Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ared-4_06-cv-00898/USCOURTS-ared-4_06-cv-00898-2/pdf.json

Parties Involved:
EMC National Life Company
Cross Defendant
First National Bank & Trust Company of Mountain Home
Counter Defendant
Donnie Garvin
ThirdParty Defendant
Floyd Knighton
Cross Claimant
Vincent Knighton
ThirdParty Defendant
Debra Hulse Knighton
Plaintiff
Minnesota Life Insurance Company
Cross Defendant
Marsha Smith
ThirdParty Defendant
Stonebridge Life Insurance Company
Counter Claimant

Document Text:

1

Doc. No. 45.

1

IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

WESTERN DIVISION

FIRST NATIONAL BANK & TRUST COMPANY

OF MOUNTAIN HOME, Special Administrator for

The Estate of Debra Hulse Knighton, Deceased PLAINTIFF

VS. 4:06CV00898-WRW

STONEBRIDGE LIFE INSURANCE COMPANY;

EMC NATIONAL LIFE COMPANY; MINNESOTA

LIFE INSURANCE COMPANY; and FLOYD

KNIGHTON DEFENDANTS

STONEBRIDGE LIFE INSURANCE COUNTER PLAINTIFF

 CROSS PLAINTIFF

 THIRD-PARTY PLAINTIFF

VS.

FIRST NATIONAL BANK & TRUST COMPANY

OF MOUNTAIN HOME, Special Administrator for

the Estate of Debra Hulse Knighton, Deceased COUNTER DEFENDANT

MARSHA SMITH; DONNIE GARVIN;

and VINCENT KNIGHTON THIRD-PARTY DEFENDANTS

FLOYD KNIGHTON CROSS DEFENDANT

 CROSS PLAINTIFF

VS.

MINNESOTA LIFE INSURANCE COMPANY;

EMC NATIONAL LIFE COMPANY; and

STONEBRIDGE LIFE INSURANCE COMPANY CROSS DEFENDANTS

ORDER

Pending is separate Cross Defendant Minnesota Life Insurance Company’s

(“Minnesota”) Motion to Dismiss First National Bank and Trust Company’s (“FNBT”)

Complaint and Floyd Knighton’s (“Knighton”) Cross Claim.1 Plaintiff FNBT responded and

Case 4:06-cv-00898-BRW Document 74 Filed 05/08/07 Page 1 of 7
2

Doc. No. 62.

3

Doc. No. 57.

4

Plaintiff and Counter Plaintiff also claim recovery from EMC National Life Company

and Stonebridge Life Insurance Company. 

5

Doc. Nos. 26, 27, 28.

6

Doc. No. 73.

7

29 U.S.C. §§ 1001-1169 (Employee Retirement Income Security Act of 1974).

8

Doc. No. 48, pp. 21-24.

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suggested that I grant the motion and withhold ruling on its claim against Minnesota.2

 Cross

Claimant Knighton responded that his claim against Minnesota is ripe.3

This is an action brought by FNBT, the Administrator of the Estate of Debra Knighton, to

claim life insurance funds from three insurance companies on behalf of her estate.4

 Knighton

filed cross claims against these three companies.5 The other two life insurance companies

interpled their funds and have been dismissed from this case.6

Minnesota was one of the three insurance companies sued by FNBT and Knighton. But,

the claims against Minnesota are different because Minnesota’s policy was issued through

Knighton’s employer. Therefore, it is undisputed that claims against Minnesota are governed by

ERISA.7

 

I. Background

Debra Knighton died from a gunshot wound inflicted by her husband -- Knighton. At the

time of the incident, Minnesota’s accidental death and dismemberment policy was in effect and

covered Knighton and his wife. Under the terms of the policy, Knighton is the “certificate

holder,” and is the only eligible beneficiary.8

Case 4:06-cv-00898-BRW Document 74 Filed 05/08/07 Page 2 of 7
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Spencer v. Floyd, 30 Ark. App. 230 (1990) (citing Calaway v. Southern Farm Bureau

Life Ins. Co., 2 Ark. App. 69 (1981); York, Administratrix v. Hampton, 229 Ark. 301 (1958);

Horn v. Cole, Administrator, 203 Ark. 361 (1941); Inter-Southern Life Ins. Co. v. Butts, 179 Ark.

