O’Brien v. McMahon, — So.3d —-, 2010 WL 3909644 (Fla. 1st DCA Oct 07, 2010)

In 1990 Calvin Todd purchased a life insurance policy from the Prudential Insurance Company and named his niece, Ms. O’Brien, and his daughter, Madison, as 50/50 beneficiaries.

In 1999 Mr. Todd signed a new beneficiary designation form, removing his niece and adding his newly adopted daughter, Heather, as a 1/2 beneficiary. When Mr. Todd died in 2007 only his two daughters were beneficiaries. Ms. O’Brien sued, claiming she was still a 1/2 beneficiary of her uncle’s life insurance policy because the change-of-beneficiary form he filed in 1999 failed to comply with Prudential’s contractual requirements.

Litigator’s Toolbox:

From a litigator’s point of view, there are two key issues addressed by the 1st DCA in this case that should be helpful for future litigants:

  1. Who has standing to litigate these claims?
  2. Is this a contract dispute or an inter vivos gift lawsuit?

[1] Who has standing to litigate these claims?

The first issue the court addresses is standing: did Ms. O’Brien have the right to file this lawsuit? She’s claiming her uncle didn’t comply with Prudential’s contractual requirements for changing beneficiaries, making his 1999 change-of-beneficiary form invalid. But isn’t that a claim only Prudential could assert? The 1st DCA seems to imply as much, but lets the issue go because it doesn’t change the outcome (and apparently none of the parties raised this objection):

Ms. O’Brien grounds her entire position on Prudential’s putative rights under the contract, rights which as to her are jus tertii. She asserts no rights that Prudential itself could not have asserted (if it had been so inclined) when she argues “that a beneficiary under a life insurance policy may be changed only by strict compliance with the conditions set forth in the policy.” . . . Yet Prudential does not make this argument or in any other way align itself with Ms. O’Brien’s efforts to claim the policy proceeds (or a portion thereof) for herself. .  .  .  Pretermitting the question whether Ms. O’Brien should be heard to urge the rights of a third party who has elected to stand mute, we turn to the pertinent policy language.

Under traditional jus tertii jurisprudence, “In the ordinary course, a litigant must assert his or her own legal rights and interests, and cannot rest a claim to relief on the legal rights or interests of third parties.” Powers v. Ohio, 499 U.S. 400, 410, 111 S.Ct. 1364, 113 L.Ed.2d 411 (1991) (emphasis added). The 1st DCA seems to be hinting that if someone had raised the standing objection, they probably would have ruled Ms. O’Brien lacked standing and killed the lawsuit early.

[2] Is this a contract dispute or an inter vivos gift lawsuit?

How you frame a case will determine in large part what law governs your lawsuit. Sometimes this matters, sometimes it doesn’t. For example, if Ms. O’Brien had framed her case as being about some sort of explicit or implied agreement by her uncle to make an inter vivos gift to her, she could have tapped into the body of law governing challenges to inter vivos gifts [click here, here]. She didn’t do that, as noted by the 1st DCA:

Ms. O’Brien makes no claim here or below that her uncle was under any legal obligation to make or keep her as a beneficiary under the policy. See generally Palm Lake Partners II, LLC v. C & C Powerline, Inc., 38 So.3d 844, 849 (Fla. 1st DCA 2010) (“A ‘promisor and a promisee can by agreement create a duty to a beneficiary which cannot be varied without his consent. But in the absence of such an agreement the parties retain control over the contractual relation they have created.’ ”) (quoting Restatement (Second) of Contracts 311 cmt. f. (1981)).

Instead Ms. O’Brien framed her case as a contract dispute: did her uncle follow Prudential’s contractual requirements for filing a change of beneficiary form? The important take-away from this decision is that this type of lawsuit will likely be governed by the rich body of law dealing with contract disputes, as specifically applied to insurance contracts.

In general, the right of an insured owner to change the beneficiaries of a life insurance policy “depends on the terms of contract between the insurer and insured as expressed in the insurance policy.” Martinez v. Saez, 650 So.2d 668, 669 (Fla. 3d DCA 1995) (quoting Shuster v. N.Y. Life Ins. Co., 351 So.2d 62, 64 (Fla. 3d DCA 1977)).