Insurer who paid wrong party doesn’t have to pay correct one

The 7^th Circuit Court of Appeals affirmed summary judgment for an insurance company that acknowledged paying a death benefit to the wrong party but successfully argued that the proper recipient waived its right to the proceeds by allowing the wrong party to claim the money.

Ron Clark, then president of Samaron Corp. and now Troyer Products, decided that when he died, his death benefit of $1 million, underwritten by United of Omaha Life Insurance Co., would go to Dave Buck, chief operating officer. Buck could then use the proceeds to buy Clark’s stock and take ownership of the company.

However, Clark soon amended the agreement so that Troyer Products would receive the benefit.

Clark retired and sold controlling interest to Dan Holtz. Holtz received a copy of the policy. When Clark died, United of Omaha paid the money to Buck instead of the company.

Troyer filed suit under diversity jurisdiction, saying the money should have been paid to the company. United of Omaha acknowledged its error but said it shouldn’t have to pay because Holtz and Troyer knew of the mistake but still let Buck collect the money.

The district court originally found in favor of Holtz and Troyer, but reconsidered and ruled for United after a recording of a meeting surfaced between Buck and Holtz. Buck told Holtz that Troyer was the beneficiary, so Holtz knew. The U.S. District Court for the Northern District of Indiana, South Bend Division, ruled for United.

The 7^th Circuit upheld the ruling in a six-page decision written by Judge Frank Easterbrook. Troyer insisted Holtz was misled by United’s mistake and had no reason to think the company was the beneficiary.

However, the unanimous panel Buck identified Troyer Products as the beneficiary in a board meeting as well as to Holtz personally. Moreover a copy of the policy was in Troyer’s files and in Holtz’s own files.  

“From beginning to end, Troyer’s brief rests on the assertions that Holtz was misled by United and did not know that Troyer was the policy’s beneficiary. That approach commits the legal error of confusing Holtz with Troyer; the corporation’s knowledge, not Holtz’s is what matters. And it commits the factual error of ignoring what happened at the board meeting, where Buck made sure that everyone present knew that Troyer was legally entitled to the proceeds,” Easterbrook wrote.

The case is Samaron Corp. doing business as Troyer Products v United of Omaha Life Insurance Company, 15-3446.