# Mayo v. Hartford Life Insurance

> District Court, S.D. Texas · March 5, 2002 · 193 F. Supp. 2d 927

URL: https://www.frixlaw.com/law-library/cases/2518454

## Case

- **Full name:** Scott MAYO, Et Al., Plaintiffs, v. HARTFORD LIFE INSURANCE CO., Et Al., Defendants
- **Court:** District Court, S.D. Texas
- **Decided:** March 5, 2002
- **Citations:** 193 F. Supp. 2d 927; 2002 U.S. Dist. LEXIS 8557; 2002 WL 449032
- **Precedential status:** Published
- **Opinion:** Opinion by Atlas
- **Judges:** Atlas
- **Cited by:** 5 later opinions in the Frix Law Library

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## Opinion text

MEMORANDUM OPINION
ATLAS, District Judge.
The parties in this case dispute the validity of corporate-owned life insurance policies purchased by employers on the lives of their employees and former employees. Plaintiffs are Texas citizens suing as representatives of a putative class of individuals, and estates of individuals, who worked for Defendant Camelot Music, Inc. (“Camelot”) and Trans World Entertainment Corporation (“Trans World”) (collectively, the “Camelot Defendants”) and Wal-Mart Stores, Inc. (“Wal-Mart”). These companies, collectively referred to as the “Employer Defendants,” are named in this action as representatives of a putative class of employers who purchased corporate-owned life insurance policies (“COLI policies”) insuring the lives of Texas citizens. The Employer Defendants purchased these life insurance policies from various insurance companies, including Hartford Life Insurance Company (“Hartford”) and AIG Life Insurance Company (“AIG”).
The Court has before it several pending motions. The Camelot Defendants move to dismiss Plaintiffs’ claims in their entire
*930
ty.
1
The Camelot Defendants also move for summary judgment.
2
Plaintiffs have cross-moved for partial summary judgment against the Camelot Defendants.
3
Defendant Wal-Mart moves for summary judgment on the claims against it.
4
The
*931
Wachovia Bank of Georgia, N.A. (“Wacho-via”), as trastee for Defendant Wal-Mart Stores, Inc. Corporation Grantor Trust (‘Wal-Mart Trust”), seeks summary judgment in its favor.
5
Defendant Hartford also moves for summary judgment,
6
and Defendant AIG moves to dismiss and for summary judgment.
7
Finally, Wal-Mart objected to evidence submitted by Plaintiffs.
8
All motions are ripe for adjudication. The Court heard argument on these motions on September 7, 2001 and January 11, 2002.
9
The parties submitted supplemental materials after the January 11 Hearing.
10
*932
Having considered the parties’ submissions, the record, and the applicable authorities, the Court grants some of the motions and denies others, as set forth specifically below.
I.
BACKGROUND FACTS
This case is an uncertified class action that involves a dispute over the rights to benefits from company-owned life insurance policies. Plaintiffs Scott Mayo, Tori-bio Rochas, Jr., Tomas Pena, Daniel Garza, and Charles W. Holmes, Jr. are Texas citizens who were employees of Defendant Camelot (collectively, sometimes referred to as the “Camelot Plaintiffs”). Another Plaintiff is the Estate of Douglas Sims (“Sims Estate”), which is represented in this action by Deborah Sims, the independent executrix of the Sims Estate and a Texas citizen. Douglas Sims was a Texas citizen who worked for Defendant Wal-Mart until his death on December 1, 1998.
Defendant Camelot was a Pennsylvania corporation. It was acquired in December 1997 by Defendant Trans World, a New York corporation with its principal place of business in New York. Defendant Wal-Mart is a Delaware corporation with its principal place of business in Arkansas. Defendant Wal-Mart Trust was established by Wal-Mart in Georgia and is represented in this action by its trustee, Defendant Wachovia, a bank apparently “located” in Georgia.
11
Defendant Hartford is a Connecticut insurance company with its principal place of business in Connecticut. Defendant AIG is a Delaware insurance company with its principal place of business in Delaware.
Camelot employed the Camelot Plaintiffs during the 1980s and 1990s. All Camelot Plaintiffs ceased their employment with Camelot by 1998. Wal-Mart employed Douglas Sims from 1987 until his death in December 1998.
The subject of this case is the validity of COLI policies, insurance policies purchased and owned by the Employer Defendants on the lives of their employees. These policies list the employers as the sole beneficiaries. As explained by Hartford, the employers borrowed money from the insurers to pay the COLI policy premiums.
12
The employers claimed the interest paid on these loans as tax deductions. The employer also earned non-taxable interest through the COLI policies. Upon the death of an employee, the employer would use the death benefit from the policy to repay the premium loans. The Internal Revenue Service (“IRS”) disputes Defendants Camelot and Wal-Mart’s deductions and the tax implications of the COLI policies.
13
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On February 16, 1990, Camelot purchased from Mutual Benefit Life Insurance Company (“Mutual”)
14
COLI policies on the lives of all of its employees who worked more than twenty hours per week.
15
Camelot and/or Trans World is the beneficiary of these policies. Plaintiffs allege that Camelot purchased the policies in secret and did not request permission from its employees. The policies remain in effect.
16
Counsel for Camelot, however, represented to the Court that there was a “very real” possibility that Camelot would surrender the policies. This decision was contingent on the resolution of a tax case concerning the policies.
17
On or about December 28, 1993, Wal-Mart bought COLI policies from Hartford and AIG on the lives of its employees, including Douglas Sims.
18
Like Camelot, Wal-Mart was to receive the proceeds of the policies.
19
Plaintiffs allege that Wal-Mart purchased these policies in secret
*934
and that Douglas Sims never consented to the purchase.
20
Wal-Mart asserts that it paid a portion, between $5,000 and $10,000 for current employees, of the proceeds of the COLI policies to the estates of its deceased employees as a Special Death Benefit.
21
The Special Death Benefit was never paid to the Sims Estate because Wal-Mart discontinued that benefit before Sims’s death.
22
Wal-Mart represented to the Court that it had surrendered all its COLI policies in January 2000.
23
It is undisputed that the Insurer Defendants developed and marketed the COLI policies to employers.
24
Plaintiffs contend that the COLI policies were a tax avoidance scheme that was challenged by IRS.
25
On the other hand, Defendants contend that the COLI policies were used to fund employee benefit plans.
26
II.
THE PARTIES’ BASIC CONTENTIONS
Plaintiffs’ essential contention is that the COLI policies are contrary to Texas public policy because the Employer Defendants do not have an “insurable interest” in their lives.
Plaintiffs seek to certify two classes. First, they request certification of a plaintiff class that consists of:
All Texas citizens (or if deceased, the Texas citizen’s estate) whose lives are or were insured under a COLI policy issued by AIG Life Insurance Company, Mutual Benefit Life Insurance Company or Hartford Life Insurance Company that purportedly named an employer or former employer as the policy’s beneficiary or owner, excluding those who are current officers of the named policy beneficiary or owner (or if deceased, those who were officers of the policy beneficiary at their death) and those who designated the policy’s beneficiary.
Complaint, at 11. Second, Plaintiffs request certification of a Employer Defendant class of:
[C]ompanies that bought insurance policies written by AIG Life Insurance Company, Mutual Benefit Life Insurance Company or Hartford Life Insurance Company, that insure or insured the lives of Texas employees other than corporate officers and name the company as beneficiary or owner.
Id.
Plaintiffs have not yet moved for class certification.
Plaintiffs seek the benefits of the COLI policies. Specifically, Plaintiffs request a declaration, under 28 U.S.C. § 2201 , that (i) the Employer Defendants do not now have and never have had an “insurable
*935
interest” in the lives of their employees, as insurable interests are defined by Texas law, (ii) that the Employer Defendants are not the lawful owners of the COLI polices, and (in) that Plaintiff employees are the “lawful owners” of the COLI policies, with all rights of the “owner” as defined in the policies. Plaintiffs seek a final judgment “providing remedies necessary to give the declarations force and effect,” which Plaintiffs define as a final judgment (i) placing the polices and all benefits from the policies in a constructive trust for the benefit of Plaintiffs, (ii) awarding “money identifying the amount held in constructive trust by members of the defendant-employer class for the benefit of the plaintiffs and members of the plaintiff-insured person class”; and (iii) disgorging the “money unjustly had and received by members of the defendant-employer class through the [COLI] policies in issue.” Complaint, at 12-13.
Defendants assert numerous defenses to Plaintiffs’ claims. First, Defendants contend that Plaintiffs’ claims are founded upon Texas law, but Georgia law governs this case and Plaintiffs cannot state a cause of action under Georgia law. Defendant Wal-Mart contends that Plaintiffs’ claims are preempted by Employee Retirement Income Security Act, 29 U.S.C. § 1001
et seq.
(“ERISA”). Defendant AIG contends that the claims of Plaintiff Sims Estate are time-barred since the COLI policy sold to Wal-Mart on Sims’s life was created in December 1993 and Wal-Mart gave Sims notice of the existence of the insurance at about that time. Defendant AIG also argues that the Sims Estate has failed to state a claim under the insurable interest doctrine and moves to dismiss these claims. The Camelot Defendants contend that the Camelot Plaintiffs’ claims are not ripe, since these Plaintiffs all are still living, and their causes of action accrue only when the death benefits under the COLI policies are payable. Finally, the Camelot Defendants contend that the Camelot Plaintiffs’ claims are not legally viable because the Texas insurable interest doctrine does not provide a remedy to living insureds and does not allow reformation of the insurance contract. Each of these matters will be addressed in turn.
III.
APPLICABLE LEGAL STANDARDS
The parties have filed numerous motions to dismiss and motions for summary judgment. The Court notified the parties at the January 11, 2002 conference that if documents or other evidence outside of the pleadings had been submitted in connection with a motion to dismiss, the Court intended to convert the motion, if appropriate, to a motion for summary judgment.
See
Fed. R. Civ. P. 12(b). The Court therefore permitted the parties to make additional submissions.
A.
Standard for Motions to Dismiss
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure is viewed with disfavor and is rarely granted.
Kennedy v. Tangipahoa Parish Library Bd. of Control,
224 F.3d 359, 365 (5th Cir.2000). The complaint must be liberally construed in favor of the plaintiff, and all facts pleaded in the complaint must be taken as true.
Zephyr Aviation, L.L.C. v. Dailey,
247 F.3d 565, 573 (5th Cir.2001). The district court may not dismiss a complaint under Rule 12(b)(6) “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”
Conley v. Gibson,
355 U.S. 41, 45-46 , 78 S.Ct. 99 , 2 L.Ed.2d 80 (1957);
Southern Christian Leadership Conf. v. Supreme Court of Louisiana,
252 F.3d 781, 786 (5th Cir. 2001). Thus, the Court must determine whether the complaint states any valid
*936
claim for relief in the light most favorable to the plaintiff and with every doubt resolved in the plaintiffs behalf.
Lowrey v. Texas A & M Univ. Sys.,
117 F.3d 242 , 247 (5th Cir.1997). Furthermore, a plaintiff must plead specific facts, not mere conclusory allegations or unwarranted deductions of fact, in order to avoid dismissal for failure to state a claim.
Collins v. Morgan Stanley Dean Witter,
224 F.3d 496, 498 , (5th Cir.2000).
B.
Summary Judgment Standard
In deciding a motion for summary judgment, the Court must determine whether “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c);
Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 , 106 S.Ct. 2548 , 91 L.Ed.2d 265 (1986);
Little v. Liquid Air Corp.,
37 F.3d 1069, 1075 (5th Cir.1994)
(en banc); Boze v. Branstetter,
912 F.2d 801, 804 (5th Cir.1990). Material facts are those facts “that might affect the outcome of the suit under the governing law.”
Smith v. Brenoettsy,
158 F.3d 908, 911 (5th Cir.1998). The facts are to be reviewed with all “justifiable inferences” drawn in favor of the party opposing the motion.
Morris v. Covan World Wide Moving, Inc.,
144 F.3d 377, 380 (5th Cir.1998). However, factual controversies are resolved in favor of the nonmovant “only when there is an actual controversy- — that is, when both parties have submitted evidence of contradictory facts.”
Laughlin v. Olszewski,
102 F.3d 190, 193 (5th Cir. 1996).
The party moving for summary judgment has the initial burden of demonstrating the absence of a material fact issue with respect to those issues on which the movant bears the burden of proof at trial. The movant meets this initial burden by showing that the “evidence in the record would not permit the nonmovant to carry its burden of proof at trial.”
Smith,
158 F.3d at 911 .
The burden then shifts to the nonmov-ant to demonstrate that summary judgment is inappropriate.
See Morris,
144 F.3d at 380 . This is accomplished by producing “significant probative evidence” that there is an issue of material fact so as to warrant a trial,
see Texas Manufactured Hous. Ass’n v. Nederland,
101 F.3d 1095, 1099 (5th Cir.1996);
Taylor v. Principal Financial Group, Inc.,
93 F.3d 155 , 161 (5th Cir.1996);
Transamerica Ins. Co. v. Avenell,
66 F.3d 715, 718-19 (5th Cir. 1995);
Forsyth v. Barr,
19 F.3d 1527, 1533 (5th Cir.1994), and that is “sufficient to support a jury verdict.”
Morris,
144 F.3d at 380 ;
Doe v. Dallas Indep. School
Dist., 153 F.3d 211 , 215 (5th Cir.1998). This burden is not met by mere reliance on the allegations or denials in the non-movant’s pleadings.
