Michael Strait v. Jackie McPhail

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2012-CT-00075-SCT
MICHAEL STRAIT AND BETTY STRAIT
v.
JACKIE McPHAIL AND AMERICAN HERITAGE
LIFE INSURANCE COMPANY
ON WRIT OF CERTIORARI
DATE OF JUDGMENT: 09/30/2011
TRIAL JUDGE: HON. WINSTON L. KIDD
TRIAL COURT ATTORNEYS: MICHAEL T. JAQUES
JASON E. DARE
COURT FROM WHICH APPEALED: HINDS COUNTY CIRCUIT COURT
ATTORNEY FOR APPELLANT: MICHAEL T. JAQUES
ATTORNEYS FOR APPELLEES: MICHAEL JEFFREY WOLF
J. STEPHEN KENNEDY
GEORGE CLANTON GUNN, IV
NATURE OF THE CASE: CIVIL - INSURANCE
DISPOSITION: THE JUDGMENT OF THE COURT OF
APPEALS IS REVERSED. THE JUDGMENT
OF THE HINDS COUNTY CIRCUIT COURT
IS REINSTATED AND AFFIRMED -
08/21/2014
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
EN BANC.
PIERCE, JUSTICE, FOR THE COURT:
¶1. In 1987, Joseph Bagley purchased a cancer and dread-disease policy through his
friend and insurance agent, Jackie McPhail. The policy was issued by American Heritage
Life Insurance Company. McPhail worked as an independent insurance broker, and she was
a registered agent with American Heritage at the time the policy was written. The policy
indicates that Bagley purchased coverage concerning cancer and dread disease, a home-
recovery rider, and a hospital intensive-care rider. Bagley also had an option to purchase life
insurance; however, McPhail testified that Bagley did not purchase life insurance under this
policy because he had purchased a separate life-insurance policy.
¶2. In 2008, Bagley was diagnosed with cancer. Bagley contacted McPhail to file a claim
under the policy and to “change the beneficiary” of the policy from his estate to Michael and
Betty Strait. McPhail testified that she had ceased writing policies for American Heritage;
however, she still retained the authority to service Bagley’s policy, and she acquired his
written consent to receive information regarding his policy from the insurance company.
While Bagley was in the hospital, McPhail met with him regarding changing the beneficiary
of his cancer policy. McPhail presented an American Heritage change-of-beneficiary form,
which Bagley ultimately signed. The signature was witnessed by Bagley’s physician, a nurse,
and McPhail. Bagley orally communicated that he wished for the beneficiary to be changed
from his estate to the Straits. At the time that Bagley signed the form, the Straits had yet to
be listed as beneficiaries on the form. McPhail met with the Straits after the form was signed
to confirm their correct legal names to be placed on the change-of-beneficiary form at a later
time. McPhail provided that she did not fully complete the form because she was attempting
to contact American Heritage to confirm the correct procedure for completing the process;
however, American Heritage’s office was closed because of Hurricane Fay, and McPhail
never succeeded in speaking with American Heritage regarding the matter. Bagley’s
physician, who witnessed Bagley signing the form, later communicated to Betty Strait that
his attorney advised that the form could not be used because the Straits’ names were not
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listed on the form prior to Bagley’s signature. Betty Strait relayed this to McPhail, who then
attempted to contact American Heritage’s legal department. McPhail called the company on
multiple occasions and left voicemail messages, but she never received a return phone call.
Soon thereafter, Bagley passed away, and the form was never completed.1
¶3. The estate was probated in Hinds County Chancery Court. McPhail worked with the
estate to file a claim on the cancer and dread-disease policy. The Straits were named
beneficiaries in Bagley’s will. The record contains written correspondence by Betty Strait
explaining that they were aware that the proceeds of the policy were now passing to Bagley’s
estate, through no fault of their own, and that they were not responsible for any final
expenses not covered by the policy. From the record, it is clear that the Straits did not contest
the passage of the policy proceeds to the estate at the time that the estate was being settled.
¶4. In 2009, proceeds totaling $44,973.50 were issued to Bagley’s estate from the
American Heritage policy. The executor of Bagley’s will, William Kinstley, petitioned for
the approval of the estate’s final accounting, which included the policy proceeds. Kinstley
submitted certain expenses to be paid from the estate, with the remainder being disbursed to
him as the residual beneficiary. Ultimately, Kinstley’s requests were granted in the order
closing the estate.
¶5. Later that year, the Straits initiated legal action against McPhail and American
Heritage in Hinds County Circuit Court, arguing that Bagley intended for them to receive the
proceeds from the cancer policy. The Straits alleged breach of contract, tortious breach of
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McPhail testified that after the estate was closed, she eventually shredded the change-of-
beneficiary form.
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contract, negligence and gross negligence, breach of fiduciary duties and the duty of good
faith and fair dealing, bad-faith refusal to pay benefits and to promptly and adequately
investigate the claim, misrepresentation and/or failure to procure, promissory and/or
equitable estoppel, and they sought a claim for declaratory relief. McPhail filed a motion to
dismiss, which was granted by the circuit court. The circuit court found that the issue had
been previously litigated and resolved in chancery court, and that no appeal had been taken
from the chancery court judgment. Likewise, the circuit court granted American Heritage’s
motion for summary judgment, finding that there were no genuine issues of material fact to
be resolved.
