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American General Life Insurance Co. v. Hart

United States District Court, N.D. California, San Francisco Division

April 7, 2017

AMERICAN GENERAL LIFE INSURANCE COMPANY, Plaintiff,
v.
GAYLE HART et al., Defendants.

          ORDER ON INTERPLEADER [RE: ECF NO. 60, 64]

          LAUREL BEELER United States Magistrate Judge.

         INTRODUCTION

         The plaintiff, American General Life Insurance Company, interpleaded the death benefit of a life-insurance policy to which the defendants - consisting on the one hand of David L. Lewis, as Trustee of the Cora Lewis Management Trust; and, on the other, of Gayle and Lawrence Hart - claim entitlement.[1] The court's order of December 27, 2016 more fully describes the facts underlying this suit.[2]

         American General now moves to be discharged from liability with respect to the policy's benefits and asks that it be dismissed from this case.[3] It asks that its fees and costs be paid from the $5000 corpus on deposit in the court.[4] It also requests an injunction that bars the defendants from suing it over the interpleaded policy benefits.[5] The insurer does not dispute its obligation to pay the death benefit, and it disavows all interest in the defendants1 contest over the money.[6] Neither defendant opposes discharging American General. The Trustee argues that the insurer should not be awarded fees - or at least that such fees should be paid by the Harts.[7] The Harts argue that the discharge order should not say that the interpleader was filed without collusion "on the part of American General."[8]

         ANALYSIS

         1. Interpleader

         This is a procedurally correct interpleader suit under 28 U.S.C. § 1335. American General paid the policy's death benefit into the court registry; it has no interest in the defendants' dispute or how that money is divided between them; and no claim has been asserted against it. The court will therefore discharge American General from liability with respect to the interpleaded fluids and will dismiss the insurer from this case with prejudice.

         2. Fees and Costs 1 - No "Duty to Further Investigate"

         "With respect to American General's motion for attorney's fees, " the Trustee writes, "American General has a duty under the terms of the policy to determine the proper beneficiary. American General is not entitled to shift the cost of making that determination onto the beneficiaries . . . ."[9]

         The Trustee cites no authority to support this assertion.[10] Whatever American General's obligations under the policy, the Trustee fails to appreciate the legal consequences of this being an interpleader suit. Within the interpleader context, the Trustee's view does not comport with the law. The Ninth Circuit has rejected an essentially identical argument:

We reject [the plaintiff] 's contention that [the insurer] should have investigated further before interpleading. Interpleader proceedings are pragmatic in nature and should be resolved expeditiously. It is this ease and efficiency that makes interpleader a valuable procedural device for insurers to resolve conflicting claims upon the proceeds of an insurance policy. Requiring a stakeholder to investigate further when an adverse claimant has already asserted a colorable claim against the stake would diminish interpleader's purpose of limiting litigation expenses. Because [the other putative beneficiary] had a colorable claim to the insurance proceeds, [the insurer] need not have expended additional time or resources trying to assess the merits of his claim.

Michelman v. Lincoln Nat'1 Life Ins. Co., 685 F.3d 887, 898 (9th Cir. 2012) (citations and footnote omitted). "This is not to suggest that a stakeholder never has a duty to investigate an adverse claim before interpleading." Id. at 898 n. 5. It is, however, beyond real dispute that American General faced competing "colorable" claims by the Trustee and the Harts. As in Michelman, the court "hold[s] only that, under the facts of this case, [American General] had sufficient infomiation in its possession to verify the existence of a colorable claim when it decided to interplead." Id.

         3. Fees and Costs 2 - Cost of Doing Business

         The court is sympathetic to American General's request for fees and costs. The insurer has been in this case for an abnormally long time. "As with attorney fee awards in other contexts, " though, whether to award such fees in an interpleader suit, and how much to award, are decisions "committed to the sound discretion of the court, based upon the equities in the particular case." B. O'Connell and K. Stevenson, Fed. Civil Proc. Before Trial¶ 10:205 (2017) (citing Septembertide Pub'g, B.V. v. Stein &Day, Inc.,884F.2d675, 683 (2nd Cir. 1989); Murphy v Travelers Ins. Co.,534 F.2d 1155, 1164 (5th Cir. 1976)). Here, the requested fees and costs (more than $12, 000) would wipe out the relatively small corpus (approximately $5000) and so would obliterate the whole purpose of the life-insurance policy. The court agrees that the Harts might have been more helpful hi bringing this case to a point where American General could have been discharged sooner. Still, in these ...


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