E.g., Morris,
144 F.3d at 380 . Likewise, “unsubstantiated or conclusory assertions that a fact issue exists” do not meet this burden.
Id.
Instead, the non-moving party must present specific facts which show “the existence of a ‘genuine’ issue concerning every essential component of its case.”
Id.
Dispute about a material fact is genuine only if evidence is such that reasonable a jury could return a verdict for nonmoving party.
Stafford v. True Temper Sports,
123 F.3d 291, 294 (5th Cir.1997);
Hanks v. Transcontinental Gas Pipe Line Corp.,
953 F.2d 996, 997 (5th Cir.1992).
In the absence of any proof, the Court will not assume that the nonmovant could or would prove the necessary facts.
McCollum Highlands, Ltd. v. Washington Capital Dus, Inc.,
66 F.3d 89, 92 (5th Cir.),
revised on other grounds upon denial of reh’g,
70 F.3d 26 (5th Cir.1995);
Little,
37 F.3d at 1075 . Rule 56 mandates the entry
*937
of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a sufficient showing of the existence of an element essential to the party’s case, and on which that party will bear the burden at trial.
Little,
37 F.3d at 1075 .
C.
Texas Insurable Interest Doctrine
“[I]t is against the public policy of the State of Texas to allow anyone who has no insurable interest to be the owner of a policy of insurance upon the life of a human being.”
Griffin v. McCoach,
123 F.2d 550, 551 (5th Cir.1941);
accord, DeLeon v. Lloyd’s London, Certain Underwriters,
259 F.3d 344, 350 (5th Cir.2001);
Cheeves v. Anders,
87 Tex. 287 , 28 S.W. 274, 275 (1894);
Tamez v. Certain Underwriters at Lloyd’s, London, International Accident Facilities,
999 S.W.2d 12, 16-17 (Tex.App.-Houston [14th Dist.] 1999, pet. denied). Put another way, the “State of Texas has established a fixed policy with reference to its own citizens, by and through which it refuses to permit one who has no insurable interest in a living person to be and become the beneficiary in an insurance policy written on the life of such living person.”
Cole v. Browning,
187 S.W.2d 588, 593 (Tex.Civ.App.-Ft. Worth 1945, writ refd w.o.m.) (citing
Cheeves v. Anders,
87 Tex. 287 , 28 S.W. 274 (1894)). The doctrine has been defined more specifically to provide that a “putative beneficiary only has an insurable interest in the life of another where the beneficiary is £(1) so closely related by blood or affinity that he wants the other to continue to live, irrespective of the monetary considerations; (2) a creditor; [or] (3) one possessing a reasonable expectation of pecuniary benefit or advantage from the continued life of another.’ ”
Tamez,
999 S.W.2d at 17 (quoting
Drane v. Jefferson Standard Life Ins. Co.,
139 Tex. 101 , 161 S.W.2d 1057, 1058-59 (1942));
Stillwagoner v. Travelers Ins. Co.,
979 S.W.2d 354, 360-61 (Tex. App.-Tyler 1998, no pet.);
DeLeon,
259 F.3d at 350 .
Since the mid-1950’s, by Texas statute, Tex. Ins. Code, art. 3.49-1, §§ 2-3, an individual may designate his own beneficiary — even if that beneficiary otherwise lacks an insurable interest under common law. Texas law also allows an employer to obtain death benefit from “key-man” life insurance on a crucial employee.
See Ta-mez,
999 S.W.2d at 18 n. 4 (citing Tex. Ins. Code, art. 3.49).
27
IV.
CHOICE OF LAW
A.
Overview
Defendants all raise a threshold choice of law issue.
28
The jurisdiction of this Court is based on diversity of citizenship. 28 U.S.C. § 1332
29
Defendants argue that Georgia law — which Defendants contend does not recognize Plaintiffs’ causes of action — governs this dispute. In response, Plaintiffs argue that Texas state courts
*938
would apply the Texas common law insurable interest doctrine to COLI policies on the lives of Texas citizens.
Relevant to this choice of law issue is the place where the COLI policy transactions occurred. Defendants Camelot and Wal-Mart contend that their COLI policy transactions are centered in the state of Georgia. The Camelot Defendants claim that they intended to situate their COLI policies in Georgia, and intended for Georgia law to apply. According to James Van Etten, a Vice President of Hartford, Camelot’s COLI policies were issued in Georgia and were administered by a third party administrator in that state.
30
Other than these conclusory assertions, the Camelot Defendants have offered no evidence to support this contention. Plaintiffs have submitted materials from a tax case related to the Camelot COLI policies. Camelot’s insurance broker testified in that proceeding that the COLI policies had closer ties to Ohio then Georgia.
31
Plaintiffs also have provided evidence that some activity related to the administration of the COLI policies occurred in Texas, since death certificates were obtained in Texas when insureds who died were Texas residents.
32
Wal-Mart submits evidence that it established the Wal-Mart Trust, which was created in Georgia to own the COLI policies, to forward funds to pay policy premiums to the insurers, and to transmit policy proceeds to Wal-Mart.
33
Wal-Mart further asserts that it applied for and received the policies in Georgia and intended the policies to be governed by Georgia law.
34
Defendants strenuously contend that the resolution of the choice of law issue is strictly determined by the Texas conflict of law rules relating to contract actions.
35
However, Plaintiffs are not signatories to the COLI policies. Plaintiffs do
not
claim that Defendants are liable for breaching the terms of those contracts. Plaintiffs do not seek to enforce rights under the terms of the COLI policy contracts as written. Plaintiffs did not participate in the negotiation for the contracts. Plaintiffs did not
*939
receive or give definitive consideration for their involvement in the contracts.
36
Thus, Plaintiffs’ role is not the ordinary participant in the formation of a contract and Plaintiffs’ causes of action do not fit the typical breach of contract rubric. Rather, Plaintiffs’ claims arise under the Texas common law insurable interest doctrine with equitable remedies sought under unjust enrichment principles.
The parties have cited and the Court is aware of no Texas authority that employs contract choice of law principles in an action that involves purely the insurable interest doctrine. This case accordingly raises a choice of law issue of first impression.
The decision as to what state’s law will apply must be made for each disputed claim separately. It is possible that the state whose law applies to the COLI policies in a dispute between the signatories to the policy contract may differ from the state whose law applies to issues regarding a non-signatory’s claim about the absence of an insurable interest. Ultimately, the relevant question is whether a Texas court would apply Texas or Georgia law on insurable interests.
Defendants insist that contract choice of law principles should be applied. Plaintiffs do not supply any probative alternative approach. Since Plaintiffs want to benefit from the insurance contracts, and sive contract doctrines are a focus of many the contentions of the parties, the Court concludes that the contract claim choice of law analysis provides an appropriate framework. The Court holds that Texas courts would apply the Texas insurable interest doctrine, even though other disputes concerning these COLI policies may be governed by other states’ laws.
B.
Applicable Contract Choice of Law Principles
In diversity cases, federal courts must apply the conflict of law rules of the state in which they sit.
Klaxon v. Stentor,
313 U.S. 487, 496 , 61 S.Ct. 1020 , 85 L.Ed. 1477 (1941);
Denman v. Snapper Div.,
131 F.3d 546, 548 (5th Cir.1998). Accordingly, this Court will apply the conflict of laws principles followed by Texas state courts.
37
The Texas Supreme Court has adopted the “most significant contacts” test of the Restatement (Second) of Conflicts of Laws § 6 (“Restatement”) for determining all choice of law issues.
38
Duncan v. Cessna Aircraft Co.,
665 S.W.2d 414, 420-21 (Tex. 1984);
see also Minnesota Mining & Mfg. Co. v. Nishika Ltd.,
953 S.W.2d 733, 735-36 (Tex.1997);
Maxus Exploration v. Moran Bros., Inc.,
817 S.W.2d 50, 53 (Tex. 1991).
The Restatement provides that a court must follow, “subject to constitutional restrictions ... a statutory directive of its
*940
own state on choice of law.” Restatement § 6(1);
Maxus Exploration,
817 S.W.2d at 54 . Neither Plaintiffs nor Defendants assert that a statutory directive governs the outcome of the choice of law issue in this case. In the absence of a statutory directive, the Court is to consider the relevant choice of law principles in the Restatement.
Id.
The Restatement’s analysis commences with § 6, which sets forth the pertinent overriding principles:
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to be applied.
Restatement § 6(2).
In contract cases, Texas courts examine the § 6 principles in light of the parties specific “contacts” or factors listed in Restatement § 188. The pertinent contacts under § 188 are:
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
(d) the location of the subject matter of the contract, and
(e) the domicile, residence, nationality, place of incorporation and place of business of the parties.
Restatement § 188(2);
Minnesota Mining and Mfg. Co.,
953 S.W.2d at 735-36 ;
Maxus Exploration,
817 S.W.2d at 53-54 ;
Houston Casualty Co. v. Certain Underwriters at Lloyd’s London,
51 F.Supp.2d 789, 797 (S.D.Tex.1999). “These contacts are to be evaluated according to their relative importance with respect to the particular issue.” Restatement § 188(2). In general, it is not the number of contacts with a particular state that is determinative.
Duncan,
665 S.W.2d at 421 . “Some contacts are more important than others because they implicate state policies underlying the particular substantive issue.”
Id.
Ultimately, the “selection of the applicable law depends on the qualitative nature of the particular contacts.”
Id.
Once the facts pertaining to the parties’ and the dispute’s contacts with various states are established, the Court is to decide the choice of law issue as a matter of law.
Id.
C.
Analysis of Restatement § 6 Considerations in Insurable Interest Cases
The Court analyzes the § 6 principles first, and then considers the § 188 contacts in that context. The importance of the § 6 principles is heightened in this case because this case does not fit the typical contract dispute pattern. As explained in Section IV.A.,
supra,
Plaintiffs’ relationship with Defendants, the actual contracting parties, is unique in that Plaintiffs did not participate in or agree to the creation of the insurance contracts in issue.
1. The Relevant Policies of the Forum, Policies of Other Interested States, and the Relative Interests of Those States in the Determination of the Particular Issue
Texas Public Policy Generally.
— Texas courts have repeatedly refused to follow the majority rule adopted by other states that allows non-creditors and non-family members to have an insurable interest in another’s life.
E.g., DeLeon,
259 F.3d at 350 (employer did not have insurable interest in employee’s life);
Griffin ,
123 F.2d at
*941
551 (assignees of insured’s former business partners and life insurance beneficiaries did not have insurable interest);
Drane v. Jefferson Standard Life Ins. Co.,
139 Tex. 101, 105-06 , 161 S.W.2d 1057, 1058-59 (1942) (godson had insurable interest in godmother’s life only because godson had a reasonable expectation of pecuniary benefit from godmother, who made frequent and substantial gifts to godson during his lifetime);
Cheeves,
87 Tex. at 291 , 28 S.W. at 275 (former partner of insured did not have insurable interest after leaving partnership);
Tamez,
999 S.W.2d at 16-17, 19 (employer did not have insurable interest in employees);
Stillwagoner,
979 S.W.2d at 360-61 (employer did not have insurable interest in employee);
Cole,
187 S.W.2d at 593 (former wife did not have insurable interest in former husband). Texas maintains a strong public policy requiring the beneficiary of an insurance contract to have an insurable interest in the life of the insured.
The
Griffin
Cases, Other Insurable Interest Decisions and Texas Public Policy.
— Plaintiffs predominantly argue that the choice of law decision in this case is governed by the opinions of the United States Supreme Court in
Griffin v. McCoach,
313 U.S. 498, 506 , 61 S.Ct. 1023 , 85 L.Ed. 1481 (1941), and the Fifth Circuit on remand in
Griffin v. McCoach,
123 F.2d 550, 551 (5th Cir.1941). The Court concludes that the
Griffin
cases do not dispose of the issue presented by Plaintiffs’ claims, but the opinions provide valuable insight into the insurable interest doctrine and its importance as law of the State of Texas.
In
Griffin,
the Supreme Court held that Texas courts have the constitutional authority to “refuse enforcement of an insurance contract where the beneficiaries have no insurable interest on the ground of its interference with local law.” 313 U.S. at 506, 61 S.Ct. 1023 . The personal representatives of Gordon, a deceased Texas citizen, disputed the entitlement of certain beneficiaries of a life insurance policy on Gordon’s life.
39
Id.
at 499-500 , 61 S.Ct. 1023 . The Supreme Court stated:
*942
It is “rudimentary” that a state “will not lend the aid of its courts to enforce a contract founded upon a foreign law where to do so would be repugnant to good morals, would lead to disturbance and disorganization of the local municipal law, or, in other words, violate the public policy of the state where the enforcement of the foreign contract is sought.”
Id.
at 506 , 61 S.Ct. 1023 (citation omitted). The court held that it would be constitutionally permissible for a Texas court to refuse the enforcement of a foreign contract that violated local public policy embodied in the Texas insurable interest doctrine.
Id.
at 507 , 61 S.Ct. 1023 . However, the court explained that Texas may only apply its public policy to foreign contracts that relate to “anything done or to be done within [its] borders.”
Id.
at 507 , 61 S.Ct. 1023 . The Supreme Court in
Griffin
did not decide whether Texas courts would apply the Texas insurable interest doctrine to foreign life insurance contracts on the lives of Texas citizens.