349 (1929); Cooper v. Krisch, 179 Ark. 952 (1929)).

10Henry v. Knights and Daughters of Tabor, 156 Ark. 165 (1922).

11Veal v. First Am. Sav. Bank, 914 F.2d 909, 913 (7th Cir. 1990); Gomez v. Illinois State Bd.

of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). 

12Conley v. Gibson, 355 U.S. 41, 45-46 (1957). 

13Metro. Life Ins. Co. v. Kelley, 890 F. Supp. 746 (N.D. Ill. 1995) (citing Mut. Life Ins.

Co. of N.Y. v. Armstrong, 117 U.S. 591, 600 (1886) which held that “it would be a reproach to

the jurisprudence of the country if one could recover insurance money payable on the death of

the party whose life he had feloniously taken”)).

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Knighton alleges that his wife’s death was an accident. But, FNBT alleges that Knighton

intentionally took his wife’s life, and he should not recover the benefits under Arkansas law,9

which designates the estate as the true beneficiary.10

Minnesota contends that the competing claims of FNBT and Knighton must be

dismissed for the following reasons: (1) the claims are premature; (2) Debra Knighton’s estate

and FNBT cannot receive benefits under the clear terms of the policy; and (3) Knighton did not

state claims under ERISA, but alleged state law claims that are preempted.

II. Motion to Dismiss Standard

In ruling on a motion to dismiss under Rule 12(b)(6), a plaintiff’s well-pleaded factual

allegations are taken as true.11 A motion to dismiss should not be granted unless it appears beyond

doubt that the plaintiff can prove no set of facts in support of his claim for relief.12

III. Authority

A. Applicable ERISA Legal Standards

 Like the Arkansas rule, the federal “slayer’s rule” holds that “a beneficiary who has

wrongfully caused the death of an insured forfeits his right to insurance proceeds.”13 There is a

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14Addison v. Metropolitan Life Ins. Co., 5 F. Supp.2d 392 (W.D. Va. 1998) (holding that,

as a matter of federal common law, a beneficiary who murdered his spouse was not entitled to

ERISA benefits); but see Administrative Committee for the H.E.B. Inv. and Retirement Plan v.

Harris, 217 F. Supp. 2d 759 (E.D. Tex. 2002) (holding that state common law is not preempted

if a beneficiary murders the insured).

15Equitable Life Assurance Soc. of U.S. v. Crysler, 66 F.3d 944 (8th Cir. 1995).

16Henry, 156 Ark. at 165; Cockrell v. Life Ins. Co. of Georgia, 692 F.2d 1164 (8th Cir.

1985) (applying Arkansas law and holding that benefits denied to the beneficiary become an

asset of the estate). 

17Id.

18Steffes v. Stephan Co., 144 F.3d 1070 (7th Cir. 1998).

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divergence of opinion as to whether federal common law or state common law applies to ERISA

under such circumstances.14 

The Eighth Circuit Court of Appeals has not specifically addressed this question, but has

held that ERISA preemption makes the designation of plan beneficiaries and the determination

of who is entitled to plan benefits questions of federal law.15 Federal law and Arkansas law do

not conflict with respect to Knighton’s claim -- he will forfeit the benefits if it is determined that

he killed his wife. A problem arises with respect to the claim on behalf of the estate. 

Arkansas, along with a majority of other states, holds that when a beneficiary is barred

from recovering because he took the insured’s life -- in the absence of a special provision to the

contrary -- the insurance company remains liable for the proceeds.16 Under this rule, when there

are no contingent beneficiaries, the funds are paid to the decedent’s estate.17

I can find no federal common law that specifically addresses this question. However, a

standard way in which federal courts create federal common law is by adopting the law of the

state whose law would govern in the absence of federal law, as long as the adopted state law is

consistent with federal policy.18

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19Life Ins. Co. of North America v. Von Valtier, 116 F.3d 279, 283 (7th Cir. 1997).

20Delk v. Durham, 959 F.2d 104 (8th Cir. 1992).

21Varity Corp v. Howe, 516 U.S. 489, 496 (1996).

22Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, 472

U.S. 559, 572 (1985).

2329 U.S.C. § 1104(a)(1).

24Shea v. Esensten, 107 F.3d 625, 628 (8th Cir. 1997) (emphasis added).

25Central Transport, 472 U.S. at 572.

