The Seventh Circuit Court of Appeals upheld a finding of summary judgment by Judge Lozano of the Northern District of Indiana in a case where the United of Omaha Life Insurance Company paid a non-beneficiary of a life insurance policy. In this case, Troyer Products purchased a key-man life insurance policy for its President, Ron Clark, with the intended beneficiary named as Dave Buck, its COO. The policy was purchased with the intent to enable Clark to use the proceeds of the policy to purchase Clark’s shares and come to control the company. Thereafter, the insurance policy was amended and the beneficiary was changed to reflect that Troyer would receive the insurance proceeds.
In 2005, Clark retired from Troyer and sold a controlling interest of his shares of the company to Dan Holtz, who became Troyer’s new President. Buck remained COO. As part of the purchase, Holtz received a copy of the amended keyman policy that indicated Troyer was the beneficiary. Clark died in 2011. Despite the amendment to the policy, Buck received the insurance proceeds. He subsequently tried to purchase Holtz shares, but was rejected and ousted from Troyer by its board.
Troyer then filed an action against United claiming that it breached its contract by paying the wrong beneficiary. Omaha conceded that it made a mistake in paying the wrong party; however, argued that Troyer knew all along that it was the beneficiary and allowed the wrong party to be paid. Thereby waiving its claim. Holtz and Troyer both insisted that they had no reason to believe that Troyer was in fact the beneficiary and instead relied upon United Omaha.
Through discovery United Omaha revealed that Troyer in fact knew all along that it was the beneficiary. Both Holtz and Troyer both possessed a copy of the amended insurance policy in their records. Moreover, during a Troyer board meeting prior to the policy payout, Buck repeatedly told Holtz that Troyer was the policy’s beneficiary. The court found that this conclusively refuted Troyer’s argument that it had no knowledge of the intended beneficiary and, therefore, granted summary judgment in favor of United Omaha.
Samaron Corp. d/b/a/ Troyer Products v. United of Omaha Life Insurance Co., (7th Cir. 2016)