Id.
at 504, 507, 61 S.Ct. 1023 . Instead, the court remanded the issue to the Fifth Circuit.
Id.
On remand, the Fifth Circuit implicitly concluded that Texas law applied,
40
and interpreted the effect of the Texas insurable interest doctrine on the facts before it.
Griffin,
123 F.2d at 551 . The Fifth Circuit held that Texas law required the insurance proceeds to be paid to the estate of the insured, rather than the contractual beneficiaries’ assignees who lacked an insurable interest in the life of the insured under Texas law. The court of appeals gave two reasons for its holding. First, the insurance proceeds were in the custody of the court.
41
Id.
Second, the court of appeals held that “it is against the public policy of the State of Texas to allow anyone who has no insurable interest to be the owner of a policy of insurance upon the life of a human being.”
Id.
The court further stated that it had “no reason to think that courts of Texas would permit citizens of other states to speculate upon the death of one of its citizens by means of contracts made without the state when the same is
*943
forbidden within its territorial limits.”
Id.
42
The
Griffin
decisions accurately reflect Texas precedent on choice of law and policy. For example, a Texas court in
Manhattan Life Ins. Co. v. Cohen,
139 S.W. 51, 57 (Tex.Civ.App.-San Antonio 1911, writ dism’d), held that an assignment of the beneficial interest in life insurance policies on the life of a Texas citizen to one with no insurable interest was governed by Texas law. The
Cohen
court emphasized the importance of Texas policy by stating that, even if the assignment were governed by, and valid under, another state’s law, “it may be doubted whether, on account of its being contrary to the distinctive policy of the forum in which the suit was brought, such laws would be given effect by the courts of Texas.”
Id.
In
Cole v. Browning,
another Texas appellate court held that Texas had a legitimate governmental interest in deciding the rights to an insurance policy’s proceeds when the insured died while he and the named beneficiary under the policy were temporarily residing in Texas. 187 S.W.2d 588, 593 (Tex.Civ.App.-Fort Worth 1945, writ ref d w.o.m.).
43
The court held that a Texas court will apply Texas insurable interest law to all insurance policies relating to persons residing in Texas, even if these individuals are citizens of states with contrary insurable interest law.
Id.
at 594 . “A state may prohibit the enjoyment by persons within its borders of rights acquired elsewhere which violate its laws or public policy.”
Id.
at 594 ;
accord Bell v. Phillips,
152 F.2d 188, 190 (5th Cir.1945).
The Current Viability of Texas Insurable Interest Doctrine.
— In response to Plaintiffs’
Griffin
arguments, Defendants characterize Texas policies and the insurable interest doctrine as obsolete. These arguments are meritless. For example, Wal-Mart argues that the public policy of Texas is an “old common law rule that has been heavily weakened by statute.”
44
Yet, Texas courts have consistently and recently applied the insurable interest doctrine.
45
Further, although Texas courts recognized
*944
certain exceptions to the doctrine even before portions of the doctrine and its exceptions were codified in the Texas Insurance Code,
see
Tex. Ins. Code, art. 3.49, Texas courts have held firm in recent years declining to give employers an insurable interest in all of their employees: “The mere existence of an employer/employee relationship is never sufficient to give the employer an insurable interest in the life of the employee.”
Stillwagoner,
979 S.W.2d at 361 ;
see Tamez,
999 S.W.2d at 17-19 .
46
Accordingly, Defendants’ attempts to characterize the insurable interest doctrine as “obsolete” or “weakened” fails.
Hartford asserts that, even if the Texas insurable interest doctrine has continued vitality, Article 21.42 of the Texas Insurance Code expresses the state’s current policy to limit the extraterritorial application of Texas law. Article 21.42 provides in relevant part:
Any contract of insurance payable to any citizen or inhabitant of this State by any insurance company or corporation doing business within this State shall be held to be a contract made and entered into under and by virtue of the laws of this State relating to insurance.
Hartford argues that “Article 21.42 is designed to ensure only that Texas law will apply to contracts made between Texas citizens and insurance companies doing business in Texas,
when and, only when
those contacts are made in the course of the company’s Texas business,” and thus the Texas Legislature intended to exclude COLI policies payable to beneficiaries outside Texas.
47
This argument is rejected. First, there is nothing in Article 21.42 to support the inference that the Texas Legislature, in enacting Article 21.42, intended to repeal by implication the longstanding, prophylactic common law insurable interest doctrine. The Texas Legislature by Article 21.42 expressed its intent to expand Texas regulatory authority to foreign entities doing business in Texas, who elect to pay or designate beneficiaries who live in or are citizens of Texas. There is no basis to conclude that this legislative decision represents an intention by Texas to abandon silently the insurable interest doctrine that protects its citizens in a different circumstance, namely, when the insured,
*945
rather than the beneficiary, is the Texas resident. The Court therefore rejects Defendants’ attempt to discount the Texas insurable interest doctrine as obsolete or as limited by Article 21.42.
Georgia’s Interests in Determination of the Issues.
— Defendants argue that Georgia has a stronger interest than Texas in the application of its public policy. Defendants also posit that enforcement of the Texas policy in this case will infringe Georgia’s public policy.
48
These contentions are singularly unpersuasive. Nothing in the record establishes that the State of Georgia has an interest in enforcing its laws in Texas as to Texas inhabitants. Indeed, Defendants fail to answer meaningfully the question why the Georgia Legislature or Georgia citizens care if an employer (within or outside of Georgia) is prohibited from obtaining insurance on the life of its Texas employees. There is no indication that the State of Georgia intended this result when adopting its insurable interest statutes.
Defendants’ analysis, taken to its logical conclusion, is that the state of Georgia may unilaterally authorize any company or person claiming a connection to that state to abrogate a contrary public policy in the remaining forty-nine states. Under Defendants’ theory, in order to impose Georgia’s law on all other states, all any employer need do is purchase a COLI policy on employees nationwide, while the employer’s representatives are in Georgia, or purchase through a legal entity created for the purpose of invoking Georgia law.
49
If this extraterritorial application of one state’s law to citizens of another state were applied universally, then states could not enforce their own conflict of laws doctrines in their own courts, and states’ substantive law would be impossible to ascertain with any certainty.
In any event, this Court is not obligated to give effect within the State of Texas to the laws of other states if the laws violate the fundamental Texas public policy. A “state is not required to enforce a law obnoxious to its public policy.”
Griffin,
313 U.S. at 507 , 61 S.Ct. 1023 .
As to the extraterritorial application of state law, Defendants also rely on
Home Insurance Co. v. Dick,
281 U.S. 397 , 50 S.Ct. 338 , 74 L.Ed. 926 (1930). Defendants argue that application of the Texas insurable interest doctrine in the case at bar “raises serious Constitutional questions involving due process.”
50
This argument lacks merit.
Home Insurance
involved a property damage claim for coverage under insurance issued in Mexico by a Mexican underwriter of a tugboat that operated outside the United States. The insurance was owned and negotiated by a person while living and working in Mexico.
51
Neither the insur-
*946
anee contract, the subject-matter of that contract, nor the parties had any meaningful contacts with Texas. The Supreme Court ruled that “[a] state may of course prohibit and declare invalid the making of certain contracts within its borders. Ordinarily, it may prohibit performance within its borders, even of contracts validly made elsewhere, if they are required to be performed within the state and their performance would violate its laws.”
Home Insurance,
281 U.S. at 407 , 50 S.Ct. 338 .
52
The
Home Insurance
ruling thus actually supports Plaintiffs’ position.
The facts in the case at bar are also materially distinguishable from those in
Home Insurance .
Here, Defendants chose to insure the lives of employees who, at the inception of the policies in issue, lived (and now may still live) in Texas. At the time these employees were insured, information on these employees had to be gathered from Texas. The insurable risk is inescapably connected to the insured’s physical location, which, for Texas insureds, is in the State of Texas. When insureds residing in Texas die, information must be obtained from this state, and their estates are likely to be probated here. These connections to Texas are materially different from
Home Insurance
where there was an absence of any contemporaneous contact by the parties or the property subject to the insurance in issue.
53
In addition, the Supreme Court decided
Home Insurance
eleven years
before
its
Grijfin
decision. In
Griffin,
as discussed above, the Supreme Court specifically held that it would be constitutionally permissible for Texas to apply its insurable interest doctrine to a foreign contract.
Thus, the Court rejects Defendants’ arguments that Georgia has a stronger interest in the disputed issues than Texas. Giving Georgia law the extraterritorial effect requested by Defendants would encroach on the Texas Legislature’s and Texas courts’ prerogatives. The Court also rejects Defendants’ contention that
Home Insurance
controls this case or limits Texas courts’ application of the Texas insurable interest doctrine. Requiring compliance with the Texas insurable interest doctrine is not an improper extraterritorial application of Texas law.
*947
2. The Basic Policies Underlying the Particular Field of Law
The issues in this case implicate the fundamental purpose of and policies underlying life insurance. Under Texas law, “the essential foundation of a life insurance policy is the life of a human being.”
Gibralter Colorado Life Co. v. Taylor,
132 Tex. 328 , 123 S.W.2d 318, 321 (1939). The primary purpose of life insurance is the “protection of those who would be pecuni-arily damaged by the death of the insured.”
Hildbrandt v. Ames,
27 Tex.Civ. App. 377, 66 S.W. 128, 131 (Tex.Civ.App. 1901, writ refd). Texas courts have held generally that “to permit those who would not be so damaged to receive the benefit of the policy would be to defeat the purpose and intent of the contract.”
Id.; accord Hansen v. Blackmon,
169 S.W.2d 955, 962 (Tex.Civ.App.-El Paso 1942),
aff'd
140 Tex. 536 , 169 S.W.2d 962 (1943) (“The primary purpose of life insurance is not investment, but protection.”). Texas courts follow this principle when applying the insurable interest doctrine:
Bluntly expressed, insurable interest ... is determined by monetary considerations, viewed from the standpoint of the beneficiary. Would [the beneficiary] regard himself as better off from the standpoint of money, would [the beneficiary] enjoy more substantial economic returns should the insured continue to live; or would [the beneficiary] have more, in the form of the proceeds of the policy, should [the insured] die? Therefore, it is said that if the situation is such that [the beneficiary] might be led to conclude that he would profit by [the insured’s] death, the policy is void as to him since the public has a controlling concern that no person have an interest in the early death of another, an interest that may give rise to a temptation to destroy [the insured’s] life.
Drane,
161 S.W.2d at 1059 . Enforcement of the Texas insurable interest doctrine advances Texas policies underlying insurance law.
54
3. The Protection of Justified Expectations and the Need for Certainty, Predictability, and Uniformity of Result
Defendants argue that the protection of justified expectations, and the need for certainty, predictability, and uniformity of result, demand enforcement of the COLI policies using Georgia law. Defendants stress that, when they created the COLI policies, they expected that Georgia law would apply to those policies. Defendants acknowledge that there are no choice of law provisions in the COLI policies. Nevertheless, Defendants contend that the choice of law provisions in the Wal-Mart Trust Agreement, the Wal-Mart Trust’s location, and all Defendants’ activities in Georgia require that the issues in this case be governed exclusively under Georgia law. Defendants further assert that application of Georgia law nationwide would advance the goal of uniformity and predict
*948
ability of the result under the COLI policies.
Under the Restatement, reliance by contracting parties on their agreed terms, including selection of laws, ordinarily is a significant consideration. Restatement § 187. The parties’ agreed terms, however, cannot control in every circumstance. Particularly when an integral interested party, such as the insured in an insurance contract, played no active part in the creation of the contract in issue, the other parties’ self-serving expectations cannot automatically govern choice of law issues in the parties’ disputes.
55
Plaintiffs did not negotiate or agree to the COLI contract terms. Nor did many even know of the insurance at all.
The Court concludes that Defendants’ expectation when entering into the COLI contracts that Georgia law would apply with regard to Texas insureds was not justified. Defendants admittedly set up the COLI policies in Georgia and selected Georgia law to avoid contrary public policies in states such as Texas. In doing so, Defendants are deemed to have taken the risk that a Texas court would decline to apply Georgia law, as prior Texas cases indicated.
Defendants also fail to demonstrate how application of Georgia law to Texas insureds advances the need for certainty, predictability, and uniformity of result. Defendants provide no meaningful reason why Texas citizens and residents should not be able to count on enforcement of the longstanding Texas insurable interests doctrine. Rather, Defendants look at the matter from solely their own perspective, contending that private parties should be able to contract for the result they desire without regard to the effect of the contract on others. The Restatement § 6’s goal of the need for certainty, predictability, and uniformity of result is not intended to serve as a subterfuge for parties to override public policies and laws. The goal of certainty, predictability, and of uniformity served in the case at bar by the consistent application of Texas law to Texas citizens, not application of Georgia law at Defendants’ behest.
4. Needs of Interstate and International Systems and Ease in the Determination and Application of the Law to be Applied.
Defendants contend that it would serve the interstate system for courts to permit parties to make contracts involving residents of other states. This contention is unfounded when the contracts flout an established public policy of another state by manipulating choice of law considerations, the interstate system is undermined.
Cf., Griffin,
123 F.2d at 551 (“[W]e have no reason to think that the courts of Texas would permit citizens of other states to speculate upon the death of one of its citizens by means of contracts made without the state when the same is forbidden within its territorial limits.”). Interstate or international systems are advanced by each jurisdiction having easily ascertainable, certain, uniform, and predictable law governing disputes in that jurisdiction.