¶6. The Straits appealed to this Court, and the case was assigned to the Court of Appeals.
The Court of Appeals reversed the judgment and remanded the case, finding that genuine
issues of material fact did exist2 and that res judicata and collateral estoppel did not bar the
Straits’ claims. Strait v. McPhail, ___So. 3d___, No. 2012-CA-00075-COA (November 12,
2013). McPhail and American Heritage filed petitions for writ of certiorari with this Court,
which were granted.
¶7. McPhail raises the following issues:
I. The Court of Appeals erred when it found that, although the Straits
would be prevented from suing the estate to recover the insurance
proceeds, they might still pursue a negligence theory, which creates a
duty where none existed before;
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Specifically, the Court of Appeals found that genuine issues of material fact existed
regarding the following: (1) whether American Heritage is directly liable because of McPhail’s
confusion over the proper way to change a beneficiary, (2) whether American Heritage is vicariously
liable for McPhail’s activities in “servicing” the policy, and (3) whether American Heritage can
claim waiver/estoppel by the Straits because of McPhail’s knowledge of Bagley’s wishes and her
failure to follow through with those wishes.
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II. The Court of Appeals’ opinion defines the Straits as third-party
beneficiaries, which creates new contractual rights for the Straits that
did not exist under the primary contract; and
III. The Court of Appeals’ decision improperly allows for the collateral
attack in one court of the judgment of another court.
¶8. American Heritage raises the following issues:
I. The Court of Appeals’ decision impos[ing] a new duty on insurers to
train independent, state-licensed brokers is a fundamental issue of
broad public importance that should be reviewed and reversed by this
court; and
II. The Court of Appeals’ opinion regarding vicarious liability is in
conflict with this Court’s precedent.
¶9. This Court finds that the Court of Appeals opinion was correct in its determination
that res judicata and collateral estoppel did not bar the Straits’ claims, because the Straits
were not named parties to the estate proceedings. Strait v. McPhail, ___So. 3d ___ No.
2012-CA-00075-COA (November 12, 2013). However, this Court finds that the policy did
not allow for the beneficiary to be changed, therefore, the Straits fail to raise any claims from
which relief may be granted, and no genuine issues of material fact exist. Accordingly, we
will address the following issues under the same analysis:
I. Whether the Straits raise any claims from which relief may be granted
regarding their entitlement to the policy proceeds, and
II. Whether any genuine issues of material fact exist to be resolved.
STANDARD OF REVIEW
¶10. The grant or denial of a motion to dismiss and the grant of summary judgment both
require this Court to apply a de novo standard of review. Scaggs v. GPCH-GP, Inc., 931 So.
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2d 1274, 1275 (Miss. 2006); Kilhullen v. Kan. City S. Ry., 8 So. 3d 168, 174 (Miss. 2009).
The grant of summary judgment will be upheld “if the pleadings, depositions, answers to
interrogatories and admissions on file, together with the affidavits, if any, show that there is
no genuine issue of material fact and that the moving party is entitled to a judgment as a
matter of law.” M.R.C.P. 56(c). “When considering a motion to dismiss, the allegations in
the complaint must be taken as true and the motion should not be granted unless it appears
beyond a doubt that the plaintiff will be unable to prove any set of facts in support of his
claim.” Scaggs, 931 So. 2d at 1275 (quoting Lang v. Bay St. Louis/Waveland Sch. Dist., 764
So. 2d 1234 (Miss. 1999).
ANALYSIS
I. Whether the Straits raise claims from which relief may be granted
regarding their entitlement to the policy proceeds, and
II. Whether any genuine issues of material fact exist to be resolved.
¶11. The Court of Appeals found that the Straits were intended third-party beneficiaries of
the policy, therefore, they had standing to pursue legal action and suffered from the actions
of the defendants. Strait v. McPhail, ___ So. 3d ___ No. 2012-CA-00075-COA (November
12, 2013). In her petition for writ of certiorari, McPhail argues that this holding is erroneous
because the finding is based on Sun Life Assurance of Canada (U.S.) v. Barnard, which is
distinguishable from the case before us. Sun Life Assurance of Canada (U.S.) v. Barnard,
652 So. 2d 681 (La. Ct. App. 1995). The Court of Appeal of Louisiana found that the
insurance agent, Barnard, was negligent when he failed to properly execute the change-of-
beneficiary form on a life-insurance policy. Sun Life Assurance of Canada, 652 So. 2d at
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685. Barnard was held liable to Ms. Cole, the intended beneficiary, for the amount she would
have received under the policy, had the change-of-beneficiary form been properly executed.
Id.
¶12. At first blush, this case appears to provide precise guidance; however, McPhail points
out that the policy in question is a reimbursement policy rather than a life-insurance policy,
as seen in Sun Life Assurance of Canada. Id. Bagley’s policy plainly states that it is a
“cancer and dread disease policy.” The policy further provides, “[t]his is a specified disease
policy which only provides benefits for loss due to cancer and dread disease. . . .” It is
undisputed that Bagley’s policy is not a life-insurance policy like the policy in Sun Life
Assurance of Canada. Id.
