Brighthouse Life Insurance Company of NY v. Mosack

Background

Brighthouse brought an interpleader action to determine the proper recipient of the death benefit from an annuity issued to Joyce Fabian. An interpleader action allows a stakeholder holding disputed funds to place those funds with an escrow agent or the court so competing claimants can litigate their rights. The court previously granted interpleader relief, directed Brighthouse to distribute the death benefit to Meltzer, Lippe, Goldstein & Breitstone, LLP as escrow agent, and dismissed Brighthouse from the action.

Fabian’s 2009 annuity application named her husband, Thomas Wolsey, as the primary beneficiary and her step-daughter, Natasha Wolf, as the contingent beneficiary. Wolsey died before Fabian. Fabian later signed powers of attorney naming Judith Gura and then Meryl Mosack as her attorneys-in-fact. Mosack contended that Fabian, Gura, and Mosack took steps through Merrill Lynch to change the beneficiary first to Gura and later to Fabian’s estate. Brighthouse stated that it never received a beneficiary-change form for this annuity before Fabian’s death.

Mosack and Wolf each moved for judgment on the pleadings, or alternatively for summary judgment. Mosack sought payment of the death benefit to her as preliminary executor of Fabian’s estate. Wolf sought an order directing payment to herself.

Legal standard

The court applied the standard for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). That standard is the same as the standard for a motion to dismiss for failure to state a claim. The court could consider the pleadings, documents attached to or incorporated into them, and matters subject to judicial notice, but it could not use the motion to weigh disputed factual allegations. Judgment on the pleadings was appropriate only if the facts admitted by the opposing party clearly entitled the moving party to judgment.

Beneficiary-change requirements

The court applied New York law because the parties’ briefs assumed that New York law governed. New York Estates, Powers and Trusts Law § 13-3.2(e)(2) requires a beneficiary designation to be in a signed writing and agreed to by the insurer. The annuity also required the owner to submit a notice to the insurer’s annuity service office, with the notice received in good order.

The court explained that New York’s substantial-compliance doctrine can sometimes excuse exact compliance when the insured took affirmative actions that accomplished everything reasonably within the insured’s power to change the beneficiary, and circumstances beyond the insured’s control prevented completion. The insured’s intent alone is not enough. The insured must also make every reasonable effort to comply with the policy’s procedures.

Analysis

The court found that the requirements for changing the beneficiary were not met. Mosack did not claim that Fabian signed a beneficiary-change document or submitted one to MetLife or Brighthouse. Mosack also did not claim that either insurer agreed to a change. The court therefore concluded that Fabian did not comply with either New York law or the annuity’s terms.

The court also rejected substantial compliance. It found Mosack’s allegations about Fabian’s intent conclusory and determined that the alleged actions involving Merrill Lynch did not show that Fabian made every reasonable effort to comply with the annuity’s procedures. The quarterly statements relied on by Mosack concerned a different annuity and therefore did not establish a beneficiary change for the annuity at issue.

The court further ruled that Gura and Mosack were not authorized to change the annuity’s beneficiary designation on Fabian’s behalf. Under the New York law discussed by the court, an attorney-in-fact cannot exercise authority to change the beneficiary of an annuity unless that authority is expressly granted in a statutory gifts rider to a statutory short-form power of attorney. Fabian did not initial the optional statutory gifts rider in either power of attorney. The court therefore concluded that any attempt by Gura or Mosack to change the beneficiary was invalid.

Entitlement to the death benefit

Because the beneficiary designation was never changed, the court applied the designation in effect when the annuity was issued. The annuity provided that the death benefit would go first to a surviving primary beneficiary, then to a surviving contingent beneficiary, and finally to the owner’s estate if there were no surviving beneficiaries.

Wolsey was the sole primary beneficiary, but he died before Fabian. Wolf was the contingent beneficiary, so the court concluded that Wolf was the beneficiary when Fabian died and was entitled to the death benefit.

Disposition

The court denied Mosack’s motion for judgment on the pleadings and granted Wolf’s motion for judgment on the pleadings. It ordered Meltzer Lippe, as escrow agent, to distribute the escrowed funds to Wolf within seven days. The Clerk of Court was directed to terminate the motions and close the case.