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DeLeon v. Lloyd's London

The administrator of a deceased employees estate failed to state a claim for breach of contract action against the insurance company that provided an accidental death insurance policy to the deceased employees employer, which was the beneficiary under the policy.

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Appeals from the United States District Court for the Southern District of Texas

A corporation elected to self insure under Texas workers’ compensation laws. As part of its opt-out from the protections of workers’ compensation, the company purchased from Lloyd’s, London insurance upon the life of its employees, payable to itself. An employee was fatally injured in the course of work, and her representative obtained a substantial sum in settlement of a claim that the death was caused by the company’s negligence. Lloyd’s paid the policy proceeds to the corporation. The representative of the deceased employee later learned of the life insurance and filed this suit against Lloyd’s, seeking the policy proceeds.

This is a diversity case and we apply the Texas law of insurable interest, ultimately affirming summary judgment in favor of Lloyd’s, London. We conclude that under Texas law Lloyd’s was obligated to pay the proceeds of the policy and discharged its obligation by paying the proceeds to the named beneficiary. We also conclude that the named beneficiary, lacking an insurable interest, held the proceeds in trust for the benefit of the estate of the insured employees.

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