Mony Life Insurance Company v. Sweet et al

Brief/Memorandum in Support

N.D. Tex.February 10, 2017

MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 2425119.1/SPSA/33651/0104/021017 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS WICHITA FALLS DIVISION MONY LIFE INSURANCE COMPANY, Plaintiff, vs. BETH ANN SWEET and MADISON LYNN SWEET, Defendants. ____________________________________ § § § § § § § § § CIVIL ACTION NO. 7:16-CV-00134-O PLAINTIFF MONY LIFE INSURANCE COMPANY’S BRIEF IN SUPPORT OF ITS MOTION TO DISMISS COUNTERCLAIMS OF BETH SWEET PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6) Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 1 of 25 PageID 107 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 2 2425119.1/SPSA/33651/0104/021017 Table of Contents Table of Contents ............................................................................................................................ 2 Index of Authorities ........................................................................................................................ 3 I. Introduction ...................................................................................................................... 5 II. Factual Background ......................................................................................................... 6 III. Motion to Dismiss Standard........................................................................................... 11 IV. Argument and Authorities.............................................................................................. 11 A. Beth Sweet’s breach of contract claim must be dismissed because her designation as primary beneficiary of the Policy was revoked pursuant to Texas Family Code § 9.301(a) upon her divorce from the Insured. ................................................................. 11 B. Beth Sweet’s breach of contract claim must be dismissed for the additional reason that the Divorce Decree expressly provided that Madison Sweet was to be named the sole beneficiary of the Policy and the Decree became the judgment of the Court once entered. ........................................................................................................................... 14 C. Beth Sweet’s Texas Insurance Code and DTPA counterclaims should be dismissed because the Policy’s death benefit is not payable to Beth Sweet. ................................. 15 V. Conclusion and Prayer ................................................................................................... 17 Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 2 of 25 PageID 108 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 3 2425119.1/SPSA/33651/0104/021017 Index of Authorities Cases Abrams v. Salinas, 467 S.W.3d 606 (Tex. App.-San Antonio 2015, no pet.)………………………………14 Ashcroft v. Iqbal, 556 U.S. 662 (2009)……………………………………………………………………...11 Bilotto v. Allied Prop. & Cas. Ins. Co., 79 F. Supp. 3d 660 (W.D. Tex. 2015)……………………………………………………15 Branch v. Monumental Life Ins. Co., 422 S.W.3d 919 (Tex. App.-Houston 2014, no pet.)…………………………………..13 Copeland v. Alsobrook, 3 S.W.3d 598 (Tex. App.-San Antonio 1999, pet. denied)…………………………….14 Douglas v. State Farm Lloyds, 37 F. Supp. 2d 532 (S.D. Tex. 1999)…………………………………………………….15 Ex parte Gorena, 595 S.W.2d 841 (Tex. 1979)……………………………………………………………..14 Fernandez-Montes v. Allied Pilots Ass’n, 987 F.2d 278 (5th Cir. 1993)…………………………………………………………….11 Hallsted v. McGinnis, 483 S.W.3d 72 (Tex. App.-Houston 2015, no pet.)……………………………………14 Harris v. Am. Prot. Ins. Co., 158 S.W.3d 614 (Tex. App.-Fort Worth 2005, no pet.)………………………………..16 Henry v. Mut. of Omaha Ins. Co., 503 F.3d 425 (5th Cir. 2007)…………………………………………………………….16 In re The Group Life Ins. Proceeds of Curtis B. Mallory, Deceased, 872 S.W.2d 800 (Tex. App.-Amarillo 1994, no pet.)………………………………….14 Interest of Madison Lynn Street, Case No. CV11.08.604……………………………………………………………………6 JAW The Pointe, L.L.C. v. Lexington Ins. Co., 460 S.W.3d 597 (Tex. 2015)……………………………………………………………..16 Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 3 of 25 PageID 109 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 4 2425119.1/SPSA/33651/0104/021017 Lincoln Benefit Life Co. v. Manglona, No. H-13-2196, 2014 U.S. Dist. LEXIS 90502, at *5-6 (S.D. Tex. 2014)…………...