BENEFICIARY HAS STANDING TO BRING CLAIMS RELATED TO LIFE INSURANCE POLICY AND BENEFITS

In Slack v. The Prudential Ins. Co. of America, 2015 WL 5604678 (E.D.Tex – Tyler, Sept. 22, 2015)(Magistrate decision), Tom Slack,  purchased a life insurance policy from The Prudential Ins. Co. of America and named his wife Marcia Slack as the beneficiary. Mrs. Slack contended community funds were used to pay additional premiums and the policy was represented to be one which made use of “vanishing premiums.”  Mrs. Slack filed suit when she received $274,391.56 in benefits instead of $500,000 after Mr. Slack died.

Slack sued Prudential alleging violations of the DTPA, Texas Insurance Code, negligence, negligent misrepresentation, gross negligence and fraud. The case was removed to federal court, and Prudential filed a motion for judgment on the pleadings on the basis that Slack did not have standing to bring these claims.  The U.S. Magistrate disagreed and denied the motion without prejudice.

Regarding Slack’s status to bring the DTPA claims, Prudential argued Slack was not a consumer because she was not a party to the original contract and only became involved after the alleged wrongdoing.  The Court ruled privity of contract was not necessary for standing.  Consumer status is determined by Slack’s “relationship to the transaction, not by a contractual relationship.” Additionally, there is no requirement the wrongful act must occur simultaneously with the sale or lease of goods or services. The Court declined to impose a “temporal prerequisite.”  When the pleadings alleged that community funds were used to pay policy premiums, that allegation supports her consumer status under the DTPA.

Regarding Slack’s standing under the Texas Insurance Code, Prudential argued a mere “third party” to the contract does not have standing to sue.  Additionally, Prudential argued claims under the Texas Insurance Code do not survive the insured’s death.  The Court disagreed with Prudential.  Standing under the Texas Insurance Code is afforded to a “person” who suffers an injury during her course of dealing with someone in the business of insurance.  Additionally, the Court noted an intended third party beneficiary does have standing to sue.  Finally, life insurance claims “necessarily survive the death of the insured because only then can beneficiary receive the benefits of the policy.”

The Magistrate then summarily held that the alleged facts support the other common law claims.