The application of Texas law to insurance contracts on the lives of Texas residents and citizens is an easily ascertainable rule that respects each jurisdiction’s choices and priorities. The application of Texas insurable interest law is not difficult. As set forth above, the doctrine is well established in Texas and has been uniformly applied. It is common that, in
*949
matters a state has authority to regulate, the state’s courts consistently will apply that state’s law to disputes involving its citizens. Defendants’ insistence that private contracting parties be able to impose on non-signatories the state law the contracting parties select, despite the impact of that law on other state’s citizens, contravenes the uniformity of Texas law, thereby undercutting the needs of an interstate system and the promotion of ease of determination and application of the law to be applied.
D.
Application of Texas Choice of Law Principles to the COLI Contracts
1. Analysis of Restatement § 188 Principles for Contract Disputes
As discussed above, the choice of law analysis in contract cases focuses on the parties’ contacts with a jurisdiction in the following respects:
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
(d) the location of the subject matter of the contract, and
(e) the domicile, residence, nationality, place of incorporation and place of business of the parties.
Restatement § 188(2);
Minnesota Mining and Mfg. Co.,
953 S.W.2d at 735-36 ;
Maxus Exploration,
817 S.W.2d at 53-54 ;
Houston Casualty Co. v. Certain Underwriters at Lloyd’s London,
51 F.Supp.2d 789, 797 (S.D.Tex.1999). The choice of law analysis must be performed under § 188(2) for each disputed issue. “Some contacts are more important than others because they implicate state policies underlying the particular substantive issue.”
Duncan v. Cessna Aircraft Co.,
665 S.W.2d 414, 421 (Tex.1984).
56
The comments to the Restatement further teach that “[standing alone, the place of contracting is a relatively insignificant contact.” Restatement § 188 cmt. e. Ultimately, the selection of the applicable law depends on the qualitative nature of the parties’ particular contacts with the respective jurisdictions.
Duncan,
665 S.W.2d at 421 .
2. The Wal-Mart COLI Policies
In this case, the Wal-Mart Defendants allege that the Wal-Mart COLI policies have the most significant contacts with the state of Georgia and that Wal-Mart intended Georgia’s law to apply. The Wal-Mart Defendants allege that the Wal-Mart Trust was created in Georgia to purchase the COLI policies from Defendants AIG and Hartford. The Wal-Mart Trust Agreement (“Trust Agreement”) named Wachovia, a bank doing business in Georgia, as the Trustee and established Georgia as the situs of the Wal-Mart Trust.
57
Wal-Mart, through the Wal-Mart Trust, directed the purchase of the COLI policies between December 1993 and sometime in 1995.
58
Raymond H. Sapp, a trust officer
*950
of Wachovia who was involved with creation of the Wal-Mart Trust, attests that: (i) Wal-Mart applied for and was issued the COLI policies in the state of Georgia, (ii) premium payments were made by the Wal-Mart Trust by wire transfer from Georgia to the offices of AIG and Hartford, and (iii) none of the COLI policies were made, issued, received, paid, or performed in Texas.
59
Wal-Mart established the Wal-Mart Trust and “structured its COLI program in this way to take advantage of favorable Georgia law on ‘insurable interest.’ ”
60
Based on these facts, Wal-Mart and the Insurer Defendants argue that all of the contacts listed in Restatement § 188 favor the application of Georgia law.
61
After consideration of all the parties’ contacts with various states, in light of the contacts’ relative importance to the insurable interest issue, this Court holds that Texas choice of law rules dictate that Texas insurance law should apply to Plaintiffs’ claims. The detailed analysis follows.
Place of Contracting.
— Defendant Wal-Mart contends that its evidence establishes that the COLI policies were applied for and issued in Georgia. Plaintiffs point to inconsistencies in Wal-Mart’s evidence and argue that they need discovery to obtain evidence that raises fact issues regarding the place of contracting.
62
The Court finds Defendants’ evidence is vague and inconclusive. Sapp, a Wachovia bank employee who was responsible for
*951
trust administration generally and the Wal-Mart Trust in particular, avers that the COLI policies Wal-Mart ultimately purchased were “applied for” in a meeting in Atlanta, Georgia on December 28, 1993, and were “issued” and “received by the Trust” there.
63
This and the other evidence before the Court suggests that Sapp signed the application in Georgia and sent them to the insurers’ home offices in various states and the insurers sent the policies from their home offices to Sapp in Georgia. The place of Sapp’s signing the AIG policy documents is pertinent but not dispositive as to the “place of contracting” factor. The AIG application also is signed by the insurance agent and an AIG Vice President, but their locations when they signed are not established in the record. Nothing in the record specifically establishes that the other parties to the contract documents signed in Georgia. Thus, there is a fact issue as to the “place of contracting.”
64
This fact issue, however, is not material. Even if there was sufficient evidence to meet Wal-Mart’s summary judgment burden to establish Georgia as the place of contracting, the Court finds that this factor alone is inadequate to justify the application of Georgia law. Each contact must be evaluated “according to their relative importance with respect to the particular issue.” Restatement § 188(2). Defendants contrived to make Georgia the place of contracting for the express purpose of taking advantage of favorable Georgia law on insurable interests. Wal-Mart attempted artificially to avoid the Texas insurable interest doctrine. In view of the policy considerations involved in that doctrine, which must be considered under Restatement § 6, the Court accords the “place of contracting” factor little weight in the choice of law analysis in this case.
Place of Negotiation.
— Defendants argue that the “place of negotiation” factor favors the application of Georgia law to the Wal-Mart COLI policies. Defendants’ sole evidence for this assertion is the superficial testimony of Sapp. Sapp avers that the Wal-Mart COLI policies were “applied for” in a meeting in Atlanta, Georgia, on December 28, 1993.
65
This
*952
evidence does not address explicitly where the
negotiations
took place.
66
Indeed, Wal-Mart’s corporate headquarters are in Arkansas, the company has facilities all over the nation, and the insureds live in many states. The broker’s contact information on one of the application forms was in Minnesota.
67
Further, the Insurer Defendants are not headquartered in Georgia. There is no specific evidence as to the identity of the representatives who negotiated for these Defendants the material terms of the COLI policies, such as the size of the premiums. Nor is there evidence as to who gathered crucial data about the Texas insureds, or how the information was amassed, for the COLI policies. Accordingly, Defendants have failed to establish Georgia as the “place of negotiations” for the Wal-Mart policies.
Even if Defendants are deemed to have shown that some key negotiations occurred in Georgia, this contact does not justify the application of Georgia law to Plaintiffs’ claims against Wal-Mart. As previously noted, Defendants contrived to submit the applications for the thousands of COLI policies covering employees nationwide. Defendants’ participation in a meeting in Georgia was specifically for the purpose of invoking favorable Georgia law and thereby attempting to evade Texas public policy. In light of the policy factors discussed above, the dearth of probative evidence on any negotiations, and the artificiality of the putative contacts with Georgia, the Court gives the “place of negotiation” factor no weight in its choice of law analysis.
Place of Performance.
— Defendants argue in conclusory fashion that the place of performance favors application of Georgia law. Defendants contend that the Wal-Mart Trust was located in Georgia, and that all premiums were paid from, and policy proceeds were paid to, that Trust in Georgia. Defendants’ contentions are not persuasive.
The Court has considered the fact that the nominal owner of the policies, the Wal-Mart Trust, was located in Georgia and that all monies relating to the policies went through the Trust.
68
However, it is clear that all the Wal-Mart Trust’s activities were conducted at the express direction of Wal-Mart. The Wal-Mart Trust was created for the purpose of serving, and in fact served, as a mere conduit in Georgia for the funds paid by Wal-Mart. The Wal-Mart Trust had only ministerial functions in the administration of the COLI policies. Thus, Defendants have not established that there are substantial contacts with Georgia on the place of performance factor. On the other hand, under the Wal-
*953
Mart/AIG COLI policies, all premium payments were not “received” and thus counted unless the payments reached the AIG headquarters in Delaware.
69
Also, the “Renewable Level Term Insurance Rider,” Form 49827 (3/90), an integral part of the COLI policies, as evidenced by the Sims Policy, recites that it was “[s]igned for the Company at Wilmington, Delaware.”
70
If an insurance contract specifies that premium payments are to be made at the insurance company’s home office, the general Texas rule is that the place of performance of the contract is the state in which the insurer’s home office is located.
71
Seiders v. Merchants Life Ass’n,
93 Tex. 194 , 54 S.W. 753, 754 (1900) (holding that place of performance of a life insurance contract was the state where premiums were made payable, even if the contract was made in another state).
Accord, New York Life Ins. Co. v. Baum,
700 F.2d 928, 933 (5th Cir.1983);
American National Insurance Co. v. Huckleberry,
638 F.Supp. 233, 235 (N.D.Tex.1986).
In addition, the Wal-Mart COLI policies issued by AIG require that all required written notice and requests be sent to the insurer’s Delaware office.
72
Payment of proceeds under those policies occurred only when “proof is received at our [insured’s] administrative office [in Delaware] of [the] Insured’s death.”
73
Further, Wal-Mart, doing business nationwide, and headquartered in Arkansas, was the true beneficiary of these insurance policies. Evidence of this fact appears in “Client Master Information Form, Exhibit A” attached to the parties’ Letter of Understanding.
74
The “Company Name to Appear on Policy” was “Wal-Mart Stores, Inc.,” with an Arkansas address. Only the “Billing Address” was Wachovia Bank of Georgia, N.A. in Atlanta.
Finally, Wal-Mart’s argument fails to address a critical component of the performance of the COLI polices, payment by the insurer of the benefits upon death of the insured. The parties agree that definitive proof to the Insurer Defendants of death of an insured is necessary before policy benefits are payable to the beneficiary. This proof, for Texas residents, can only be obtained from the records of the state of Texas. Georgia has no connection to this aspect of performance.
75
The court accordingly concludes that the location of the Wal-Mart Trust and the facts on which Wal-Mart relies are not dispositive in the § 188 choice of law analysis in connection with the dispute at bar. After considering all the contacts of the parties regarding performance of the COLI policies generally and the Sims Policy specifically, it is apparent that Georgia
*954
has only a weak connection to these insurance policies with respect to the “place of performance.” Texas has a significant relationship in this regard, which tips this important factor heavily in favor of Texas.
Location of the Subject Matter of the Contract.
— Defendant Wal-Mart asserts that the location of the subject matter of the COLI policy contracts favors the application of Georgia law. Wal-Mart focuses on the fact that the Insurer Defendants paid COLI policy proceeds on deceased insureds to the Wal-Mart Trust in Georgia. Wal-Mart further asserts that the only contact with Texas was the place of residence of employee Douglas Sims, a Texas resident. Wal-Mart’s assertions ignore the existence of the responsibilities, risks, and rewards to the insurance carriers and to Wal-Mart during the life of the insureds under the COLI policies. Wal-Mart was obligated to pay the Insurer Defendants premium payments while the Wal-Mart COLI policies were in effect.
76
These policies involved financial obligations during the insured’s life, as well as upon the insured’s death. For the Sims Policy, and policies on Texas insureds, the location of the insureds is crucial to Defendants. During any insured’s life, proof that the insured is in fact still living entitles the insurer to premiums from the policy owner. When an insured such as Sims died, different contractual responsibilities applied; the insurer then was obligated to pay the policy proceeds. That obligation arose generally as a result of an event in Texas, the death of the insured. It is the insured’s life that is the subject matter of the COLI policy. Since Sims and the other Plaintiffs in this suit are (or were) citizens or residents of Texas, the location of the subject matter of the COLI policies is Texas.
This result is consistent with Texas law. Texas courts have held that the subject matter of a life insurance policy is the life of the insured. Specifically, a life insurance policy that lapsed before the insured died cannot be reinstated after the insured’s death because the insured’s life— the subject matter of the policy- — no longer exists.
Gibralter Colorado Life Co. v. Taylor,
132 Tex. 328 , 123 S.W.2d 318, 321 (1939);
P.M. Baker v. Penn Mutual Life Ins. Co.,
617 S.W.2d 814, 815-816 (Tex.Civ. App.-Houston [14th Dist.] 1981, n.w.h.). “The essential foundation of a life insurance policy is the life of a human being.”
Gibralter,
123 S.W.2d at 321 .
The Restatement provides that “[t]he state where the [subject of the contract] is located will have a natural interest in transactions affecting it.” Restatement § 188, cmt. e. Accordingly, the location of the subject matter of the Sims Policy and the other COLI policies insuring the lives of Texas citizens or residents is Texas.
Public policy considerations prompt the Court in this case to give the “subject matter of the contract” factor great significance in the choice of law analysis. The Texas insurable interest doctrine exists to protect the lives of Texas citizens.
Cheeves,
28 S.W. at 275 (“It is against the public policy of this state to allow any one who has no insurable interest to be the owner of a policy of insurance upon the life of a human being.”);
Griffin v. McCoach,
123 F.2d at 551 (“The [insurable interest] rule in Texas is for the protection of the lives of its citizens.”). This Texas public policy is integrally intertwined with the subject matter of the contracts in issue.
Domicile of the Parties.