…13 Lockett v. Prudential Ins. Co. of Am., 870 F. Supp. 735 (W.D. Tex. 1994)……………………………………………………...16 Northwinds Abatement, Inc. v. Employers Ins. of Wausau, 258 F.3d 345 (5th Cir. 2001)…………………………………………………………….16 Provident Life and Accident Ins. Co. v. Cleveland, 460 Fed. Appx. 359, 360 (5th Cir. 2012)………………………………………………...14 Ray-Marshall v. Ray, No. SA-12-CA-597, 2013 U.S. Dist. LEXIS 194555, *4 (W.D. Tex. 2013)……………..13 Russell v. Russell, 478 S.W.3d 36 (Tex. App.-Houston 2015, no pet.)……………………………………14 15626 Ft. Bend Ltd. DBA Mercedes-Benz of Sugarland v. Sentry Select Ins. Co., 991 F.Supp.2d 932 (S.D. Tex. 2014)…………………………………………………….16 Statutes TEX. FAM. CODE ANN. § 7.006 (West 2016)……………………………………………………..14 TEX. FAM. CODE ANN. § 9.301 (West 2016)…………………………………5, 7, 9, 10-14, 16, 17 Rules FED. R. CIV. P. 12(b)(6)………………………………………………………………………….11 Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 4 of 25 PageID 110 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 5 2425119.1/SPSA/33651/0104/021017 I. Introduction This is an interpleader action concerning the proceeds of a life insurance policy issued in 1993 by Plaintiff, The Mutual Life Insurance Company of New York, now known as MONY, to Beth Sweet’s (“Beth Sweet”) former husband, James Sweet (sometimes hereinafter the “Insured”). In 2002, the Insured designated Beth Sweet as First Beneficiary of the policy and the Sweet’s then minor daughter, Madison Lynn Sweet (“Madison Sweet”) as the Second Beneficiary. Simultaneously, the Insured also transferred ownership of the policy jointly to Beth Sweet and Madison Sweet. In 2013, in divorce proceedings between Beth Sweet and the Insured, a Final Decree of Divorce (“Divorce Decree”) was entered in Wise County, Texas. The Divorce Decree, which incorporated and approved a written property agreement between Beth Sweet and the Insured, expressly provided that Madison Sweet, who by that time had reached the age of majority, was to be the sole beneficiary of the MONY policy. Following the Insured’s death in April 2016, Beth Sweet made demand on MONY for payment of the policy proceeds. MONY informed Beth Sweet that because of her divorce from the Insured, she was disqualified from receiving the policy’s death benefit pursuant to Texas Family Code § 9.301. MONY then contacted Madison Sweet regarding her potential claim to the proceeds as she was designated as the sole beneficiary in the Divorce Decree. Madison Sweet responded, inaccurately, that she was not the co-owner of the policy or a beneficiary and that she therefore had no rights under the policy. Subsequently, MONY sent Madison Sweet, among other documents, a copy of the Divorce Decree and a Hold Harmless and Waiver Agreement (“Waiver Agreement”), informing her that if she did not wish to make a claim under the policy, she should execute and return the Waiver Agreement, or in the alternative, she Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 5 of 25 PageID 111 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 6 2425119.1/SPSA/33651/0104/021017 should communicate to MONY that she was not prepared to give up any potential claim that she might have. When Madison Sweet did not return an executed Waiver Agreement or otherwise respond to MONY’s correspondence, MONY commenced this interpleader action. II. Factual Background On October 8, 1993, MONY issued life insurance Policy No. 1379-14-78 JF (the “Policy”) to James H. Sweet in the face amount of $100,000. In the Application for the Policy which was incorporated in and a part of the Policy, Beth Sweet, the Insured’s then spouse, was designated as the beneficiary. See application and Policy Schedule attached to the Complaint collectively as Exhibit A. On February 20, 2002, the Insured submitted a Title Change Form designating Beth Sweet as First Beneficiary; Madison Sweet as Second Beneficiary; and transferring “Rights (Ownership) Under Policy” jointly to Beth Sweet and Madison Sweet. See copy of the Title Change Form attached to the Complaint as Exhibit B. On May 6, 2013, a Final Decree of Divorce was entered by the Wise County, Texas County Court