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Strait v. McPhail

Court of Appeals of Mississippi

November 12, 2013

MICHAEL STRAIT AND BETTY STRAIT, APPELLANTS
v.
JACKIE MCPHAIL AND AMERICAN HERITAGE LIFE INSURANCE COMPANY, APPELLEES

DATE OF JUDGMENT: 09/30/2011

Page 697

[Copyrighted Material Omitted]

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HINDS COUNTY CIRCUIT COURT, HON. WINSTON L. KIDD, TRIAL JUDGE.

FOR APPELLANTS: MICHAEL T. JAQUES.

FOR APPELLEES: J. STEPHEN KENNEDY, CLIFFORD ALLEN MCDANIEL II, GEORGE CLANTON GUNN IV, MICHAEL JEFFREY WOLF.

BEFORE GRIFFIS, P.J., BARNES AND JAMES, JJ. IRVING AND GRIFFIS, P.JJ., ISHEE, ROBERTS, MAXWELL, FAIR AND JAMES, JJ., CONCUR. LEE, C.J., AND CARLTON, J., NOT PARTICIPATING.

OPINION

Page 700

BARNES, J.

¶1. This appeal concerns a lawsuit where Michael and Betty Strait sued insurance agent Jackie McPhail and American Heritage Life Insurance Company (American Heritage). The Straits alleged that McPhail negligently failed to effectuate the instructions of the insured, Joseph Bagley, to change the beneficiary of a cancer/dread-disease insurance policy from Bagley's estate to the Straits.

¶2. The Straits, a married couple, were close friends of Bagley and cared for him during his final illness. Bagley died of cancer in Jackson, Mississippi, on August 22, 2008. Days earlier, McPhail met with Bagley to have the benefits of his cancer policy paid to the Straits. [1] McPhail attempted to follow Bagley's wishes by having Bagley sign a " change of beneficiary" form. But while Bagley signed the form, McPhail never completed the form or gave it to the insurer. Therefore, the cancer-policy benefits were paid to Bagley's estate. In their complaint, the Straits claimed they sustained damages equivalent to the proceeds payable under the policy, or $44,973.50.

¶3. McPhail filed a motion to dismiss, which the Circuit Court of Hinds County granted, finding that the Chancery Court of Hinds County had determined that the proper beneficiary of the insurance policy was Bagley's estate. Based on that finding, the circuit court found the Straits' claim against McPhail and American Heritage had already been adjudicated. The circuit court also granted American Heritage's motion for summary judgment. The Straits timely appealed, raising three issues: (1) whether the circuit court erred in applying res judicata and/or collateral estoppel in granting McPhail's motion to dismiss; (2) whether the circuit court erred in granting American Heritage's motion for summary judgment; and (3) whether American Heritage is liable for the negligent acts of McPhail. We find the circuit court erred in applying res judicata and collateral estoppel to dismiss the Straits' claims, and in granting summary judgment to American Heritage. Accordingly, we reverse and remand the circuit court's judgments, allowing the action to proceed in the circuit court.

STATEMENT OF FACTS AND PROCEDURAL HISTORY

¶4. In July 1987, Bagley purchased a cancer and dread-disease policy that provided repayment of medical services rendered for cancer treatment. McPhail, an independent insurance broker and close friend of Bagley, sold the policy to Bagley while acting as a licensed agent for American Heritage. Bagley designated his estate as the beneficiary of the policy proceeds. [2]

Page 701

¶5. McPhail had served as Bagley's insurance agent for many years. Although McPhail ceased to be an authorized agent for American Heritage policies sometime before 2008, [3] she often assisted Bagley with various insurance forms because he " was not a paperwork person." [4] McPhail testified that, even though no longer an agent of American Heritage, she still had the ability to " service" every policy that she ever sold. This ability included sending documents to American Heritage and expecting American Heritage to act upon them.

¶6. In June 2008, Bagley was diagnosed with head, neck, and throat cancer. Two weeks before his death, Bagley asked McPhail to help him complete a claim form for the policy. McPhail testified she agreed to " help him with his service work." The claim form allowed the insured to assign policy benefits to a third party. Bagley told McPhail to mark " not applicable" in the section of the form entitled " assignment of benefits" because, as McPhail testified, she thought this would assign the benefits to a physician or a hospital. She later added that, at that time, Bagley did not want the benefits going to any physician, hospital, or " anyone else."

¶7. McPhail testified that Betty had contacted her [5] and said Bagley realized he had not signed a change-of-beneficiary form for the cancer policy, and he wanted to change the beneficiaries to the Straits. On August 19, 2008, Bagley entered the hospital due to his worsening condition from cancer. On August 21, McPhail traveled to the hospital because of Bagley's request to change the beneficiary on the cancer policy from his estate to the Straits. She brought with her a generic change-of-beneficiary form she had received from American Heritage. [6] In his hospital room, Bagley again orally affirmed that he wanted the policy proceeds to go to the Straits. He signed the form, which was witnessed by McPhail, a nurse, and Bagley's treating physician, Dr. Keith Robbins. The Straits were not present during the execution of the form. McPhail took the executed form and went into another room with the Straits to obtain their correct legal names to put on the form. Betty testified that McPhail was unsure how to fill out the paperwork and wanted everything listed properly; so she was going to put their proper legal names on the form later. At the time, McPhail stated she was not aware that the policy did not allow for " a change of beneficiary." Additionally,

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McPhail testified that the Straits did not know she was no longer an agent for American Heritage. [7]

¶8. Dr. Robbins, also friends with Bagley, spoke with his attorney immediately after witnessing the execution of the form. He told Betty that the form was improper because the Straits' names were not on the form when Bagley signed it. Betty relayed this information to McPhail, who tried to contact American Heritage's legal department for advice on whether she could still use the form. She twice left voice-mail messages in the legal department; however, at the time, the home offices of American Heritage were closed due to Hurricane Fay. McPhail never received a return phone call. Bagley passed away the next day, and it is undisputed that the change-of-beneficiary form was never completed. McPhail then assisted the estate in obtaining the information to file a claim on the policy. McPhail testified she eventually either shredded or threw away the executed form after Bagley's estate was settled.

¶9. The executor of Bagley's will, William Kinstley, opened the estate and probated the will in the Hinds County Chancery Court. The Straits were both beneficiaries in the will - Michael was left a diamond ring, and Betty and Michael were both left other personal property at Bagley's residence from which they could choose. Michael and Kinstley negotiated a trade of ...


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