Robert Lee v. West Coast Life Insurance Co.
2012 U.S. App. LEXIS 15768
9th Cir.2012Background
- West Coast Life issued an $800,000 life policy to Steve Lee, Sr., with Steve Sr. as owner and William Lee as original beneficiary.
- Over the years, Lee family members submitted ownership/beneficiary changes; July 2005 forms purported to transfer ownership/benefits to Robert Lee, Bobbie Bill Lee, and Steve Lee, Jr.
- Davis, West Coast’s Director of Policy Administration, instructed signatures incorrectly and failed to obtain Steve Jr.’s signature on a change of beneficiary, yet West Coast approved and recorded Robert as a 62.5% beneficiary, with Steve Jr. and Bobbie at 19% and 18.5% respectively.
- Robert paid premiums for about four years based on the July 2005 changes before discovery of the error.
- 2008 changes ultimately designated Robert and Gina Stevens as sole beneficiaries; Steve Sr. died in January 2009, prompting claims from Robert, Gina, and Bobbie.
- West Coast informed disputants that the 2005 changes were improperly executed and that none had an interest, leading to interpleader filing and subsequent litigation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether interpleader protects the stakeholder from tort liability for creating a conflict | Counterclaimants: interpleader shields West Coast from tort claims arising from the conflict. | West Coast: interpleader may not immunize independent tort claims or liability beyond the stake. | Interpleader does not shield blameless or negligent stakeholders from independent tort liability. |
| Whether counterclaimants may recover attorney’s fees and damages caused by stakeholder’s negligence | Counterclaimants: damages include $290,000 allocated to plaintiffs plus attorney’s fees incurred. | West Coast: attorney’s fees require bad faith and relitigating entitlement; no direct damages from negligence. | Damages causally and proximately caused by the stakeholder’s negligence are recoverable, including related attorney’s fees. |
| Whether the district court properly granted Rule 52(c) judgment against counterclaimants | Counterclaimants: genuine issues of fact remain on negligence and estoppel claims. | West Coast: Rule 52(c) supports judgment as a matter of law where damages were not pled or proven. | The Rule 52(c) ruling is reversed; proceedings must continue consistent with this opinion. |
| Whether Hovis and similar cases support limiting interpleader protections | Counterclaimants rely on Hovis to show interpleader protects only blameless stakeholders. | West Coast argues Hovis is distinguishable and interpleader can shield when there is no independent liability. | Hovis supports that interpleader does not shield negligent stakeholders from other tort claims. |
Key Cases Cited
- State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523 (1967) (interpleader does not immunize a stakeholder from independent tort liability when it created the controversy)
- Prudential Ins. Co. of America v. Hovis, 553 F.3d 258 (3d Cir. 2009) (interpleader does not relieve a stakeholder from liability arising from its failure to resolve the controversy)
- New York Life Ins. Co. v. Lee, 232 F.2d 811 (9th Cir. 1956) (interpleader protects rights to the fund but does not destroy acquired rights against the insurer)
- Mack v. Kuckenmeister, 619 F.3d 1010 (9th Cir. 2010) (interpleader protects against multiple claims to a fund; considers efficiency and cost of litigation)
- Aetna Life Ins. Co. v. Bayona, 223 F.3d 1030 (9th Cir. 2000) (interpleader governed by equitable principles; bad-faith stakeholders not protected)