26LeFebre v. Westinghouse Elec. Corp., 747 F.2d 197, 207 (4th Cir. 1984).

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There is no question that federal common law rules of contract interpretation govern

ERISA disputes.19 Under these rules, the terms of the policy are interpreted in an ordinary and

popular sense, and if there are ambiguities in the insurance contract, they are resolved against the

insurance company.20 

B. Fiduciary Duties under ERISA

ERISA protects employee pensions and other benefits by imposing certain fiduciary

duties on the administration of pension and nonpension benefit plans.21 ERISA’s fiduciary

provisions invoke the common law of trusts.22

 An ERISA fiduciary must discharge his duties in the interest of the plan participants and

beneficiaries.23 A fiduciary must also comply with the common-law duty of loyalty, and is

obligated to deal fairly and honestly with all plan members.24

Under the common law of trusts, “[a] trustee is . . . expected to ‘investigate the identity of

the beneficiary when the trust documents do not clearly fix such party.’”25 Furthermore, “[a]

trustee has the obligation to guard the assets of the trust from improper claims, as well as the

obligation to pay legitimate claims.”26 In fine, fiduciary duties extend to everyone covered by

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27Tillery v. Hoffman Enclosures, Inc., 280 F.3d 1192 (8th Cir. 2002) (emphasis added).

28Atwater v. Nortel Networks, Inc., 388 F. Supp. 2d 610, 617 (M.D. N.C. 2005) (citing

Estate of Curtis by Curtis v. Prudential Ins. Co., 839 F. Supp. 491 (E.D. Mich. 1993) (finding

that an administrator breached its fiduciary duty to other plan participants by paying benefits to a

man suspected of murdering the insured)).

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the policy, and, if an a claim is not properly investigated, the administrator breaches his fiduciary

duty to all beneficiaries by granting benefits to unqualified claimants.27

“If a pending judicial determination could serve to bar a distribution to a particular

beneficiary, it reasonably follows that there is a fiduciary responsibility to delay the distribution

to that person until a judicial determination regarding that beneficiary’s ability to receive plan

benefits has been made.”28

IV. Discussion

At this time, there is a reasonable inference that Knighton murdered his wife. The

evidence supporting this inference is strong enough to create a question of fact for trial. Arkansas

and federal law recognize the “slayer’s rule,” which prohibits payment of benefits if Knighton

took his wife’s life. The “slayer’s rule” applies to ERISA claims. 

Minnesota is acting prudently by denying benefits until this case is adjudicated. If

Minnesota paid Knighton now, and he was later found guilty at trial, Minnesota would have

breached its fiduciary duties. So, Minnesota is correct -- Knighton’s claim is premature. 

Minnesota maintains that, under the unambiguous terms of the policy, FNBT cannot

claim benefits in Knighton’s place, and, therefore, it does not state a claim for relief. According

to federal common law, unambiguous contract terms will be enforced. In this case, the contract

terms designate Knighton as the certificate holder and the only beneficiary. However, under

Arkansas law, the insurer remains liable despite such terms. The policy must have terms that

Case 4:06-cv-00898-BRW Document 74 Filed 05/08/07 Page 6 of 7
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specifically exclude the estate under these circumstances. Based on this, FNBT has a legal basis

for recovery.

V. Conclusion

This is a claim for recovery of life insurance benefits under a plan governed by ERISA. 

Minnesota is a fiduciary of Knighton and all other plan participants. As such, Minnesota would

breach its duty to the other plan participants by paying Knighton’s claim if he is disqualified by

the “slayer’s rule.” There are no federal common law rulings on FNBT’s right to recovery if

Knighton is excluded. In the absence of federal law, I can look to Arkansas for the answer. In

view of this, FNBT states a claim for relief.

Cross Defendant, Minnesota Life Insurance Company’s Motion to Dismiss the Claims of

Plaintiff and Cross Plaintiff, Floyd Knighton (Doc. No. 45) is DENIED. A ruling on the merits

of the ERISA claims will be withheld until after Knighton’s guilt or innocence has been

determined in a civil trial on the merits of the other claims in this case. An Amended ERISA

Scheduling Order will be issued within thirty days of a final adjudication of the other claims. 

IT IS SO ORDERED this 8th day of May, 2007.

 /s/Wm. R. Wilson, Jr.

UNITED STATES DISTRICT JUDGE

 

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