— Defendants argue that the domicile of the parties to the COLI policies favors the application of
*955
Georgia law. In support of this argument, Defendant Wal-Mart asserts that the Wal-Mart Trust is located in Georgia. However, the Wal-Mart Trust is an entity entirely controlled and funded by Wal-Mart; the Trust exists merely to perform ministerial functions at Wal-Mart’s direction and to serve Wal-Mart interests in attempting artificially to obtain the protection of Georgia law as to the COLI policies. Accordingly, Wal-Mart’s placement of the Wal-Mart Trust in Georgia does not dictate the application of Georgia law.
It is undisputed that none of the other parties to the contract has its domicile, state of incorporation, or principal place of business in Georgia. The Insurer Defendants are domiciled in Delaware and Connecticut, respectively. Wal-Mart is domiciled in Arkansas. The insureds, whom Defendants all contend are parties to the COLI contracts, are domiciled in Texas.
The location of the Wal-Mart Trust is insufficient to establish that the “domicile of the parties” element of the choice of law analysis favors Georgia law. Indeed, because the Plaintiff-insureds are domiciled in Texas, Texas has at least as strong a connection as Georgia to this dispute under this choice of law factor. Thus, the “domicile of parties” factor is inconclusive.
Conclusion on the Choice of Law Under Restatement § 188 and § 6.
— The Restatement § 188 factors
per se
reveal that there is no one state with clearly the “most significant contacts” for this dispute. As between Georgia and Texas, Texas has far stronger contacts than Georgia. Texas is the place of Sims’s and the other insureds’ domiciles, the place of the subject-matter of the COLI policies, and the place of the most significant aspects of performance of the contracts. Evidence on the places of contracting and negotiation is sparse and inconclusive, and these factors are entitled to little weight. The Restatement § 6 factors point strongly to Texas as the place with the most significant contacts. The purpose of insurance, the need for certainty, predictability and uniformity of result, as well as other factors, all point to Texas as the state with the most significant interest in the application of its law and public policies to this dispute. When the § 188 factors are considered in light of the § 6 considerations, as the Restatement directs, Texas choice of law mandates that Texas law be applied in this case.
The Fifth Circuit Baum
Decisions.— Defendants contend that
New York Life Ins. Co. v. Baum,
700 F.2d 928 (5th Cir. 1983)
(“Baum II”),
dictates that Georgia law be applied in this case because that state has the most contacts to the COLI policies in issue.
Baum ,
however, is inap-posite.
77
In
Baum ,
the insurer, New York Life, filed an interpleader action in a Texas
*956
federal court, seeking a declaratory judgment that the policy was void for lack of an insurable interest, and that no beneficiary should receive the proceeds of the policy. New
York Life Ins. Co. v. Baum,
617 F.2d 1201, 1203 (5th Cir.1980)
(“Baum I”).
The district court granted summary judgment to New York Life, holding that Louisiana law applied to the life insurance contract, and that under Louisiana law, the contract was void
ab initio
because neither of the contesting beneficiaries had an insurable interest.
Id.
78
The Fifth Circuit reversed, holding there was a material question of fact as to the circumstances of the creation of the insurance policy and designation of beneficiaries.
Id.
at 1204-05 .
On remand, the district court again held that Louisiana law controlled, and that none of the contestants had an insurable interest in Cook’s life.
Baum,
700 F.2d at 929-30, 934-35 . The Fifth Circuit reversed a second time, and directed the district court to pay the proceeds to Baum. Id. at 935 . The court of appeals held that Texas contract choice of law analysis applied, and that it favored the application of New York law. Id. at 932 .
79
Ultimately, on rehearing, the court vacated its own grant of summary judgment awarding the insurance proceeds to Baum. New
York Life Ins. Co. v. Baum (“Baum III
”), 707 F.2d 870, 871-72 (5th Cir.1983). The court adhered to its choice of law ruling reversing the district court on all issues concerning New York Life, but concluded that there were material fact questions that precluded summary judgment for Baum over a Texas shell company controlled by Baum’s former business partners, because there was evidence that Baum may have been aware of the incorporation of that entitly.
Id.
80
Baum
II’s holding as to choice of law is not inconsistent with the result the Court reaches in this case.
Baum
involved a typical contract dispute. The insurer
*957
sought to avoid payment of death benefits to parties associated with the two potential beneficiaries of the insurance contract, who were or claimed to be affiliated in business with the insured. In
Baum,
the insured (Cook) was aware of and consented to the owner’s (Baum’s or Media’s) creation of the life insurance policy in connection with a creditor/debtor relationship among the insured, the owner, and the named beneficiary.
See Baum III,
707 F.2d at 872 . All the real parties in interest participated actively in creation of the contract. The court of appeals employed a traditional contract choice of law analysis, which dictated that the places of contracting and performance were the most significant factors under the facts of the case.
Resolution of insurable interest cases is highly fact specific. The
Baum
circumstances are materially different from Plaintiffs’ dispute with Defendants. In the instant case, the insured Plaintiffs were not active participants in creation of the COLI policies. Many Plaintiffs did not even know the insurance had been created.
81
Thus, the place of contracting and payment, the central factors for the Fifth Circuit in
Baum II,
are not dispositive here.
82
Moreover, despite the
Baum
court’s detailed rulings, there was no analysis of the numerous other factors important to a full choice of law analysis under the Restatement. Thus, the
Baum
cases do not serve as a helpful guide to this Court, and those rulings do not alter the Court’s analysis.
3. The Camelot COLI Policies
Hartford and the Camelot Defendants contend that Georgia law applies to the COLI policies that the Camelot Defendants purchased from Mutual, which Hartford acquired. In support of this contention, Defendant Hartford proffers a sparse affidavit of James Van Etten stating that (i) Camelot intended for Georgia to be the situs of its COLI policies, (ii) Camelot intended for Georgia law to govern its COLI policies, (in) Mutual used forms for the policies authorized for use in Georgia, and (iv) the COLI policies were administered by a third-party administrator in Georgia.
83
Hartford further asserts:
No part of the negotiations related to the Wal-Mart or Camelot COLI policies took place in Texas. No insurance policies were delivered in Texas, no premiums were paid from Texas, no beneficiaries were Texas residents, and no policy benefits were paid in Texas.
84
Defendant Hartford proffers no other evidence to establish the Camelot COLI policies’ contacts with Georgia. The Camelot Defendants introduce no independent evidence.
85
*958
In response, Plaintiffs argue that testimony in a related action demonstrates that Camelot’s COLI policies were not issued or delivered in Georgia.
In re CM Holdings, Inc.,
254 B.R. 578 (D.Del.2000).
86
At issue in
CM Holdings
was whether Camelot’s COLI policy scheme was a sham transaction for tax purposes.
Id.
at 583 . The Delaware District court did not address the choice of law issue in its opinion. The testimony cited by Plaintiffs involves opinions of an insurance agent that the Camelot COLI policies had close connections to Ohio.
87
Plaintiffs also cite comments made by the presiding judge in
CM Holdings
during the trial which indicate that the COLI policies were not issued in Georgia.
88
In rebuttal, the Camelot Defendants argue that even if the testimony in
CM Holdings
case shows that Ohio, rather than Georgia, had more significant contacts with the COLI policies there in issue, Plaintiffs fail because Ohio law does not recognize their cause of action.
Evidence from the tax case is not probative as to the choice of law issue presented here. Plaintiffs were not parties to those proceedings. The issues before that court were materially different from those raised here. The statements and testimony on which Plaintiffs rely were not necessary to and did not form any part of the district court’s holding in
CM Holdings.
Thus, neither Plaintiffs nor Defendants have demonstrated that estop-pel should be imposed through application of the Delaware district court’s ruling. The Court has broad discretion to determine whether collateral estoppel should be applied to preclude litigation of an issue.
Copeland v. Merrill, Lynch & Co.,
47 F.3d 1415, 1423 (5th Cir.1995);
J.M. Muniz, Inc. v. Mercantile Texas Credit Corp.,
833 F.2d 541, 543 (5th Cir.1987). Collateral estoppel bars the relitigation of an issue of ultimate fact by the party against whom the issue has been determined by a valid and final judgment.
Hibernia Nat’l Bank v. United States,
740 F.2d 382 , 387 (5th Cir.1984). While mutuality of parties is not required, collateral estoppel can only be applied against parties who have had a prior full and fair opportunity to litigate their claims.
89
Hardy v. Johns-Manville
*959
Sales Corp.,
681 F.2d 334, 338 (5th Cir. 1982) (explaining
Parklane Hosiery Co. v. Shore,
439 U.S. 322 , 99 S.Ct. 645 , 58 L.Ed.2d 552 (1979)).
The Court engages in an independent choice of law analysis for the Camelot COLI policies and uses the available factual record. The Court finds that virtually no factually specific evidence establishes meaningful contacts between the State of Georgia and Plaintiffs’ claims against the Camelot Defendants and Hartford. Nothing in the sample Camelot COLI insurance policy reveals any connection with the State of Georgia. The insurer, Mutual, is listed as having a New Jersey address and other connections to that state as well as Missouri.
90
Premiums paid by the Camelot Defendants were payable at Mutual’s home office in New Jersey.
91
Under the heading “Statement of Policy Cost and Benefit Information” the insurance agent is listed with a Florida address.
92
Camelot was a Pennsylvania corporation that was acquired in December 1997 by Trans World, a New York corporation with its principal place of business in New York. Hartford is a Connecticut insurance company with its principal place of business in Connecticut.
The Court also concludes that the State of Texas has a substantial interest and several important contacts with the dispute concerning the Camelot COLI policies. The Court incorporates, to the extent relevant to the Camelot parties, the foregoing analysis of the Restatement § 6 and § 188(2) factors discussed with respect to Wal-Mart. The Camelot Defendants set up a COLI policy administrator in Georgia that serves a function comparable to the Wal-Mart Trust.
93
The choice of law analysis on the Camelot Plaintiffs’ claims therefore is the same as for the Wal-Mart parties’ contacts with the State of Texas.
The Restatement § 6 and § 188(2) factors as to the Camelot COLI policies point to Texas as the state with the most significant contacts to the dispute. Although Georgia and the states in which the parties (other than the insureds) are domiciled may have some interest in the dispute, these states’ interests pale by comparison to Texas. The Camelot Plaintiffs are or were Texas residents and/or citizens. Their lives are the subject matter of the COLI policies. Material aspects of the performance under those contracts is in Texas. The Texas contacts with this dispute are stronger than the connection of any other state.
Accordingly, the Court holds that the Camelot Defendants’ and Hartford’s motions for summary judgment are denied insofar as these parties seek to apply
*960
Georgia law to Plaintiffs’ claims concerning the Camelot COLI policies. The Court further holds that Texas law should apply to the Camelot Plaintiffs’ claims against the Camelot Defendants and Hartford.
C.
Conclusion on Choice of Law
Having considered all the parties’ arguments regarding the choice of law issue, the Court concludes that Georgia law does not apply. Based on the available record, this case is governed by Texas law, including its insurable interest doctrine.
94
Y.
CONTENTIONS RELATED TO SIMS ESTATE’S CLAIMS
A.
ERISA Preemption
Defendant Wal-Mart seeks dismissal of Plaintiff Sims Estate’s claim for the COLI death benefits because the claim relates to an ERISA plan and is therefore preempted by the Employee Retirement Income Security Act, 29 U.S.C. § 1001
et seq.
(“ERISA”).
95
Wal-Mart relies on the proposition that its COLI policies formed part of its employee benefit plan (“Wal-Mart Plan”). Plaintiffs respond that the COLI policies are unrelated to any part of the Wal-Mart Plan. Plaintiffs further argue that even if the COLI policies were related to the Wal-Mart Plan, the Sims Estate’s claim is not preempted under the ERISA “savings clause.”
96
Alternatively, Plaintiffs contend that they have insufficient factual information on the COLI policies and the Wal-Mart Plan .to respond to Wal-Mart’s ERISA arguments, and move under Rule 56(f) of the Federal Rules of Civil Procedure for a continuance to pursue additional discovery.
97
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Wal-Mart has failed to demonstrate that the Sims Estate’s claim for COLI policy-benefits, which became payable after Wal-Mart terminated the Special Death Benefit, is related to Wal-Mart’s ERISA plan. The Sims Estate’s claim therefore is not preempted.
1. Standard for ERISA Preemption
To determine whether a particular plan qualifies as an ERISA plan, the Fifth Circuit asks whether the plan “(1) exists; (2) falls within the safe harbor exclusion established by the Department of Labor; and (3) meets the ERISA requirement of establishment or maintenance by an employer for the purpose of benefitting the plan participants.”
McNeil v. Time Ins. Co.,
205 F.3d 179, 189 (5th Cir.2000);
Meredith v. Time Ins. Co.,
980 F.2d 352, 355 (5th Cir.1993).
98
ERISA preempts “any and all State laws insofar as they now or hereafter relate to an employee benefit plan.” 29 U.S.C. § 1144 (a). The Supreme Court has held that the term “relate to” should be expansively construed.
FMC Corp. v. Holliday,
498 U.S. 52, 57-58 , 111 S.Ct. 403 , 112 L.Ed.2d 356 (1990) (“The preemption clause is conspicuous for its breadth. It establishes as an area of exclusive federal concern the subject of every state law that ‘relates to’ an employee benefit plan governed by ERISA.”).
