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Massachusetts Mutual Life Insurance Co v. Hiller

United States District Court, D. South Carolina, Greenville Division

June 20, 2018

Massachusetts Mutual Life Insurance Company, Plaintiff,
v.
Randall S. Hiller and A.E. Pennebaker Co. Inc., Defendants, Randall S. Hiller, Cross-Plaintiff,
v.
A.E. Pennebaker Co., Inc., Cross-Defendant.

          ORDER AND OPINION

         This matter is before the court on A.E. Pennebaker Co., Inc.'s (“Pennebaker”) Renewed Motion for Partial Summary Judgment. (ECF No. 76.) For the following reasons, the court -GRANTS Pennebaker's Motion for Partial Summary Judgment (ECF No. 76).

         I. FACTUAL AND PROCEDURAL BACKGROUND

         In the late 1980's Durham Mechanical Contractors, Inc. (“Durham Mechanical”) and Pennebaker made an agreement that Durham would purchase life insurance policies covering the lives of its three principals, including Carla Durham, in order for Durham Mechanical to receive a line of credit from Pennebaker. (ECF No. 23-5; ECF No. 79-1 at 64-66.) The policies were purchased from Massachusetts Mutual Life Insurance Company (“MassMutual”). (ECF No. 1 at 2 ¶ 10.) For purposes of this action, only Carla Durham's policy is at issue.

         In 1986, MassMutual issued policy number xxxx005 (“005 Policy”), a term life insurance policy insuring the life of Carla Durham. (ECF No. 1 at 2 ¶ 10.) According to counsel for MassMutual, the materials relating to this policy were destroyed in the normal course of business in accordance with MassMutual's document retention policies on September 1, 2010, due to its cancellation and the issuance of a new policy replacement as explained below. (ECF No. 23-6.) Therefore, it is unclear who the beneficiary was at the time of the issuance of the policy.

         On December 5, 1986, the 005 Policy was assigned to Pennebaker. (ECF No. 23-3.) On May 3, 1994, the beneficiary was changed to Randall Hiller (“Hiller”). (ECF No. 23-7.) Shortly thereafter, MassMutual's records indicate that Claude F. Durham[1] attempted to cancel the policy. (ECF No. 23-8.) In denying this request, MassMutual identified that it had a legal obligation to recognize the rights of the assignee. (Id.)

         On or about October 15, 1996, Pennebaker submitted to MassMutual an application to convert the 005 Policy to a whole life insurance policy. (ECF No. 1 at 2 ¶ 13; ECF No. 23-9.) On October 18, 1996, in response to the October 15, 1996 application, MassMutual issued policy number xxxx889 (“889 Policy”), a whole life insurance policy with a face value of $175, 000, insuring the life of Carla Durham. (ECF No. 1 at 3 ¶ 14.) The Policy also includes a Life Insurance Supplemental Rider with a value of $175, 000. (Id.) The 889 Policy replaced the 005 Policy. (See ECF No. 23-10 at 2.) At the time of the issuance of the 889 Policy, MassMutual's records indicate that the owner of the Policy was the insured, Carla Durham, the assignee of the Policy was Pennebaker, and the primary beneficiary of the Policy was Hiller. (ECF No. 1 at 3 ¶ 15.) Although MassMutual's records are unclear, Pennebaker paid the Policy premiums until at least 2003. (ECF No. 23-12.)

         Carla Durham died on April 29, 2015, in Greenville County, South Carolina. (ECF No. 1 at 3 ¶ 16.) At the time of Carla Durham's death, the owner of the Policy was Carla Durham, the assignee of the Policy was Pennebaker, and the primary beneficiary of the Policy was Hiller. (Id. ¶ 17-18.)

         On or about February 11, 2016, Hiller submitted a Life Insurance Claim Form to MassMutual requesting the life insurance proceeds due under the Policy be paid to him in full. (Id. ¶ 19.) On May 12, 2016, Pennebaker, through counsel, put MassMutual on written notice that it had a duty to pay the Policy proceeds to Pennebaker immediately. (ECF No. 23-13.) According to MassMutual, the death benefit due under the Policy is $231, 306.90, exclusive of interest. (ECF No. 1 at 3 ¶ 21.)

         On May 20, 2016, MassMutual filed a Complaint for Interpleader against Hiller and Pennebaker, alleging competing claims to the proceeds of the life insurance Policy insuring the life of Carla Durham. (ECF No. 1.) MassMutual claims that it is in doubt as to which Defendant is entitled to payment of the Policy proceeds. (ECF No. 1 at 3 ¶ 23.)

         Pennebaker and Hiller filed cross-motions for partial summary judgment (ECF Nos. 23, 35) which were denied (ECF No. 57).[2] On June 7, 2018, Pennebaker filed a renewed Motion for Partial Summary Judgment. (ECF No. 76.) On June 18, 2018, Hiller responded. (ECF No. 79.)

         II. JURISDICTION

         The court has jurisdiction over this action pursuant to 28 U.S.C. § 1332. There is complete diversity between Plaintiff Massachusetts Mutual (“MassMutual”) and Defendants Pennebaker and Hiller. (ECF No. 1 at 2 ¶ 6.) The amount in controversy exceeds $75, 000, exclusive of interest and costs. (Id.) The court retains jurisdiction over an interpleader insurance case, even if the cross-complaining parties lack diversity, as long as the original plaintiff and defendants are diverse parties. Leimbach v. Allen, 976 F.2d 912, 917 (4th Cir. 1992).[3]

         III. LEGAL STANDARD

         Summary judgment should be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” if proof of its existence or nonexistence would affect the disposition of the case under the applicable law. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248-49 (1986). A genuine question of material fact exists where, after reviewing ...


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