¶13. Nonetheless, a deeper analysis of Bagley’s cancer policy must be conducted. A third
party could receive payments from this policy in two ways. The policy provides for the
following:
Assignment - - We are not bound by an assignment of this policy for a claim
on this policy unless we have received the assignment in our Home Office
prior to the payment of any benefits claimed. We assume no responsibility for
the validity of the assignment.
Payment of Claims – All indemnities payable under this policy will be paid to
the Insured. Any accrued indemnities unpaid at your death will be paid to your
estate. If any indemnity of this policy shall be payable to your estate, or if you
are not competent to give valid release, we may pay such indemnity, up to an
amount not exceeding $3,000, to any relative by blood or connection by
marriage to you who is deemed by us to be equitably entitle[d] thereto. Any
payment made by us in good faith pursuant to this provision shall fully
discharge us to the extent of such payment.
The policy terms do not contain any provisions regarding naming beneficiaries or the change
of beneficiaries. On Bagley’s completed insurance form, he lists “Estate” under “Name of
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Beneficiary.” However, the section requesting the name of beneficiary is under section C of
the form, which is titled “Life Insurance/Life Insurance Riders.” As previously mentioned,
the policy form offers the option to purchase life-insurance coverage. The form clearly shows
that Bagley did not purchase life insurance in conjunction with his cancer policy. As
previously mentioned, McPhail testified that Bagley had a separate life-insurance policy,
which was acquired through a company other than American Heritage.
¶14. Based on the policy terms quoted above, the policy does not provide the policyholder
with an option to name a beneficiary. The terms plainly state that the policy pays the insured,
which reimburses the policyholder for any expenses related to diagnosis of cancer or dread
disease. An assignment would have allowed Bagley to assign any number of claims to cover
the expenses directly owed to the third party, if the assignment was received by the company
prior to any benefits payment to Bagley. Lastly, the policy allowed the insurance agency to
disburse payments not to exceed $3,000 to any relative, through blood or marriage, who was
equitably entitled to reimbursement, if Bagley was incompetent to authorize such release or
if Bagley had passed away.
¶15. It is evident that, even if McPhail had successfully completed the change-of-
beneficiary form, the Straits never could have been named beneficiaries under the policy,
because the policy did not entitle Bagley to name a beneficiary. Further, the Straits have
never claimed any expenses owed to them because of Bagley’s illness. From the language
of the policy, it appears that the only possible way the Straits might have been eligible to
receive payment, would have been if Bagley had assigned a claim to them for benefits owed
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regarding any expenses the Straits had assumed on behalf of Bagley. As stated, no such
expenditures by the Straits are claimed, nor are they evidenced in the record.3
¶16. These facts further distinguish this case from Sun Life Assurance of Canada, because
the life-insurance policy in that case did provide for a named beneficiary and for a way in
which that beneficiary could be changed. Sun Life Assurance of Canada 652 So. 2d 681.
Here, the Straits never could have been named a beneficiary to the cancer policy. The cancer
policy remained only to reimburse the expenses accrued as a result of being diagnosed with
the disease.
¶17. Lastly, the record reflects that the Straits were actively involved in the probate of the
will, as they were named beneficiaries under Bagley’s will. The Straits negotiated some of
the terms of the will, trading a ring for a vehicle. Moreover, it is evident from Betty’s written
correspondence that the Straits knew that the remainder of the policy proceeds would be
passing to the estate, yet they never attempted to contest this during the probate of the estate.
CONCLUSION
¶18. Because the Straits fail to raise any issues upon which relief may be granted, the
circuit court’s grant of McPhail’s motion to dismiss was proper. However, the circuit court
erred in granting the motion to dismiss based on res judicata and collateral estoppel.
Additionally, the circuit court properly granted American Heritage’s motion for summary
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The claim form that was signed by Bagley contained a section for assignment. “N/A” was
present on the claim form that Bagley signed prior to his death. McPhail testified that she instructed
Bagley that he could assign the claim to a doctor or hospital. McPhail testified that Bagley did not
want to assign any claims, therefore, “N/A” was placed under that section. It is clear that assignment
would only be for reimbursement related to Bagley’s illness, and the Straits do not claim any
entitlement to reimbursement.
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judgment, as there are no issues left to be resolved in this case. The Straits were never
eligible to be third-party beneficiaries under the policy, and they have failed to show any
equitable entitlement to reimbursement. For the above reasons, we reverse the judgment of
the Court of Appeals. Further, we reinstate and affirm the judgments of the Circuit Court of
Hinds County.
¶19. THE JUDGMENT OF THE COURT OF APPEALS IS REVERSED. THE
JUDGMENT OF THE HINDS COUNTY CIRCUIT COURT IS REINSTATED AND
AFFIRMED.
WALLER, C.J., DICKINSON AND RANDOLPH, P.JJ., LAMAR, KITCHENS,
CHANDLER, KING AND COLEMAN, JJ., CONCUR.
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