of Law in the Matter of the Marriage of James Henry Sweet and Beth Ann Sweet and in the Interest of Madison Lynn Street, Case No. CV11-08-604 (hereinafter “Divorce Decree”), attached to the Interpleader Complaint as Exhibit D. In the Divorce Decree, the Court found: [T]he parties have entered into a written agreement as contained in this decree by virtue of having approved this decree as to both form and substance. To the extent permitted by law, the parties stipulate the agreement is enforceable as a contract. The Court approves the agreement of the parties as contained in this Final Decree of Divorce. Ex. D to Complaint, at p. 2. Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 6 of 25 PageID 112 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 7 2425119.1/SPSA/33651/0104/021017 In the Divorce Decree, the Policy was awarded to Beth Sweet as her sole and separate property and the Insured was divested of all right, title, interest and claim to the Policy. Id. at W- 7. The Divorce Decree further expressly provided that the “Mutual New York - $100,000” insurance policy “shall name Madison Lynn Sweet as the sole beneficiary.” Id. at W-8. At the time the Divorce Decree was entered, Madison Sweet was 18 years old, having reached the age of majority on January 21, 2013. On April 3, 2016, the Insured died and the proceeds of the Policy became payable. At the time of the Insured’s death, Beth Sweet remained the designated First Beneficiary of the Policy and Madison Sweet remained the designated Second Beneficiary, according to MONY’s records. On May 16, 2016, MONY received a completed claim form from Beth Sweet indicating she was the ex-wife of the Insured. See Beth Sweet’s claim form attached to the Complaint as Exhibit C. At MONY’s request, Beth Sweet provided a copy of the Divorce Decree to MONY. On June 16, 2016, MONY wrote Beth Sweet informing her that she was disqualified from receiving the Policy’s death benefit pursuant to Texas Family Code § 9.301; that the Divorce Decree stated that Madison Sweet was to be the sole beneficiary of the Policy; and that MONY believed the rightful payee of the proceeds was Madison Sweet. MONY provided Beth Sweet a claim form to be completed by Madison Sweet and a Withdrawal of Claim form that MONY requested be completed and returned by Beth Sweet. See copy of MONY’s June 16, 2016 letter to Beth Sweet, attached to Complaint as Exhibit E. On July 21, 2016, MONY received a letter from attorney Robert Aldrich, advising of his representation of Beth Sweet and demanding payment of the Policy proceeds to her. Mr. Aldrich stated his opinion that Beth Sweet was not disqualified from receiving the Policy proceeds by Texas Family Code § 9.301 because that statute “only applies when the insured spouse keeps the Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 7 of 25 PageID 113 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 8 2425119.1/SPSA/33651/0104/021017 policy after the divorce;” and that Madison Sweet “has no intention or desire to file a claim on the proceeds.” See copy of Mr. Aldrich’s July 18, 2016 letter to MONY, attached to Complaint as Exhibit G. On July 27 and 28 and August 2, 2016, MONY emailed Mr. Aldrich inquiring whether Madison Sweet would be willing to sign a sworn disclaimer affidavit since Mr. Aldrich stated in his July 18, 2016 letter that Madison Sweet had no intention of claiming the proceeds to the Policy. Mr. Aldrich replied that he saw “no reason to do something that is not necessary . . . .” On September 2, 2016, Protective Life Insurance Company (“Protective”), the parent company of MONY, reached out to Madison Sweet via LinkedIn. The LinkedIn message stated that Madison Sweet was the co-owner of a MONY policy insuring her father, James Sweet; that the Policy’s death benefits may be payable to her unless she intended to waive her rights in favor of her mother; and Madison Sweet was provided the contact information for Protective’s in- house attorney, Bill McCarty. Madison replied to Protective’s LinkedIn message on September 2, 2016, stating, inaccurately, the following: “per the policy agreement, I am NOT the co-owner of a MONY life insurance policy that insured my father, James