors or administrators should be conditional or defeasible; and that payment to any of the class or classes of persons designated in the 2d article of the policy, showing themselves to be equitably entitled [10] to receive the money, should operate a discharge of the defendant from the obligation of the policy.” Of course, if fraud or bad faith has been practised by the company, where a party not equitably entitled to the fund has been paid, it would constitute a good defense to defendant’s special plea. But the fraud must consist in the company either doing some act not left to its discretion, — such as the payment of only a portion of the amount due or payment to a stranger not included in one of the classes mentioned in the policy, — or fraudulently settling with one who manifestly had no equitable right to be selected. When the company in good faith finds a person within one of the classes to be equitably entitled to the fund, and makes payment accordingly, the decision is final, and not subject to review; since to reverse it would be equivalent to making a new contract for the parties. There is no evidence of fraud in this case to justify the submission of the question to the jury. The mere fact that the company selected one person over the protest of another, when it had the power to select either, is not even a badge of fraud. It merely amounts to the exercise of the discretion conferred upon it by the contract. Nor do we think there was anything unreasonable in the selection here made as between the husband, who had paid the premiums on the policies, cared for his wife, and supported her, at least up to the time she came to Washington, and the aunt, under whose influence the insured was placed after coming to Washington.' It cannot be assumed that the company knew, nor does it appear that it was advised before making settlement, of the existence of family differences, which, if known, might or might not have affected its decision. If á mere protest by one competent to be selected would operate to estop the company from exercising the discretion conferred by the contract, there would be few cases where it could act with safety, and the beneficent purpose of the provision of the policy would be completely nullified: The judgment is reversed, with costs, and the cause 'is remanded for a new trial. Reversed and remanded.