Applying these principles, the Fifth Circuit has found generally that ERISA preempts state law claims in two situations: “(1) the claim addresses areas of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan; and (2) the claim directly affects the relationship among the traditional ERISA
entities
— i.e., the employer, plan administrators, fiduciaries, participants, and beneficiaries.”
Bullock v. The Equitable Life Assurance Society,
259 F.3d 395, 399 (5th Cir.2001);
Cypress Fairbanks Med. Ctr., Inc. v. Pan-American Life Ins. Co.,
110 F.3d 280, 283 (5th Cir.1997).
However, some state law claims may affect an ERISA plan in a manner that is too tenuous, remote, or peripheral to warrant a finding that the law “relates to” the plan.
Nickel v. Estate of Estes,
122 F.3d 294, 297 (5th Cir.1997). For example, in certain circumstances a plaintiff may refer to plan benefits as a measure of damages without invoking ERISA preemption.
Rozzell v. Security Serv., Inc.,
38 F.3d 819, 822 (5th Cir.1994). In order to determine whether a state law claim is preempted by ERISA, the Court must look past the words in the complaint and consider the substance of the claim alleged.
Id.
The Fifth Circuit takes a fact-sensitive approach when making a preemption determination.
E.g., Memorial Hosp. Sys. v. Northbrook Life Ins. Co.,
904 F.2d 236, 246 (5th Cir.1990) (examining the “commercial realities” of plaintiffs position as part of ERISA preemption analysis).
*962
2. Relatedness to Wal-Mart’s ERISA Plan
Starting in December 1993, WalMart offered a $5,000 Special Death Benefit to all employees covered by a Wal-Mart medical plan during 1994 to 1995.
99
The Special Death Benefits were payable to the same beneficiary as the
employee selected
under non-COLI life insurance policies that Wal-Mart bought for its employees through the Wal-Mart Plan.
100
The Special Death Benefits were described in the Summary Plan Descriptions (“Summaries”) issued by Wal-Mart to its employees for the years 1994 and 1995.
101
The section regarding the Special Death Benefits in each of the Summaries makes no reference to the COLI policies. Instead, each says that the “special death benefit is
fully paid by
Wal-Mart.”
102
Wal-Mart nevertheless asserts, on the basis of the affidavit of Tom Emerick, Wal-Mart’s Vice President of Benefits, that the Special Death Benefits were “funded” by the COLI policies.
103
Besides Emerick’s conclusory statement, the sole evidence submitted in support of this assertion is Memorandum dated December 14, 1993 (“Benefits Memorandum”) and the accompanying brochure (“Benefits Brochure”) announcing the initiation of the Special Death Benefit program in December 1993.
104
The Benefits Brochure was not a formal ERISA mandated document among the “controlling Wal-Mart Plan documents.”
105
*963
The Benefits Memorandum stated that the “new benefit is being implemented because of financial benefits associated with a Wal-Mart owned life insurance program which is explained in the enclosed [Benefits Brochure].”
106
The Benefits Brochure stated:
Wal-Mart is providing these new death benefits as a result of financial gains from life insurance policies Wal-Mart will purchase which will cover the lives of associates who participate in the group health plan. That Wal-Mart owned life insurance will result in the financial benefits for the corporation. Any net life insurance proceeds payable to Wal-Mart from this life insurance as a result of the death of an active associate will be contributed to the profit sharing plan.
107
The Benefits Brochure established, at best, that the “Wal-Mart owned life insurance” is “payable to
Wal-Mart,”
and that Wal-Mart elected to pay the Special Death Benefit under the Wal-Mart Plan.
108
Thus, there is no documentary evidence that demonstrates that the proceeds of the COLI policies
per se
were paid into the Wal-Mart ERISA Plan. At best, Wal-Mart’s evidence creates a fact issue as to how the Special Death Benefit actually was funded.
If the Court, nevertheless, assumes that Wal-Mart’s commitment to pay the Special Death Benefit causes the COLI policies to be a part of the Wal-Mart Plan, Wal-Mart’s ERISA preemption contentions about the Sims Estate’s claim still fail. First and foremost, the Sims Estate does not seek recovery of the Special Death Benefits or any other Wal-Mart Plan benefits. The Sims Estate seeks to recover the COLI policy proceeds as the lawful beneficiary under Texas insurable interest doctrine.
109
The Sims Estate’s claim has
*964
no bearing on the Plan or its administration.
110
The Sims Estate’s claim does not relate to the Wal-Mart ERISA plan.
111
This result is bolstered by the cases on which Wal-Mart relies. In
Lee v. E.I. DuPont de Nemours and Co.,
894 F.2d 755 (5th Cir.1990), the plaintiffs sought “to recover benefits defined by their former employer’s ERISA plan, benefits to which they would have become entitled but for an alleged misrepresentation by their employer, during their employment, on which they relied to their detriment.”
Lee,
894 F.2d at 757 . Plaintiffs alleged state law claims of fraud and negligent misrepresentation for which they sought to recover specifically the additional monthly retirement benefits they would have received if they had retired under the new retirement program.
Id.
at 756 . The Fifth Circuit held preemption applied since the plaintiffs’ putative state law fraud claims “re-laten to their former employer’s pension plan and interfere[] with the exclusively federal regulatory scheme.”
Id.
at 758 .
112
The Court of Appeals in
Lee
relied on
Cefalu v. B.F. Goodrich Co.,
871 F.2d 1290 (5th Cir.1989), also cited by Wal-Mart. In
Cefalu ,
a former employee sued to recover additional plan benefits based on an alleged oral contract. 871 F.2d at 1291 . The Fifth Circuit held that the plaintiffs’ claim was related to an ERISA plan and preempted because plaintiffs damages “would consist of the pension benefits he would have received had he been employed [by the successor entity].”
Id.
at 1294 .
The
Lee
and
Cefalu
cases are clearly distinguishable from the matters at bar. In each case, the plaintiffs plainly sought policy benefits to which they would have been entitled but for their reliance on their respective employer’s alleged misrepresentations. These were claims to recover benefits under an ERISA plan. In the case at bar, however, the Sims Estate seeks to recover nothing under the terms of the Wal-Mart Plan. Indeed, the Special Death Benefit is entirely irrelevant to the Sims Estate’s claim relating to the COLI policy insuring Douglas Sims. The COLI policy was owned and its benefits were payable to Wal-Mart through the Wal-Mart Trust, not the Wal-Mart plan.
Wal-Mart’s arguments regarding ERISA preemption therefore fail. The Sims Estate’s claims for the COLI policy benefits are not related to an ERISA plan. Therefore, the Court need not reach the parties’ arguments regarding the ERISA savings clause. Wal-Mart’s Summary Judgment Motion claiming ERISA preemption is denied.
*965
B.
Statute of Limitations
Defendant AIG argues that the Sims Estate’s claim is barred by the statute of limitations.
113
In response, the Sims Estate argues that its claim is not barred because that claim did not accrue until death benefits were paid from the Wal-Mart COLI policy on Sims’s life. After reviewing the pertinent authorities,
114
the Court concludes that the Sims Estate’s claim has been asserted timely.
1. Length of Limitations Period
AIG argues that the longest possible limitations period applicable to the Sims Estate’s claim is four years, since the Sims Estate seeks a constructive trust. AIG argues that the majority rule in Texas is to apply the residual four year limitations period to claims for a constructive trust. Tex. Crv. Prao. & Rem. Code § 16.051 (“Every action for which there is no express limitations period, except an action for the recovery of real property, must be brought not later than four years after the day the cause of action accrues.”). The minority rule, according to AIG, is that courts apply the limitations period of the underlying claim in actions for a constructive trust. Under the latter rule, the limitations period would be either two or four years, depending on how the Sims Estate’s claim is characterized.
115
The Court concludes that the applicable limitations period is four years, whether § 16.051 governs or the limitations period governing the underlying claim applies. All Defendants in this action, including AIG, which incorporates the other Defendants’ arguments by reference, characterize this case as a contract action for choice of law purposes. In Texas, the limitations period for contract actions is four years. Tex. Crv. PRAC.
&
REM.Code § 16.004(a)(3) (Vernon Supp.2001);
Morriss v. Enron Oil & Gas Co.,
948 S.W.2d 858, 869 (Tex.App.San Antonio 1997, no writ). Alternatively, Wal-Mart characterizes this case as one for unjust enrichment in its ERISA preemption argument. The Texas statute of limitations for unjust enrichment action is four years. Tex. Civ. Prac.
&
Rem. Code § 16.004(a)(3) (Vernon Supp.2001);
Amoco Production Co. v. Smith,
946 S.W.2d 162, 164-165 (Tex.App.-El Paso 1997, no pet.).
116
*966
Accordingly, the Court holds that the Sims Estate’s cause of action is subject to a four year statute of limitations.
2. Accrual of the Sims Estate’s Claim
AIG argues that the four year limitations period began when the Sims Policy was issued in 1993. AIG contends that Plaintiffs concede through their allegations in the Complaint, that their claims for constructive trust accrued when the COLI policies were issued. AIG deduces that the limitations period began to run on the Sims Estate’s claim when the COLI policies were issued in 1993, more than four years before commencement of this lawsuit, and thus the Sims Estate’s claim is time-barred.
In response, the Sims Estate attempts to distinguish its claim from those of the Camelot Plaintiffs, who are live individual insureds seeking ownership of the COLI policies currently in force. The Sims Estate argues that it seeks a constructive trust on the death benefits of the COLI policy on Sims’s life, a cause of action that did not accrue until Sims died. Furthermore, the Sims Estate argues that it could not have brought that claim until Sims died since the estate did not exist until Sims death.
The Court is not persuaded by AIG’s or the Sims Estate’s arguments.
117
Plaintiffs all seek declarations that the Employer Defendants lack an insurable interest in their lives and that Plaintiffs are the “lawful owners of the ... COLI policies insuring their lives, ....”
118
The fact that the estate of a deceased individual may seek the additional relief of a constructive trust on death benefits under the insurance policy does not alter the underpinning of all Plaintiffs’ claims. In order to determine the timeliness of the Sims Estate’s claim, the Court must determine when Sims’s cause of action for declaratory relief accrued. If Sims’s individual claim for declaratory relief was time barred while he was alive, then his estate’s claim on the same theory would also be barred.
Russell v. Ingersoll-Rand Co.,
841 S.W.2d 343, 345 (Tex.1992).
The Court concludes as to Sims and his estate that the claim for declaratory judgment as to the existence of Wal-Mart’s insurable interest accrued each day that the questioned COLI policy insuring Sims was in force. The “State of Texas has established a fixed policy with reference to its own citizens, by and through which it refuses to permit one who has no insurable interest in a living person to be and become the beneficiary in an insurance policy written on the life of such living person.”
Cole,
187 S.W.2d at 593 (citing
Cheeves,
87 Tex. 287 , 28 S.W. 274 ). The violation of this Texas legal doctrine is not restricted
*967
to the day Wal-Mart contracted for or obtained the allegedly improper interest as the beneficiary of the Sims Policy.
119
It would undermine the public policy of Texas embodied in its insurable interest doctrine to preclude an insured or his heirs from protecting his and the estate’s interests in avoiding incentives for the murder of or wagers on an insured’s life, merely because the insured failed to perceive the legal importance of, or to act on, knowledge of the existence of the improper beneficiary designation. No Texas decisions on the insurable interest doctrine have considered the timing of the filing of the suit vis á vis the naming of a beneficiary that lacks an insurable interest, or vis á vis the occurrence of facts that result in a beneficiary lacking an insurable interest.
120
AIG’s contentions would add an unnecessary layer of uncertainty to enforcement of the prophylactic Texas insurable interest doctrine. The insured suffers the same risks and the Texas doctrine is violated irrespective of whether the improper beneficiary was named with or without the knowledge of the insured, and irrespective of when the improper relationship was created.
The Sims Estate filed its claim for declaratory relief within four years of Wal-Mart’s termination of the Sims COLI Policy. As to the death benefits, the Sims Estate claim was filed less than four years from Sims’s death. Thus, the Sims Estate’s claims for declaratory judgment and for constructive trust over the policy proceeds are timely.
C.
AIG’s Motion to Dismiss
1. Overview and Applicable Legal Standards
AIG seeks dismissal of Plaintiff Sims Estate’s claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on the ground that the Sims Estate has failed in the Complaint to state a claim against it upon which relief may be granted.
121
This motion is granted without prejudice to Plaintiffs to replead, since there has been no discovery in this case and the authorities on which the Sims Estate and other Plaintiffs base their claim require a fact
*968
specific analysis. From the Complaint, it appears that the Sims Estate’s claim is primarily against Wal-Mart, an Employer Defendant. The Complaint contains no specific allegations of wrongful or inequitable conduct
by AIG
against Sims or his estate in particular. In reviewing a Rule 12(b)(6) motion, the Court must accept as true all well-pled allegations, resolving all doubts in favor of the complainants.
Tanglewood East Homeowners v. Charles-Thomas, Inc.,
849 F.2d 1568, 1572 (5th Cir.1988). Motions “to dismiss for failure to state a claim [are] viewed with disfavor, and [are] rarely granted.”
Southern Christian Leadership Conference v. Supreme Court of State of La.,
252 F.3d 781, 786 (5th Cir.2001) (internal quotation marks and citations omitted). The Court must construe pleadings in an expansive and deferential way at this stage of a suit.
Id.