Sweet. . .;” that “Beth Sweet is the sole owner and beneficiary. . .;” and that “I do not have a legal claim to these proceeds and therefore cannot waive my right to them.” On September 6, 2016, Protective’s in-house attorney, Bill McCarty, emailed Madison Sweet and provided her a copy of: (1) the 2002 Title Change Form designating Beth Sweet and Madison Sweet as the co-Rightsholders (Owners) of the Policy and designating Madison Sweet as the Second Beneficiary; (2) a 2011 Statement of Coverage listing Beth Sweet and Madison Sweet as co-Rightsholders of the Policy; (3) excerpts from the Divorce Decree including the Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 8 of 25 PageID 114 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 9 2425119.1/SPSA/33651/0104/021017 division of the marital estate and the provision that the Policy “shall” name Madison Sweet as the “sole beneficiary.” Mr. McCarty explained MONY’s belief that the Divorce Decree possibly gave Madison Sweet a legal basis to claim the Policy proceeds regardless of MONY’s records showing Beth Sweet as the primary beneficiary on the Policy. Mr. McCarty asked that Madison Sweet let him know that she was either prepared to give up her potential claim and MONY would send her the waiver form to sign, or that she was not prepared to give up her potential claim. Madison Sweet responded on September 8, 2016, stating, inaccurately, that she was “fully aware” Beth Sweet “is the sole policy owner as well as the beneficiary;” that Madison Sweet was “not the policy owner; co-owner or beneficiary and therefore [she had] no rights to this policy.” On September 9, 2016, Mr. McCarty emailed Madison Sweet stating he would provide a waiver form for her to consider signing, the effect of which would confirm for MONY’s records that Madison Sweet was not making and never intends to make a claim to the Policy proceeds despite being aware of everything that MONY’s records show. On September 16, 2016, attorney Robert Aldrich wrote MONY demanding payment of the Policy’s $130,000 death benefits to Beth Sweet, $25,000 in attorney’s fees and $50,000 for MONY’s “knowing violations” of the Texas Deceptive Trade Practices Act and the Texas Insurance Code. On September 19, 2016, Bill McCarty emailed Madison Sweet a Hold Harmless and Waiver Agreement (“Waiver Agreement”), attached to Complaint as Exhibit H; a copy of Texas Family Code § 9.301 which was referenced in the Waiver Agreement; and another copy of the 2002 Title Change Form naming Beth Sweet and Madison Sweet as co-Rightsholders (owners) Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 9 of 25 PageID 115 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 10 2425119.1/SPSA/33651/0104/021017 of the Policy and designating Madison Sweet as the Second Beneficiary. In his correspondence, Mr. McCarty stated that if Madison Sweet did not wish to make a claim to the Policy benefits “after knowing all of the facts,” she could sign the Waiver Agreement before a notary and return it to Mr. McCarty. Mr. McCarty’s email concluded with a request that Madison Sweet either sign and return the Waiver Agreement or, alternatively, communicate her clear intention that she was not prepared to give up any potential claim under the Policy that she might have. Madison Sweet did not return an executed Waiver Agreement or otherwise respond to Mr. McCarty’s September 19, 2016 email. As a result of the Insured’s divorce from Beth Sweet in 2013, the Divorce Decree’s express direction that Madison Sweet was to be named as the sole beneficiary of the Policy, the provisions of Texas Family Code § 9.301(a) and (b), the failure to submit a change of beneficiary form designating Madison Sweet as the sole beneficiary following rendition of the Divorce Decree, Beth Sweet’s claim for the Policy benefits, and Madison Sweet’s failure to waive any right to make a claim under the Policy, MONY initiated this interpleader action in order for this Court to determine the rightful recipient of the Policy’s death benefit. With her Answer, Beth Sweet filed a counterclaim against MONY alleging the following three causes of action: (1) breach of contract; (2) violations of the Texas Insurance Code; and (3) violations of the Texas Deceptive Trade Practices Act (“DTPA”). Answer and Counterclaim, ECF Doc. 5, at ¶¶ 42-58. Beth Sweet’s counterclaim should be dismissed in its entirety because her designation as primary beneficiary of the Policy was revoked by operation of law pursuant to Texas Family Code § 9.301(a). Upon her divorce from the Insured, the Divorce Decree did not name Beth Sweet as the beneficiary of the Policy and it did not designate her to receive the Policy proceeds Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 10 of 25 PageID 116 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 11 2425119.1/SPSA/33651/0104/021017 in trust for, on behalf of, or for the benefit of Madison Sweet. Moreover, after rendition of the Divorce Decree Beth Sweet was not re-designated as the beneficiary. Because none of the events required by Texas Family Code § 9.301(a) occurred, Beth Sweet is not entitled to receive the Policy proceeds. Thus, Beth Sweet’s claims for breach of contract, violations of the Texas Insurance Code and the Texas DTPA fail as a matter of law. III. Motion to Dismiss Standard A court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” FED. R. CIV. P. 12(b)(6). To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotations and citations omitted). All well-pleaded facts must be accepted as true; however, “conclusory allegations or legal conclusions masquerading as factual conclusions will not prevent dismissal.” Fernandez- Montes v. Allied Pilots Ass’n, 987 F.2d 278, 284 (5th Cir. 1993). IV. Argument and Authorities Beth Sweet’s counterclaim must be dismissed in its entirety for the following critical reasons: her designation in 2002 as primary beneficiary of the Policy was revoked by operation law pursuant to Texas Family Code § 9.301(a) upon her divorce from the Insured in 2013, and the Divorce Decree expressly provided that Madison Sweet was to be named the sole beneficiary of the Policy, which became the judgment of the Court when the Decree was entered. The Policy’s death benefit is therefore not due or payable to Beth Sweet, a necessary prerequisite for her breach of contract, DTPA and Texas Insurance Code causes of action. A. Beth Sweet’s breach of contract claim must be dismissed because her designation as primary beneficiary of the Policy was revoked pursuant to Texas Family Code § 9.301(a) upon her divorce from the Insured. Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 11 of 25 PageID 117 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 12 2425119.1/SPSA/33651/0104/021017 Texas Family Code § 9.301 provides: (a) If a decree of divorce or annulment is rendered after an insured has designated the insured’s spouse as a beneficiary under a life insurance policy in force at the time of rendition, a provision in the policy in favor of the insured’s former spouse is not effective unless: (1) the decree designates the insured’s former spouse as the beneficiary; (2) the insured redesignates the former spouse as the beneficiary after rendition of the decree; or (3) the former spouse is designated to receive the proceeds in trust for, on behalf of, or for the benefit of a child or a dependent of either former spouse. (b) If a designation is not effective under Subsection (a), the proceeds of the policy are payable to the named alternate beneficiary or, if there is not a named alternate beneficiary, to the estate of the insured. Id. Beth Sweet concedes in her counterclaim that the Insured designated her as the First Beneficiary in 2002; that she and the Insured divorced in May 2013; that their daughter, Madison Sweet, was a legal adult at the time of the divorce; that the Divorce Decree provided that the Policy “shall name Madison Lynn Sweet as the sole beneficiary;” and that no change of beneficiary form re-designating her as beneficiary was submitted to MONY following Beth Sweet’s divorce from the Insured. Counterclaim, at ¶ 43. Consequently, Beth Sweet does not and cannot dispute that the Divorce Decree did not name her as the beneficiary of the Policy; that she was not re-designated as the beneficiary after the divorce; and that the Divorce Decree did not designate Beth Sweet to receive the proceeds in trust for, on