Cases: No duty to investigate forged signature
An insurance company has no duty to investigate whether the signature of a policy holder on a change-of-beneficiary form is genuine or not, and its duty to pay is satisfied when it turns over the policy proceeds to the fraudulent beneficiary, according to a new decision by the Alabama Supreme Court.
In the case, Jay D. Pinkley had a $100,000 life insurance contract with Fortis Insurance Co. He listed his wife, Bertha, as the beneficiary and his stepson, Sanford, as the contingent beneficiary. The insurance contract stated that, should Jay wish to change the beneficiary, he would have to fill out a form and it would not be in effect until it was filed and recorded by Fortis. Later, someone called Fortis, pretending to be Jay, and requested a change-of-beneficiary form. The form was filled out and the signature was forged to change the beneficiary to Sanford. When Jay died, Fortis paid the proceeds of the policy to Sanford and his wife. Two years later, Bertha tried to get the money from Fortis, but Fortis claimed it had discharged its contractual duties when it paid the money to Sanford. Bertha sued Fortis for negligence, wantonness, breach of contract, and bad-faith failure to pay a claim.
The question on appeal was whether the insurance company had a duty to investigate the authenticity of a signature before paying benefits to the designated beneficiary. Bertha argued that under the contract only Jay, the policy owner, had the authority to change the beneficiary, and he hadn’t done so. Therefore the insurer was in breach of contract. The court, noting that statutes governing payment by insurance companies made no distinction between forged and legitimate forms, rejected the argument. To burden every insurer with an obligation to make sure that all the signatures in its file were genuine would be unreasonable. The court remanded the case with instructions to grant summary judgment to Fortis.
Fortis Benefits Insurance Co. v. Pinkley, 2005 Ala. LEXIS 119 (July 29, 2005).