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United American Insurance Co. v. Fauber

United States District Court, W.D. Virginia, Harrisonburg Division

September 6, 2017

UNITED AMERICAN INSURANCE COMPANY, Plaintiff,
v.
SANDRA J. FAUBER, et al., Defendants.

          MEMORANDUM OPINION

          Elizabeth K. Dillon, United States District Judge

         In May 2002, United American Insurance Company (UAIC) issued a life insurance policy on the life of Carl Clinton Mize, Jr. (Carl Mize or Mize). UAIC was, at best, careless with regard to its attention to the details of the policy, and over time it often provided contradictory information regarding the policy, which led both Sandra J. Fauber, Carl Mize's ex-fiancée, and Clinton Mize, Carl Mize's son, to believe that each was the sole beneficiary of the policy. Then, wiping its hands of the mess it created, UAIC filed this interpleader action (Compl., Dkt. No. 1), asking the court to determine who should receive the proceeds of the life insurance policy following Carl Mize's death.

         There are two claimants to the policy's proceeds: Fauber and Clinton Mize. Both claimants submitted proposed findings of fact and conclusions of law, and a bench trial on the merits was held on April 21, 2017. This Memorandum Opinion constitutes the Court's findings of fact and conclusions of law, pursuant to Federal Rule of Civil Procedure 52(a). For the following reasons, the court finds that Fauber is entitled to the proceeds of the insurance policy.

         I. FINDINGS OF FACT

         Fauber and Carl Mize began a romantic relationship in 1996 and got engaged in December of that year. Fauber credibly testified that their relationship was that of “man and wife”: the two lived together in a house deeded to both of them and shared responsibility for the care of Fauber's children, household chores, and financial obligations associated with the house and with Mize's medical bills. When Mize began receiving social security disability benefits, Fauber and Mize relied on those payments to pay for home expenditures.

         On February 19, 2002, Mize and Fauber[1] filled out an application for a life insurance policy on Mize's life. For some unknown reason, UAIC did not receive that application.

         Mize and Fauber completed a second application for life insurance on April 22, 2022. The first page of the application identified Mize as the proposed insured and Fauber as the beneficiary. It also indicated that premium notices should be sent to Fauber at the address where she lived with Mize. Mize signed the application on a line marked “Proposed Insured, ” and Fauber signed on the line marked “Applicant (if other than the proposed insured).” (Claim File 18, Trial Ex. 1.)[2] The application document also included an application for a discount health services plan. Mize signed that section twice on lines designated “Applicant's Signature” and “Signature of Applicant.” (Id.)

         On May 23, 2002, UAIC sent Mize and Fauber a letter enclosing the policy. (Id. at 79.) The letter was addressed to “CARL C MIZE JR” and “Sandra J [Fauber]-Owner.” (Id.) The policy, number 22-1952519, listed Mize as the insured in the amount of $12, 000.00 and Fauber as the owner and beneficiary with a date of issue of May 23, 2002. (Id. at 90.) They were advised to review the application, which was included, and contact UAIC promptly regarding any errors. (Id.)

         UAIC briefly suspended and then reinstated the policy in October 2002, apparently to remove the discount health services plan that Mize had applied for in April. A letter from UAIC, dated October 4, 2002, notified Fauber as Owner that the Partners Discount Health Services Program was removed from the policy as requested. (Id. at 34.) An undated agent's document, apparently not sent to either Fauber or Mize, entitled reinstatement, listed Mize as the “Isured/Owner [sic].” (Id. at 20.)

         From the time the policy became effective in May 2002 until May 2015, Fauber paid the policy premiums. UAIC drafted the payments on Fauber's personal bank account during that time.

         In the meantime, Mize executed a power of attorney naming Fauber his attorney-in-fact in August 2011. Fauber sent that power of attorney to UAIC in April 2014.

         In September 2012, UAIC sent Mize a letter that identified him as the owner of the policy and Fauber as the beneficiary. (Id. at 36.) In April 2014, UAIC sent Fauber a letter with information about the policy. (Id. at 44.)

         In April 2015, Mize and Fauber ended their romantic relationship. Fauber moved in with her daughter, and Mize moved to Utah to live with his son, Clinton Mize. Shortly thereafter, Carl Mize changed his will and power of attorney, and instructed his son to change the life insurance policy so that Fauber was no longer its beneficiary.

         The next month, Clinton Mize called UAIC to make the requested change to the policy. From June 2015 until Carl Mize's death in January 2016, premiums on the life insurance policy were paid from a joint bank account that Clinton Mize set up with Carl Mize, despite Fauber's request to UAIC that drafts continue to be taken from her account.

         On June 18, 2015, UAIC sent Fauber an email confirming that she remained the owner of the policy. (Id. at 80.)

         Clinton Mize, at Carl Mize's direction, took steps to change the beneficiary designation of the life insurance policy to himself, including sending the new power of attorney to UAIC at the request of a UAIC representative. On January 14, 2016, Carl Mize received confirmation from UAIC that his beneficiary designation had been changed to Clinton Mize. (Id. at 116.)

         On January 17, 2016, Carl Mize died. Thereafter, both Fauber and Clinton Mize made claims on the proceeds of the life insurance policy.

         The Policy contains a number of relevant provisions. First, with regard to the contract documents, it provides:

“The entire contract is this policy, the attached application and any riders.”

(Id. at 73.)

         It also contains a number of definitions:

“The Insured - The person whose life is insured under this policy while the policy is in force.” “You, Your, Owner - The current Owner of this policy, unless changed as allowed in the policy. The Owner has all the rights this policy provides unless otherwise stated in the policy.”

(Id.)

         With regard to ...


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