behalf of, or for the benefit of Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 12 of 25 PageID 118 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 13 2425119.1/SPSA/33651/0104/021017 Madison Sweet. Beth Sweet therefore cannot dispute that none of the exceptions set forth in § 9.301(a)(1)-(3) were met. When a beneficiary designation is not effective under subsection (a), § 9.301(b) provides that the proceeds become payable to “the named alternate beneficiary,” or to the estate of the insured if an alternate beneficiary is not named. Id. Because Beth Sweet’s designation as beneficiary was revoked by operation of § 9.301(a), the proceeds became payable to Madison Sweet, the named alternate beneficiary pursuant to § 9.301(b). See Branch v. Monumental Life Ins. Co., 422 S.W.3d 919 (Tex. App.-Houston 2014, no pet.) where the court explained: By statute, if an insured’s spouse is designated as a life-insurance beneficiary but the couple later divorces or their marriage is annulled, the earlier designation of the spouse as a policy beneficiary is ineffective. See TEX. FAM. CODE ANN. § 9.301(a). . . If that happens, then the policy proceeds are payable to the named alternate beneficiary, or if there is none, then the proceeds are payable to the insured’s estate. Id. § 9.301(b). It is undisputed that [the insured’s former spouse] was married to [the insured] when she was designated as the policy’s named beneficiary, and that they subsequently divorced; thus, as a matter of law, her designation as the policy beneficiary was of no effect unless one of the three statutory exceptions applies. . . . . . . Because [the insured’s former spouse] does not contend that any of the statutory exceptions apply, we conclude that [the insured’s] designation of her as a life-insurance beneficiary is ineffective as a matter of law. . . . Id. at 923. See also Lincoln Benefit Life Co. v. Manglona, No. H-13-2196, 2014 U.S. Dist. LEXIS 90502, at *5-6 (S.D. Tex. 2014) (“Under § 9.301 of the Texas Family Code, if an insured designates his or her spouse as a beneficiary to a life insurance policy and they subsequently divorce, the designation of the former spouse is not effective unless one of the three conditions [in § 9.301(a)] is met . . . . If none of the conditions are met, a final divorce automatically revokes the status of the designated spouse as a beneficiary and terminates his or her right to the Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 13 of 25 PageID 119 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 14 2425119.1/SPSA/33651/0104/021017 life insurance proceeds of the former spouse.”); Ray-Marshall v. Ray, 2013 U.S. Dist. LEXIS 194555, *4 (W.D. Tex. 2013) (“Because none of the exceptions to Section 9.301 apply, [the former spouse’s] interest in the policy vanished by operation of law as soon as the couple divorced.”); Provident Life and Accident Ins. Co. v. Cleveland, 460 Fed. Appx. 359, 360 (5th Cir. 2012) (“Because none of the exceptions to § 9.301 are applicable, we agree with the district court that [the former spouse’s] interest vanished by operation of law when the couple subsequently divorced.”); Copeland v. Alsobrook, 3 S.W.3d 598, 601 n. 2 (Tex. App.-San Antonio 1999, pet. denied) (“By operation of law, [the former spouse’s] interest as a beneficiary vanished when she divorced [the insured]”, citing the predecessor to Texas Family Code § 9.301); In re The Group Life Ins. Proceeds of Curtis B. Mallory, Deceased, 872 S.W.2d 800, 803 (Tex. App.-Amarillo 1994, no pet.) (“Similarly, the Family Code specifically provides that if the beneficiary designation of a former spouse is rendered ineffective by virtue of [what is now § 9.301] the proceeds must be paid to the alternate beneficiary named in the policy, if any.”). B. Beth Sweet’s breach of contract claim must be dismissed for the additional reason that the Divorce Decree expressly provided that Madison Sweet was to be named the sole beneficiary of the Policy and the Decree became the judgment of the Court once entered. In the Divorce Decree, the Wise County, Texas Court found that Beth Sweet and the Insured stipulated their written agreement, as contained in the Decree and approved by the Court, was “enforceable as a contract.” See Ex. D to Complaint, at p. 2. The Divorce Decree expressly provided that Madison Sweet was to be the sole beneficiary of the Policy. Id. at W-8. Texas law is clear that when a court approves an agreement made by the divorcing parties, “the court may set forth the agreement in full or incorporate the agreement by reference in the final decree.” Russell v. Russell, 478 S.W.3d 36, 46 (Tex. App.