A four-year-old unsolved murder in the Harbor Gateway neighborhood of Los Angeles created a legal headache for the victim’s life insurance company. The victim’s husband was the only named beneficiary of her life insurance policy, but he was also an active suspect in her murder. Since the victim left no will or other instructions regarding her affairs, the insurance company was forced to ask the courts to intervene.
Frank and Rosamaria Rees each held life insurance policies for $150,000 from Farmers New World Life Insurance Company. Rosamaria Rees’ policy insured her life and named her husband as sole primary beneficiary. She did not name any contingent beneficiaries. If Frank Rees predeceased his wife, then her life insurance proceeds would be payable to her estate.
On September 18, 2009, Rosamaria Rees was walking to her car parked on the street outside of her home. According to the Los Angeles Police Department, “an unknown suspect or suspects approached on foot and shot her,” killing her instantly. The LAPD has never made an arrest in the case.
Shortly after his wife’s death, Frank Rees filed a claim on the Farmers insurance policy. A Farmers claims manager contacted a detective at the LAPD, who reported that “no one has been ruled out” as a suspect in Rosamaria Rees’ murder, including her husband. Based on this information, Farmers informed Frank Rees it would not pay out his claim until the police concluded their investigation.
Frank Rees continued to push his claim with Farmers for several more months. By July 2010, he’d retained counsel, who advised Farmers to inform him of whether or not his client had actually been accused of killing his wife. At this point, Farmers decided to seek judicial intervention through what’s known as an interpleader action.
Insurance Company Caught in the Middle
Rosamaria Rees did not have a will. Nor did she name any contingent beneficiaries for her life insurance policy other than her estate. Since she had no children, her next-of-kin was her mother, who would inherit her entire estate under California intestacy law should her husband be disinherited.
When an insurance company is unsure who to pay a claim to, it may file an interpleader action. This means that while the insurance company initiates a lawsuit, it is not a party to the suit. Rather, the interpleader forces the actual parties to the dispute to litigate their claims against one another. In this case, those parties were Frank Rees and Rosamaria Rees’ mother. (Had Rosamaria Rees left a will and named an executor, that person would have been the second party.)
Rosamaria Rees’ mother never contested the litigation. The trial court entered default judgment against her and in favor of Frank Rees. The insurance proceeds, which Farmers paid to the court when it initiated the interpleader action, were released to him.
The California Court of Appeals was later called upon to settle a secondary issue. As a third party that incurred legal fees and costs, Farmers requested and received about $8,000 from the amount previously paid over to the court. Frank Rees objected to this reimbursement, arguing the life insurance proceeds were never “in dispute,” since his mother-in-law never appeared in court. The Court of Appeals overruled the objection, noting that had Frank killed his wife-an issue that “could have been litigated in the interpleader proceeding”–he would not have been legally entitled to collect the life insurance benefits. Therefore, the funds were “in dispute,” and Farmers acted appropriately in filing an interpleader action, for which it was entitled to reasonable attorney’s fees and costs.
Preparing for Contingencies
While it was the unsolved murder that prompted the disputed life insurance claim, the absence of a will, or even contingent beneficiaries on the policy, only frustrated matters further. An executor or personal representative is someone who can act in your estate’s interest. It’s important to not just name one person, but also one or more alternates who can act if your first choice is unavailable or legally compromised. The same holds true for potential beneficiaries of your estate. These are all issues you should address in consultation with an experienced California estate planning attorney. Contact the Law Office of Scott C. Soady in San Diego if you have any questions.