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Ninth Circuit Court Of Appeals Rejects Claim Of Alleged Interference Involving Change Of Annuity Beneficiary

Annuities, Blogs

The Ninth Circuit Court of Appeals last week affirmed a U.S. District Court’s decision that an insurance company failed to establish justifiable reliance in a case involving annuity payments sent to the wrong claimant.

The opinion is Sun Life Assurance Company of Canada (U.S.) v. Friendship Foundation, Inc., No. 10-16092 (9th Cir. July 11, 2011).

Sun Life Assurance Company of Canada (U.S.) (“Sun Life”) had filed a federal diversity action against the Marshall & Ilsley Trust Company, NA (“M & I”), alleging that M & I’s negligent misrepresentation constituted interference that caused Sun Life to send the annuity payments to the wrong claimant, and resulted in damages of $141,869.69.

Sun Life had received a beneficiary designation form, which contained a tax identification number and mailing address for the newly-designated beneficiary, which was to be the Friendship Foundation, Inc. in Glendale, Arizona (“FFI-AZ”). Sun Life also received claim forms from the Friendship Foundation, Inc. in Pennsylvania (“FFI-PA”); those claim forms contained FFI-PA’s taxpayer identification number and mailing address.

In the Arizona district court, both Sun Life and M & I moved for summary judgment, which the court granted in favor of M & I, holding that Sun Life failed to show that M & I owed it a duty of care and also that Sun Life failed to show that it justifiably relied on M & I’s actions.

The Ninth Circuit Court of Appeals affirmed.

The Ninth Circuit said that “importantly, only Sun Life, not M & I, received the claim forms from . . . which contained FFI–PA’s TIN and mailing address” and therefore Sun Life “was situated at least as well as M & I – if not better – to ascertain the correct beneficiary of the Sun Life annuity.” Furthermore, the Ninth Circuit noted, Sun Life “was the only entity that could have compared the TIN and mailing address of the designated beneficiary, FFI–AZ, with the TIN and mailing address of the claimant, FFI–PA.” This discrepancy “should have alerted Sun Life to a problem.”

The court also said that Sun Life contended that, even if it had noticed the discrepancy and had notified M & I, M & I would have insisted that FFI–PA was the proper beneficiary. “This argument, however, is speculative and therefore without merit,” said the Ninth Circuit.

The result, concluded the Ninth Circuit, was that Sun Life had not demonstrated justifiable reliance on M & I’s actions: “Because Sun Life had access to information identifying the correct designated beneficiary and to information indicating a problem requiring further investigation, Sun Life has failed to show that it justifiably relied on M & I’s actions.”

Because Sun Life failed to establish justifiable reliance, the Ninth Circuit affirmed the decision of the district court. The Ninth Circuit did not reach the district court’s determination concerning whether M & I owed a duty to Sun Life.

The full opinion is available here.