Court Opinion

ID: 3503525
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:13:22.922164+00
Date Added: 2024-06-11T14:05:23.356129
License: Public Domain

At the outset we ought to bear in mind that the beneficiary named in the policy had no right of commutation. The policy is explicit that the right of commutation shall be allowed only to the insured's legal representatives at his death or to the beneficiary's legal representatives after both the insured's death and the beneficiary's, but before payment of all the installments. The legal representatives of the insured and of the beneficiary could not have such a right at the same time. Here, because beneficiaries were named, the right of commutation could be exercised, if at all, only by their legal representatives after their deaths as well as the death of the insured. The beneficiaries themselves had no right of commutation.
The insurer's obligation under the policy was to pay the proceeds of the insurance to the beneficiary named therein in 20 annual installments. The case of Clark v. Mutual L. Ins. Co. (9 Cir.) 56 F.2d 87, makes it clear that where the proceeds of the insurance are payable in installments at the death of the insured to the beneficiary named in the policy there is no right of commutation. The question in that case was whether or not the balance *Page 386 
of the insurance, after deducting the amount of a loan to the insured, should be paid in a lump sum or whether the beneficiary should be paid the installments less an amount equal to the loan. The court held (56 F. [2d] 89): "The purpose of the insured was to secure an annuity in favor of his wife for the remainder of her life," and that to pay the proceeds of the insurance in a lump sum would defeat the purpose of the contract on the part of both the insured and the insurer.
Equally important is it to dispel any notion that, because one of the beneficiaries named was the daughter, and consequently an heir of the insured, the beneficiaries had any right to the proceeds of the insurance as the insured's legal representatives or that such relationship has any bearing on their rights at all. Where the person named as beneficiary is one who is entitled to take from the insured by inheritance, his right to the proceeds of the insurance upon the insured's death are contractual under the policy and not derivative by devolution. Mund v. Rehaume, 51 Colo. 129, 117 P. 159, Ann. Cas. 1913A, 1243; In re Killien's Estate, 178 Wn. 335,35 P.2d 11. In Wallace v. United Order of Golden Cross, 118 Me. 184,188, 106 A. 713, 714, the court said: "she [the beneficiary named in the policy] takes the insurance money, if at all, directly by the terms of the contract and not derivatively, as in the capacity of heir or legal representative of the member."
Upon Kate Fargo's death the entire interest in the policy, according to its language, inured to the insured. As the sole owner of all interest in the policy, he had the right to surrender the policy for its cash value, to transmit his interest therein either by a testate or intestate disposition, or to name a new beneficiary to take under the policy. The insured elected to keep the policy and to name plaintiffs as the beneficiaries.
By appointing plaintiffs as beneficiaries and directing the company to pay the insurance to them as beneficiaries subject to the provisions of the policy and in accordance with its terms, the insured, with the consent of the company, simply substituted plaintiffs as beneficiaries in place of Kate. No change was made in the *Page 387 
terms of the policy by the change of beneficiaries. Designating a beneficiary is an exercise of the power to appoint and amounts to nothing more than appointing a person to receive the proceeds of the insurance. Mutual Benefit L. Ins. Co. v. Swett (6 Cir.) 222 F. 200, Ann. Cas. 1917B, 298; Ehlerman v. Bankers Life Co. 199 Iowa 417, 200 N.W. 408. See Vance, Insurance (2 ed.) pp. 566-568. The appointment of a beneficiary vests in him the rights of a beneficiary as defined in the policy, Goldman v. Moses, 287 Mass. 393, 191 N.E. 873; it involves no disposition of the insurance policy, Crowell v. N.W. Nat. L. Ins. Co. 140 Iowa 258, 118 N.W. 412.
Since plaintiffs were named as beneficiaries to receive the proceeds of the insurance subject to the provisions of the policy and in accordance with its terms, the insurer's obligation, according to the express terms of the policy, was to pay the insurance to them in 20 annual payments.
The several changes of beneficiaries show that the insured was concerned about the disposition of the insurance and especially about whether and how plaintiffs should receive it. He determined that they should receive it as beneficiaries according to the terms of the policy. After all, the insured paid for the insurance. It was his right, with the company's consent, to dispose of the proceeds thereof as he pleased. It is altogether to the company's credit that it insists on fidelity to the deceased insured by faithful performance of the insurance contract according to its terms.
For the reasons stated, I think that there should be a reversal and that judgment should be ordered for defendant.