The Court may dismiss the Sims Estate’s claim against AIG only if it has shown “beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitled him to relief.”
Conley v. Gibson,
355 U.S. 41, 45-46 , 78 S.Ct. 99 , 2 L.Ed.2d 80 (1957);
Southern Christian Leadership Conf,
252 F.3d at 786 (5th Cir.2001).
2. Allegations in the Complaint
Plaintiffs allege that Wal-Mart purchased approximately 278,558 COLI policies from AIG, pursuant to a “scheme” by which Wal-Mart insured the lives of its employees, including many Texas citizens.
122
Plaintiffs allege generally that certain employers “bought COLI policies, not to insure against the loss of a key employee, which was a lawful and well-established practice in the insurance industry, but as an investment and as a means to improperly avoid federal income tax liability.”
123
According to Plaintiffs,
the corporate employer insured the lives of a vast number of its employees without its employees’ knowledge or consent. Generally, the corporate employer borrowed money from the insurer to pay the premiums, claiming a tax deduction for the often exorbitant interest it paid. Upon the death of a covered employee, the insurer paid the corporate employer the death benefit, which the corporate employer claimed as tax-free. The corporate employer would then use some of the death benefit to repay the premium loans.
124
Plaintiffs further allege that Douglas Sims was employed by Wal-Mart from 1987 until 1998, when he died.
125
He was insured by one of the COLI policies purchased by Wal-Mart from AIG, and he allegedly never consented to this insurance or to the designation of Wal-Mart as the policy beneficiary.
126
Plaintiffs, on behalf of the Sims Estate, allege that Wal-Mart never had an insurable interest in Sims’s life,
127
but AIG paid Wal-Mart the death benefits under the COLI policy after Sims’s death.
128
On the basis of these factual allegations, Plaintiffs claim generally that the Employer Defendants hold the COLI policies and all their benefits in constructive trust for the benefit of the Texas citizen-insureds,
129
that the Employer Defendants have been unjustly enriched,
130
*969
and that the Employers that bought COLI policies have unclean hands.
131
3. Analysis
Initially, the Court finds that Plaintiffs have failed in their Complaint specifically to allege that AIG has committed a wrong against the Sims Estate or has been unjustly enriched by the sale of the Sims Policy to Wal-Mart. Thus, AIG’s motion has merit and will be granted. However, Plaintiffs are granted leave to amend the Sims Estate’s claim, should they insist on doing so. This result is in the interest of justice since Plaintiffs describe in oral argument one or more theories against AIG that are not specifically pleaded.
132
Leave to amend also is necessary because the Court cannot conclude definitively, as a matter of law, that the Sims Estate cannot state a claim on which relief can be granted against AIG. AIG in support of its Motion to Dismiss argues that the Sims Estate’s claim is unsustainable because the rule articulated in
DeLeon v. Lloyd’s London, Certain Underwriters,
259 F.3d 344, 350-53 (5th Cir.2001), prohibits double recovery from insurers under the insurable interest doctrine. According to AIG,
De-Leon
stands for the proposition that an insurer is relieved from all liability once it pays death benefits to the named beneficiary, and thus the appropriate remedy is for the estate to seek the death benéfíts from the beneficiary through a construc-five trust. In addition, AIG argues that the Sims Estate cannot state a claim against it for unjust enrichment and that it was not unjustly enriched at the expense of the Sims Estate.
The Sims Estate responds by citing several cases in which Texas courts allowed a deceased insured’s estate to recover death benefits from an insurer which already had paid death benefits to a beneficiary.
See Manhattan Life Ins. Co. v. Cohen,
139 S.W. 51 (Tex.Civ.App.-San Antonio 1911, writ ref d), and
National Life & Accident Ins. Co. v. French,
144 S.W.2d 653 (Tex. Civ.App.-Amarillo 1940, no writ). While it is highly unlikely that the Sims Estate can prevail on any claim based on these cases, the Court cannot conclude as a matter of law that the Sims Estate has no legal claim against AIG.
133
The first of these cases,
Cohen ,
involved unique circumstances that made rote application of other Texas authority inappropriate. In
Cohen ,
the estate of the deceased insured sued the insurance company that paid death benefits to an assignee who did not have an insurable interest in the life of the insured.
134
The trial court awarded death benefits to the estate. The court of civil appeals affirmed. In doing so, the appeals court focused on two facts as justifying an exception to the general rule: (i) the insurer’s knowledge of the estate’s
*970
claim at the time it paid the death benefits to Hilsman, and (ii) the indemnity bond given by Hilsman to the insurer.
135
The court’s reliance on the insurer’s indemnification agreement with Hilsman, the original recipient of the benefits, suggests that the court did not intend the insurer to have to bear the expense of the benefits twice. It is noted that
Cohen ,
which was decided long before seminal insurable interest cases in Texas,
136
has been cited only once for the proposition on which Plaintiffs attempt to rely. Specifically, in
Stillwagoner ,
the Tyler Court of Appeals stated in
dicta
without any analysis: “If the insurance company with knowledge of the estate’s adverse claim and the reasons therefore pays proceeds benefits to a beneficiary without an insurable interest this can afford no defense to the action by the estate of the insured for the entire amount due on the policies.”
Stillwagoner v. Travelers Ins. Co.,
979 S.W.2d 354, 358 (Tex.App.Tyler 1998, no pet.).
Plaintiffs also rely on
French,
144 S.W.2d 653 (Tex.Civ.App.-Amarillo 1940, no writ), a case decided in 1940, in which the Amarillo Court of Civil Appeals affirmed the trial court’s holding that an insurer was liable to a deceased insured’s estate for $125 in death benefits after the insurer already had paid these benefits to the named beneficiary who did not have an insurable interest in the insured’s life under Texas law. It appears that the insurer did not have notice of the estate’s claim when it originally paid the death benefits. However, significantly, there is no indication that the insurer raised the prior payment as a defense. Also, in
French ,
the named beneficiary paid many of the premiums (which were a mere twenty-five cents per month), and thus had some equitable claim to at least some of the death benefits.
137
Moreover, the
French
decision has not been cited by any Texas or other courts as reliable precedent.
At best, the cited cases demonstrate that Texas courts might, in certain highly unusual situations, when necessary to do equity, hold an insurer liable for death benefits to the estate of an insured even if the insurer already has paid the benefits to the named beneficiary.
138
It is far from clear that Plaintiffs can allege the neces
*971
sary circumstances in this case. Wal-Mart appears to be financially viable, there is no indication of any indemnification agreement between Wal-Mart and AIG, and there is no evidence or allegation that AIG knew of the Sims Estate’s claim to the policy proceeds when it paid them to Wal-Mart.
139
In sum, the Sims Estate’s claim against AIG rests on an exceedingly slim reed.
Nevertheless, at this early stage in the proceedings, the Court is constrained to permit an amendment of the Complaint, if the Sims Estate insists, in light of the fact-sensitive inquiry required by
Cohen .
It is not “beyond doubt” that the Sims Estate can prove no set of facts in support of its claim which would entitle it to relief.
Conley v. Gibson,
355 U.S. 41, 45-46 , 78 S.Ct. 99 , 2 L.Ed.2d 80 (1957);
Southern Christian Leadership Conf. v. Supreme Court of Louisiana,
252 F.3d 781, 786 (5th Cir. 2001). Therefore, the Court grants the Sims Estate the opportunity to replead its claim against AIG, subject to the admonishment that Plaintiffs are not to reargue matters addressed comprehensively in this Opinion.
See also infra
Section VI.B.2.
140
*972
The Court has considered AIG’s other arguments on this issue and finds them unpersuasive. Therefore, AIG’s motion to dismiss is granted without prejudice to Plaintiff Sims Estate’s right to replead. If the Sims Estate intends to pursue its claims against AIG, the Sims Estate shall file a Third Amended Complaint within ten (10) business days of entry of this Opinion.
141
VI.
CAMELOT-RELATED CONTENTIONS
A.
Ripeness
The Camelot Plaintiffs seek a declaratory judgment that (i) the Camelot Defendants never have had an insurable interest in the lives of the Camelot Plaintiffs, (ii) the Employer Defendants are not the legal owners of the COLI policies on the Camelot Plaintiffs’ lives, and (iii) under Texas law, the employees are the “lawful owners” of the COLI policies, with all rights of the “owner” as defined in the policies. The Camelot Plaintiffs also seek a judicial determination of the value of a constructive trust and damages arising from Defendants’ wrongs.
The Camelot Defendants and Hartford strenuously argue that Plaintiffs’ claims are not ripe and thus not justiciable.
142
For the reasons explained below, the Court holds that the Camelot Plaintiffs’ claims are ripe for adjudication.
1. Declaratory Judgment Standards and the Ripeness Doctrine
In support of their request for a declaratory judgment, Plaintiffs rely on 28 U.S.C. § 2201 (a), which provides in pertinent part: “In the case of actual controversy within its jurisdiction ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” Parties may seek declaratory judgment
*973
before a completed “injury-in-fact” has occurred.
United Transportation Union,
205 F.3d at 857 .
Nevertheless, to be ripe, a declaratory judgment claim must be based upon an “actual controversy.”
Id.; Orix Credit Alliance, Inc. v. Wolfe,
212 F.3d 891, 896 (5th Cir.2000).
143
An “actual controversy exists where ‘a substantial controversy of sufficient immediacy and reality [exists] between parties having adverse legal interests.’ ”
Id.
(citation omitted). “A court should dismiss a case for lack of ripeness when the case is abstract or hypothetical.”
New Orleans Public Service, Inc. v. Council of New Orleans,
833 F.2d 583, 586 (5th Cir.1987);
Orix Credit,
212 F.3d at 895-96 ;
United Transportation Union v. Foster,
205 F.3d 851, 857 (5th Cir.2000).
“The [ripeness] key considerations are ‘the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.’... A case is generally ripe if any remaining questions are purely legal ones; conversely, a case is not ripe if further factual development is required.”
New Orleans Pub. Serv., Inc.,
833 F.2d at 586-87 (citations omitted) (quoting
Abbott Labs. v. Gardner,
387 U.S. 136, 149 , 87 S.Ct. 1507 , 18 L.Ed.2d 681 (1967),
modified on other grounds by Califano v. Sanders,
430 U.S. 99 , 97 S.Ct. 980 , 51 L.Ed.2d 192 (1977));
accord Groome Resources Ltd., L.L.C. v. Parish of Jefferson,
234 F.3d 192, 199 (5th Cir.2000).
2. Defendants’ Ripeness Arguments
All the Camelot Plaintiffs are alive. Under the express terms of the COLI policies, the Employer Defendants are allowed to change the named beneficiaries or to surrender the policies while the insureds, Plaintiffs, are alive. Defendants accordingly argue that the Camelot Plaintiffs’ claims are too contingent to be ripe. Defendants argue that there “is no justiciable controversy ... because any ‘rights’ that [Camelot Plaintiffs’] estates may be entitled to in the future depend on events which have not occurred and, in some cases, likely never will occur.” Camelot Defendants’ Motion to Dismiss, at 12.
The Court must consider each cause of action specifically asserted by the Camelot Plaintiffs to determine whether there is an actual controversy on that claim. Defendants’ contentions fail to appreciate these Plaintiffs’ first two fundamental claims for relief, namely, a request for a declaration that the Employer Defendants now lack (and in the past, lacked) an insurable interest in Plaintiffs’ lives, and that the Employer Defendants are not (and have not been) the lawful owners of the COLI policies. The fact that the Employer Defendants may someday decide to surrender a policy or that these Defendants may change the beneficiaries in the future does not resolve the ripeness issues as to the Camelot Plaintiffs’ claims, which challenge present circumstances. As discussed above, under the Texas insurable interest doctrine, only specified categories of people or entities may own insurance on another’s life. Two public policy concerns underlie this doctrine: (i) the prevention of murder, and (ii) the prevention of wagering on human life.
E.g., Stillwagoner,
979 S.W.2d at 358 . The Camelot Plaintiffs’ claims raise the immediate questions of whether the mere existence of the Camelot COLI policies violates Texas law, and whether the Employer Defendants are now the legal owners of the COLI policies
*974
on Plaintiffs’ lives. Plaintiffs’ claims thus satisfy the first of the Fifth Circuit’s two ripeness factors,
i.e.,
that there is an actual controversy that is fit for judicial review.
See New Orleans Public Service,
833 F.2d at 586-87 .
As to the second ripeness factor, the Court finds that each Plaintiff would suffer hardship cognizable under Texas law, if a ruling in this case were delayed until that Plaintiff died. To withhold decision in a case would unnecessarily permit the potential violation to continue, thereby prolonging the very harms the insurable interest doctrine was designed to discourage, particularly the wagering on the insured’s life. Thus, determination of the issue of whether the violation exists should not have to wait for the death of the insured. The insurable interest doctrine is prophylactic. There is no reason to delay a ruling on the declaratory relief Plaintiffs seek.
Defendants’ opposition focuses on the 1951 decision of the Dallas Court of Civil Appeals in
Roberts v. Southwestern Life Ins. Co.,
244 S.W.2d 302, 308 (Tex.Civ. App.-Dallas 1951, writ refd n.r.e.). In
Roberts ,
the court held that T.P. Roberts, owner of several insurance policies, was estopped from asserting a right that he claimed under the Texas insurable interest doctrine to change the beneficiaries in life insurance policies without the consent of his former wife, Aliene Roberts, one of the named beneficiaries on the policies. The
Roberts
court assumed for its ruling that Aliene lacked an insurable interest in T.P.’s life after entry of their final divorce judgment. The
Roberts
court reasoned at several points in its opinion that T.P. was estopped from disturbing the final agreed divorce judgment entered years earlier by a court of competent jurisdiction, both because that judgment was final and because the judgment was based on the parties’ agreed property settlement.
