This story is reprinted with permission from FC&&S Legal, the industry's only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.
A federal district court in Georgia has refused to dismiss claims brought against a life insurer by a wife accused of killing her husband after the insurer froze the account into which it had previously deposited the proceeds of his life insurance policy.
The Case
After Russell Bailey died, his wife Sherry Bailey made a claim as beneficiary of a life insurance policy on his life issued by Prudential Insurance Company of America.
Prudential placed $343,420.50 into a Prudential Alliance Account (the "account") in Ms. Bailey's name. The "Alliance payment notification" sent to Ms. Bailey described the Account as follows:
We have approved your group life insurance claim and have settled your benefit through Prudential's Alliance Account settlement option. An interest bearing account has been established in your name. . . . With the Alliance Account, you can access your money immediately by writing a draft for the amount you'd like to withdraw. You can withdraw the entire amount immediately, which will close the account, or you can write drafts as needed. Any balance you maintain will earn continuous interest.
Five days later, a grand jury indicted Ms. Bailey for the murder of her husband. She subsequently wrote three checks withdrawing a total of $83,855.50 from the Account.
Prudential then notified Ms. Bailey that it had frozen the Account. According to Ms. Bailey, the account contained at least $259,616.51 at the time Prudential imposed the freeze.
Prudential filed an interpleader complaint in the U.S. District Court for the Southern District of Georgia and deposited the funds in the account with the court.
Ms. Bailey answered and filed a counterclaim, contending that Prudential had stolen $259,616.51 from her account and had deposited it with the court without her permission.