-Houston 2015, no pet.), citing Texas Family Code § 7.006(b). “Once the agreement of the parties has been approved by Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 14 of 25 PageID 120 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 15 2425119.1/SPSA/33651/0104/021017 the court and made a part of its judgment, the agreement is no longer merely a contract between private individuals but is the judgment of the court.” Russell, 478 S.W.3d at 46, citing Ex parte Gorena, 595 S.W.2d 841, 844 (Tex. 1979) (orig. proceeding). See also Hallsted v. McGinnis, 483 S.W.3d 72, 74 (Tex. App.-Houston 2015, no pet.) (same); Abrams v. Salinas, 467 S.W.3d 606, 610 (Tex. App.-San Antonio 2015, no pet.) (same). The Wise County, Texas court approved and incorporated in the Divorce Decree the written agreement of Beth Sweet and the Insured that Madison Sweet was to be named the sole beneficiary of the Policy. That agreement, once entered, became the judgment of the Court. By virtue of the divorce judgment that was entered directing that Madison Sweet was to be named the sole beneficiary of the Policy, the proceeds became payable to Madison Sweet upon the death of the Insured. It does not matter that no change of beneficiary form naming Madison Sweet as the sole beneficiary was submitted to MONY following the rendition of the divorce decree. Beth Sweet’s claim for the Policy proceeds was in insupportable in light of the judgment of divorce. Accordingly, Beth Sweet’s breach of contract counterclaim should be dismissed for this additional reason. C. Beth Sweet’s Texas Insurance Code and DTPA counterclaims should be dismissed because the Policy’s death benefit is not payable to Beth Sweet. Beth Sweet’s causes of action under the Texas Insurance Code and DTPA are predicated upon MONY’s purported wrongful denial of Beth Sweet’s claim for the Policy’s death benefit. “According to Texas law, extra-contractual tort claims pursuant to the Texas Insurance Code and the DTPA require the same predicate for recovery as bad faith causes of action.” Douglas v. State Farm Lloyds, 37 F. Supp. 2d 532, 544 (S.D. Tex. 1999) (citation omitted). Thus, “in order to establish a statutory violation under the Insurance Code or the DTPA, the elements necessary Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 15 of 25 PageID 121 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 16 2425119.1/SPSA/33651/0104/021017 to demonstrate an insurer’s breach of the common law duty of good faith and fair dealing must be proven.” Id. To establish a breach of the common law duty of good faith and fair dealing under Texas law, a Plaintiff must show: “(1) there is an absence of a reasonable basis for denying or delaying payment of benefits under the policy and (2) the carrier knew or should have known that there was not a reasonable basis for denying the claim or delaying payment of the claim.” Bilotto v. Allied Prop. & Cas. Ins. Co., 79 F. Supp. 3d 660, 674 (W.D. Tex. 2015). Generally, “an insured may not prevail on a bad faith claim without first showing that the insurer breached the contract.” Id. See also JAW The Pointe, L.L.C. v. Lexington Ins. Co., 460 S.W.3d 597, 602 (Tex. 2015) (“[a]s a general rule there can be no claim for bad faith when an insurer has promptly denied a claim that is in fact not covered.”) (quotations omitted). Where there has been no breach of contract or violation of the duty of good faith and fair dealing, “the bar for establishing extra-contractual liability is high: the insurer must commit some act, so extreme, that [it] would cause injury independent of the policy claim.” Northwinds Abatement, Inc. v. Employers Ins. of Wausau, 258 F.3d 345, 353 (5th Cir. 2001) (quotations omitted).1 1 See also Henry v. Mut. of Omaha Ins. Co., 503 F.3d 425, 