144
The court, at the end of the opinion, noted that a determination of insurable interest in the case was not necessary until T.P. died, because the named beneficiaries might predecease T.P., thereby mooting the is
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sues.
145
Id.
at 308-09 . The
Roberts
decision is
sui generis.
The language on which Defendants rely was arguably
dicta,
and certainly was language designed merely to bolster an already clear and well supported result.
The precedential value of these comments by the
Roberts
court is sharply limited by the unique circumstances before that court. In any event, the
Roberts
ripeness ruling has been severely undermined by the Texas Supreme Court’s decision in
Empire Life Ins. Co. v. Moody,
584 S.W.2d 855 (Tex.1979).
146
In that case, the Supreme Court directed the lower courts to determine an insurable interest issue, at the request of the insured prior to his death.
147
The
Empire
court thus recognized that the insurable interest issue was ripe for adjudication.
Empire,
584 S.W.2d at 858 . The
Roberts
ruling is limited to the unique facts of that case, and is not a
*976
persuasive precedent on the ripeness issue presented here.
148
The Court concludes that, under Texas law, Plaintiffs’ insurable interest claims are ripe and justiciable during their lives. If Plaintiffs’ claims are valid, then there is no reason to allow improper insurance contracts to continue without judicial declaration of the parties’ rights. The Court therefore holds that there is a present and actual controversy raised by the Camelot Plaintiffs in this case, and their claims are ripe for adjudication.
B.
The Merits of Camelot Plaintiffs’ Claims for Relief
The Camelot Plaintiffs have moved for summary judgment on their request for a declaration that the Camelot Defendants have no insurable interest in their lives.
149
The Camelot Defendants and Defendant Hartford move for summary judgment dismissing the Camelot Plaintiffs claims as a matter of law.
150
After careful consideration of the parties’ submissions, the record, and the applicable authority, the Court grants the Camelot Plaintiffs’ motion. The Court denies in part and grants in part the Camelot Defendants’ and Hartford’s summary judgment motions on these matters.
1. Camelot Plaintiffs’ Claim for Declaration that Camelot Defendants Lack an Insurable Interest
The Camelot Plaintiffs claim that the Camelot Defendants lack an insurable interest in the Camelot Plaintiffs’ lives. These Plaintiffs argue that Texas law recognizes three forms of insurable interest: the beneficiary must be (i) related by blood or affinity, (ii) a creditor for the insured, (iii) or “one having a reasonable expectation of pecuniary benefit or advantage from the continued life of another.”
Drane,
161 S.W.2d at 1058-59 .
151
It is undisputed that the first two categories are inapplicable to this case. The Camelot Plaintiffs argue that the third category also does not apply in this case.
152
The Camelot Plaintiffs are correct. The Camelot Defendants fail to demonstrate
*977
that they presently have any expectation of pecuniary benefits or advantage from Camelot Plaintiffs apart from the COLI policies on these Plaintiffs’ lives. Each Camelot Plaintiffs employment with the Camelot Defendants terminated in or prior to 1998.
153
Thus, at the present time the Camelot Defendants have
no
relationship with the Camelot Plaintiffs outside the COLI policies.
In response to the Camelot Plaintiffs’ motion, Hartford contends that it needs a continuance under Rule 56(f) of the Federal Rules of Civil Procedure to allow for discovery to determine whether the “key man” concept applies.
154
The Court denies this request since Hartford has failed to meet its burden to show entitlement to such delay.
“In order to obtain a continuance of a motion for summary judgment for discovery purposes, a party must set forth some statement to the court indicating why additional discovery is necessary and ‘how additional discovery will create a genuine issue of material fact.’ ”
Canady v. Bossier Parish School Bd.,
240 F.3d 437, 445 (5th Cir.2001) (citing
Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit,
28 F.3d 1388, 1395 (5th Cir.1994));
Stearns Airport Equip. Co. v. FMC Corp.,
170 F.3d 518, 535 (5th Cir. 1999). A party “may not simply rely on vague assertions that additional discovery will produce needed, but unspecified facts.”
Krim v. BancTexas Group, Inc.,
989 F.2d 1435, 1442 (5th Cir.1993) (internal citations omitted). Contrary to these legal requirements, Hartford has provided nothing except a vague suggestion that there may be a “key man” issue.
Texas law provides, by statute, that businesses may have an insurable interest in their “key” personnel,
i.e.,
important officers and stockholders.
See, e.g., Stillwagoner,
979 S.W.2d at 361 . The statute has been interpreted narrowly to grant an insurable interest “only to the lives of officers and stockholders ‘to whom the other stockholders looked primarily for the success of the business’ or ‘on whose services the corporation depends for its prosperity, and whose death will be the cause of a substantial loss to it.’”
Id.
(quoting
McBride v. Clayton,
140 Tex. 71 , 166 S.W.2d 125, 128-29 (1942)). The “mere existence of an employer/employee relationship is never sufficient to give the employer an insurable interest in the life of the employee.”
Id.
No insurable interest exists if the loss arises
“from the cessation of ordinary service.” McBride,
166 S.W.2d at 129 (emphasis in original). In any event, once a “key man” leaves the company’s employ, the need for “key man” insurance disappears.
See Cheeves,
28 S.W. at 276 (“The want of an insurable interest is just as absolute where it has ceased as where it never existed, and the inducement to destroy the life insured for gain is just as strong in the one case as in the other.”).
Hartford has failed to identify any specific individual to whom the “key man” concept might apply. Hartford has known the identity of the named Plaintiffs for a substantial period of time and has had continuous access to its own records
*978
on these individuals.
155
Hartford issued insurance on the lives of
USO
Camelot employees, who were retail store managers or district supervisors. There is no indication that any of the named Plaintiffs, or any of the insureds, fits the stringent Texas “key man” requirements. Thus, Hartford has failed to meet its Rule 56(f) burden to entitle it to a continuance or discovery.
The Camelot Defendants and Hartford also fail to meet their nonmovant summary judgment burden to raise a fact issue that any Camelot Plaintiff is or was a “key man” with the Camelot Defendants.
156
Thus, the Court holds that the Camelot Defendants currently lack, and have lacked in the past, an insurable interest in the Camelot Plaintiffs’ lives.
The Camelot Defendants and Hartford, apparently recognizing the uphill battle they face in light of Texas law on this point, assert several dubious arguments. The Court discusses each below.
157
Hartford contends, expressly contrary to Texas law,
158
that Plaintiffs lack standing to assert their claims because only insurers may state a claim for a lack of insurable interest. Hartford urges the Court to adopt the law of other states, since “Texas law on this subject is the anomaly, not the rule.”
159
The Court is bound to apply Texas law for the reasons set forth in detail in prior sections of this Opinion. Accordingly, this argument is rejected.
Hartford further argues that the Camelot Plaintiffs are required under Texas law to show that Defendants have no insurable interest in their lives both at the time the policy was issued
and
at the time Plaintiffs’ die.
160
Hartford’s premise is based solely on a misconstruction of the two citations it provides.
See Insurance Contracts and Coverage,
45 TEX. JUR. 3D § 217 (1995);
Roberts v. Southwestern Life Ins. Co.,
244 S.W.2d 302, 308 (Tex.Civ.App.-Dallas 1951, writ ref d n.r.e.)
Hartford relies on the sentence in
Roberts
that: “In major respects, a policy of insurance, like a will, speaks at the time of death.”
Id.
at 308 . The Court has already addressed
Roberts
above, finding it inapplicable to this case and undermined, if not overruled in this respect, by the Texas Supreme Court in
Empire Life Ins. Co. v. Moody,
584 S.W.2d 855, 858 (Tex. 1979). More importantly for present purposes, the quote on which Hartford relies
*979
does not address the issue at bar.
Roberts
contains nothing to support Hartford’s argument.
The Texas treatise cited by Hartford merely sets forth the rule applied by Texas courts in determining who is entitled to death benefits when the benefits become payable. This rule is that the “beneficiary must have an insurable interest both at the time when the policy is issued and when the benefits are payable.”
Insurance Contracts and Coverage,
45 Tex. Jur. 3D § 217 (1995).
161
This well established principle means that if the named beneficiary lacks an insurable interest at either time, that beneficiary may not retain the death benefits from the life insurance policy. Hartford attempts to create a new rule. Hartford contends that Plaintiffs, because they are alive, cannot show that the Camelot Defendants lack an insurable interest because Plaintiffs cannot negate the existence of an insurable interest at the second of the two required points in time,
ie.,
when Plaintiffs die. Hartford’s argument amounts to the proposition that the existence or absence of the insurable interest during the insured’s life is immaterial. This argument falls of its own weight. First, under black letter Texas law, the absence of an insurable interest at
either
pertinent time requires denial of the death benefits. In this case, the Camelot Defendants cannot qualify for the death benefits on the Camelot Plaintiffs since Defendants lacked an insurable interest when the COLI policies were created. Second, Hartford’s reliance on the cited treatise is misplaced since that provision is relevant only to the award of death benefits, which are payable only after the insured dies. The Camelot Plaintiffs do not seek payment of death benefits at this time. Plaintiffs seek a declaration that the Camelot Defendants do not now have an insurable interest in their lives. The inquiry about the existence of an insurable interest at an insured’s death in the future is separate from the determination of a beneficiary’s
present
insurable interest on the insured while alive.
Hartford’s argument, on close analysis, is essentially a reworked ripeness argument. As the Court held in the preceding section of this Opinion, the Camelot Plaintiffs’ claim for a declaration as to the existence of a current insurable interest is ripe, and the Camelot Plaintiffs are entitled at this time to seek a ruling in this case as to whether the Camelot Defendants have a legally cognizable insurable interest.
Hartford and the Camelot Defendants have failed to raise a genuine fact issue in response to the Camelot Plaintiffs’ motion seeking a declaration that the Camelot Defendants lack an insurable interest in Plaintiffs’ lives. Therefore, the Camelot Plaintiffs’ prayer for a declaration that the Camelot Defendants lack an insurable interest in the Camelot Plaintiffs’ lives is
*980
granted. The Hartford and Camelot Defendants’ motions for summary judgment to dismiss this claim are denied.
162
2. Camelot Plaintiffs’ Claim for a Constructive Trust and Ownership of the COLI Policies
In the Complaint, Plaintiffs seek a declaration that they are the owners of all existing COLI policies on their lives.
163
Plaintiffs further seek a “final judgment concluding that the policies, policy benefits, and any residual or resulting benefits from the policies are held in a constructive trust by [Defendants].” Complaint, at 12. The Camelot Defendants and Hartford move to dismiss these claims.
164
The Court grants these aspects of Defendants’ motions.
165
These rulings are made in the context that no Camelot Plaintiff has died, and there are no death benefits due at this time.
COLI Policy Proceeds Upon a Plaintiff’s Death.
— Courts applying the Texas insurable interest doctrine consistently have held, in the event that the beneficiary lacks an insurable interest, that the insurance policy is to be enforced as written except that a constructive trust is imposed in favor of the insured’s estate on the death benefits that are paid.
166
In most reported cases, the insured has died.
167
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The insurable interest doctrine, therefore precludes the Camelot Defendants from retaining death benefits from a COLI policy on the life of a Camelot Plaintiff,
if
the COLI policy is still owned by the Camelot Defendants at the time the Camelot Plaintiff insured dies and
if,
at that time, the policy designates a Camelot Defendant as the beneficiary.
See, e.g., Insurance Contracts and Coverage,
45 Tex. JuR. 3D § 217 (1995). However, for the reasons explained below, Texas law does not justify declaration of an immediate constructive trust on contingent death benefits or other rights under the policy while the insured is still alive.
Living Plaintiffs’ Remedies.
— The Camelot Plaintiffs, the living insureds under COLI policies, seek to obtain ownership of the insurance policies
per se,
as well as a judgment imposing a constructive trust on “the policies, policy benefits, and any residual or resulting benefits from the policies.”
168
Each Plaintiff thus seeks control over the policy on his own life, as well as all benefits available to the owner under the policy during Plaintiffs lifetime and thereafter.
169
Plaintiffs’ request for an immediate constructive trust on the COLI policies would require Defendants to handle the policies as fiduciaries, giving Plaintiffs substantial authority over the disposition of the policies and their proceeds. Establishment of constructive trusts during Plaintiffs’ lives, as Plaintiffs request, would be analogous to transfer of ownership of the policies to Plaintiffs. Therefore, the Court will address Plaintiffs’ claims for ownership and for a constructive trust together.
After considering the parties’ arguments and the authorities applying the insurable interest doctrine, the Court finds no probative support in Texas law for the far-reaching remedies Plaintiffs request. The Camelot Plaintiffs attempt to obtain remedies well beyond relief any Texas court previously has ordered under the insurable interest doctrine in circumstances even remotely similar to those here. The Court declines this invitation. The Court concludes that Texas courts would not provide for the transfer of legal or beneficial ownership of the

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/2518454. Public record. Not legal advice.