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First National Bank & Trust Company of Mountain Home v. Stonebridge Life Insurance Co.

August 30, 2010

FIRST NATIONAL BANK & TRUST COMPANY OF MOUNTAIN HOME, SPECIAL ADMINISTRATOR FOR THE ESTATE OF DEBRA HULSE KNIGHTON, DECEASED, PLAINTIFF - APPELLEE,
v.
STONEBRIDGE LIFE INSURANCE COMPANY; EMC NATIONAL LIFE COMPANY, DEFENDANTS, MINNESOTA LIFE INSURANCE COMPANY, DEFENDANT - APPELLANT,
FLOYD KNIGHTON, DEFENDANT.



Appeals from the United States District Court for the Eastern District of Arkansas.

The opinion of the court was delivered by: Smith, Circuit Judge.

Submitted: February 11, 2010

Before RILEY, Chief Judge,*fn1 SMITH and SHEPHERD, Circuit Judges.

Floyd Knighton ("Floyd") shot and killed his wife, Debra Knighton ("Debra"), for whom he had purchased life insurance from Minnesota Life Insurance Company ("Minnesota Life") through his employer J.B. Hunt Transport Services, Inc. ("Hunt"). The administrator of Debra's estate, First National Bank & Trust Co., ("First National"), sought the policy proceeds but Minnesota Life refused, contending the company had no obligation to pay because Floyd had the only interest in the policy and had forfeited his right to any proceeds. The district court found that Debra had an interest in the policy and required Minnesota Life to pay the proceeds of the policy to First National.

The district court also entered an order finding that First National was entitled to recover $53,505 in attorneys' fees and $7,577.29 in costs from Minnesota Life. On appeal, Minnesota Life maintains that the district court committed two errors: (1) finding that First National had an interest in the insurance policy and was therefore entitled to the proceeds; (2) awarding First National $53,505 in attorneys' fees and $7,577.29 in costs. We affirm in part and reverse in part.

I. Background

On or about January 1, 2002, First National issued Group Accidental Death and Dismemberment Policy Number 32501-G and Dependents Accidental Death and Dismemberment Policy Rider ("the Policy")*fn2 to Hunt. Hunt employed Floyd who participated in the group benefit by maintaining coverage under the Policy for himself and Debra.

Floyd shot and killed Debra on or about May 23, 2004. The State of Arkansas initially criminally prosecuted Floyd for Debra's death but later nolle prossed the case. First National, as special administrator of the estate of Debra Knighton, commenced this lawsuit in the Circuit Court of Faulkner County, Arkansas, alleging that public policy prohibits Floyd, as the beneficiary who caused the death of the insured, from receiving death benefits under the Policy. First National also sought recovery of the proceeds under the Policy.

At trial, a jury found by a preponderance of the evidence that Floyd wrongfully and intentionally killed Debra. Consequently, Floyd was disqualified from receiving the death benefits under the Policy pursuant to the slayer's rule.*fn3 First National attempted to collect under the Policy, but Minnesota Life refused to pay. First National then exhausted all ERISA administrative remedies before seeking redress judicially.

On June 4, 2009, the district court entered an order finding that Debra had an interest in the policy and First National was entitled to the proceeds of the Policy on behalf of Debra's estate. The district court also entered a final judgment dismissing the case in its entirety.

On June 18, 2009, pursuant to Federal Rule of Civil Procedure 54(d)(1) and (2) First National filed a motion seeking an award of attorneys' fees in the amount of $58,787.50 and costs in the amount of $7,577.29 from Minnesota Life. On July 20, 2009, the district court entered an order finding that First National was entitled to recover $53,505 in attorneys' fees and $7,577.29 in costs from the Minnesota Life.

II. Discussion

A. First National's Interest in the Policy

On appeal, Minnesota Life argues that the district court erred in finding that First National, as administrator of Debra's estate, had an interest in the Policy. First, Minnesota Life contends that pursuant to the plain and unambiguous language of the Policy, it is relieved of all liability for payment of death benefits under the Policy to First National because no one other than Floyd possessed any interest in the Policy and the Policy named no contingent beneficiary to whom the funds are payable. Next, Minnesota Life contends that according to the Restatement (First) of Restitution § 189(1) comment (e)*fn4 when no one else has an interest in an insurance contract the insurer is relieved of all liability for payment of the proceeds. Next, Minnesota Life maintains that the Policy's unambiguous language does not authorize payment to the insured's estate upon disqualification or invalidation of the certificate holder. Finally, Minnesota Life ...


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