429 (5th Cir. 2007) (“causes of action against insurers for bad faith under the DTPA and the Insurance Code require the same predicate for recovery as common law claims: Plainly put, an insurer will not be faced with a tort suit for challenging a claim of coverage if there was any reasonable basis for denial of that coverage.”) (citation and quotations omitted); Lockett v. Prudential Ins. Co. of Am., 870 F. Supp. 735, 741 (W.D. Tex. 1994) (“[I]n order to establish statutory violations under the DTPA and the insurance code, the same elements necessary to establish the insurer’s common law duty of good faith and fair dealing need to be proved . . . . A statutory violation is dependent upon a determination pursuant to law that the insurer breached the duty of good faith and fair dealing. Obviously, unless the breach of the duty of good faith and fair dealing is first established, the essential determination pursuant to law is absent.”) (internal citation and quotations omitted); Harris v. Am. Prot. Ins. Co., 158 S.W.3d 614, 623 (Tex. App.-Fort Worth 2005, no pet.) (“An insurer will not be held liable for violating [the prompt payment statute] unless it is found liable for the underlying insurance claim.”); 15626 Ft. Bend Ltd. DBA Mercedes-Benz of Sugarland v. Sentry Select Ins. Co., 991 F.Supp.2d 932, 947 (S.D. Tex. 2014) (“There is no liability under the [prompt payment statute] if the insurer is not liable on the insurance claim. . .”). Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 16 of 25 PageID 122 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 17 2425119.1/SPSA/33651/0104/021017 Upon Beth Sweet’s divorce from the Insured, the designation of her as primary beneficiary was revoked pursuant to Texas Family Code § 9.301(a), and the Policy proceeds became payable to Madison Sweet, the named alternate beneficiary, pursuant to § 9.301(b). Moreover, the Divorce Decree incorporated and approved the written agreement of Beth Sweet and the Insured that Madison Sweet was to be the sole beneficiary of the Policy. Once the Divorce Decree was entered on May 6, 2013, the parties’ agreement became the judgment of the Court. When the Insured died, the Policy proceeds became payable to Madison Sweet in accordance with the judgment entered by the court and pursuant to § 9.301(b) as Madison Sweet was the named alternate beneficiary of the Policy. Moreover, Beth Sweet’s Counterclaim is devoid of any allegation of extreme acts that would cause injury to her independent of her alleged Policy claim. For these reasons, Beth Sweet’s Texas Insurance Code and DTPA claims should be dismissed. V. Conclusion and Prayer For the reasons stated above, MONY respectfully requests that the Court dismiss Beth Sweet’s Counterclaim with prejudice. STRASBURGER & PRICE, LLP 2301 Broadway St. San Antonio, Texas 78215 Telephone: (210) 250-6000 Facsimile: (210) 250-6100 By: /s/ Mark G. Sessions MARK G. SESSIONS State Bar No. 18039500 Mark.sessions@strasburger.com Attorneys for Plaintiff Dated: February 10, 2017. Respectfully submitted, Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 17 of 25 PageID 123 MONY’S BRIEF IN SUPPORT OF MOTION TO DISMISS 18 2425119.1/SPSA/33651/0104/021017 Certificate of Service This is to certify that on February 10, 2017, the undersigned electronically submitted the foregoing document with the Clerk of the Court for the U.S. District Court, Northern District of Texas, and using the electronic case filing system, I served all counsel of record electronically or by another manner authorized by Federal Rule of Civil Procedure 5(b)(2). /s/ Mark G. Sessions MARK G. SESSIONS Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 18 of 25 PageID 124 Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 19 of 25 PageID 125 Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 20 of 25 PageID 126 Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 21 of 25 PageID 127 Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 22 of 25 PageID 128 Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 23 of 25 PageID 129 Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 24 of 25 PageID 130 Case 7:16-cv-00134-O Document 9 Filed 02/10/17 Page 25 of 25 PageID 131