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The Prudential Insurance Company of America v. Bailey

United States District Court, S.D. Georgia, Stateboro Division

September 29, 2017

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff,
v.
SHERRY BAILEY, Counterclaimant/Defendant
v.
SHARMON HOWARD, KENNETH MOON, JR., JAMES BAILEY and RANDALL BAILEY Defendants.

          ORDER

          J. RANDEL HALL CHIEF JUDGE

         Presently before the Court is a motion for judgment on the pleadings filed by Prudential Insurance Company of America ("Prudential"). (Doc. 25.) The Court DENIES IN PART and GRANTS IN PART Prudential's motion.

         IBackground

         Prudential provided a life insurance policy to Russell Bailey (the "Policy"). Sherry Bailey was Russell Bailey's wife and the beneficiary of the Policy. On June 24, 2015, Russell Bailey died. On June 26, 2015, Sherry Bailey made a claim on the Policy.

         The Policy contained $332, 000.00 of term life coverage and $332, 000.00 of accidental death coverage. On January 21, 2016, Prudential settled the term life portion of the Policy and placed $343, 420.50 into a Prudential Alliance Account (the "Account") in Sherry Bailey's name. The "Alliance Payment Notification" sent to Sherry Bailey described the Account as follows:

We have approved your group life insurance claim and have settled your benefit through Prudential's Alliance Account settlement option. An interest bearing account has been established in your name. . . . With the Alliance Account, you can access your money immediately by writing a draft for the amount you'd like to withdraw. You can withdraw the entire amount immediately, which will close the account, or you can write drafts as needed. Any balance you maintain will earn continuous interest.

(Doc. 28-1, at 12.)

         On January 26, 2016, a grand jury indicted Sherry Bailey for the murder of Russell Bailey. Between January 29, 2016, and February 3, 2016, Sherry Bailey wrote three checks withdrawing a total of $83, 855.50 from the Account. On February 8, 2016, Prudential notified Sherry Bailey that it had frozen the Account. Sherry Bailey claims that the Account contained at least $259, 616.51 at the time Prudential imposed the freeze.

         On May 25, 2016, Prudential filed an interpleader complaint in this Court seeking to enjoin Sharmon Howard, Kenneth Moon, Jr., James Bailey, and Randall Bailey as potential beneficiaries under the Policy. Simultaneously, it moved to "deposit into the Registry of this Court a total of death benefits in the amount of $591, 564.90, plus applicable claim interest, if any (the 'Death Benefit') that is due and payable as a result of the death of Russell Bailey, who was insured under [the Policy] ." (Doc. 3 at 1.) Prudential made no mention of any distributions to Sherry Bailey under the Policy or the $83, 855.50 Sherry Bailey had already collected under the Policy.[1]On May 26, 2016, this Court granted Prudential's motion.

         Sherry Bailey filed an answer and counterclaim on August 31, 2016. In her counterclaim she alleges that Prudential illegally took $259, 616.51 from her Account and placed it into the Court's Registry without her permission. She also alleges claims for fraud and breach of contract related to her agreement with Prudential to place the distributed term life benefits into the Account.

         On December 21, 2016, Prudential moved for judgment on the pleadings. In its motion, Prudential asks the Court to: (1) discharge it "from any and all liability" to Sherry Bailey, Sharmon Howard, Kenneth Moon, Jr., James Bailey, and Randall Bailey; (2) discharge it from liability for all claims relating to the Policy; (3) enjoin any claims against it relating to the Policy; (4) dismiss with prejudice all claims against it relating to the Policy, including Sherry Bailey's counterclaim; and (5) award it reasonable legal fees and costs. (Doc. 25 at 1-2.)

         II. Discussion

         At the outset, the Court notes that this case is not as clear cut as Prudential would lead the Court to believe. Prudential would have the Court believe that it is an innocent party who wants to pay its contractual obligations but simply does not know who it needs to pay. Sherry Bailey's counterclaim, however, casts serious doubt on Prudential's narrative.

         In her counterclaim, Sherry Bailey alleges that Prudential was not entirely forthcoming in its interpleader complaint and motion to deposit funds. Specifically, she claims that Prudential stole approximately $259, 000.00 from the Account and placed it in the Court's Registry. She also claims that Prudential did not give her notice prior to depositing the disputed funds in the Court's Registry. These claims significantly complicate Prudential's interpleader action and raise questions about the validity of the Court's Order accepting the disputed funds.

         After reviewing the motions and pleadings filed in this case, the Court takes the following actions. First, it RELEASES back to Prudential all the funds it accepted on its Order dated May 26, 2016. Second, it DENIES IN PART and GRANTS IN PART Prudential's interpleader request. Third, it DENIES Prudential's request for a discharge and injunction. Fourth, it DENIES IN PART and GRANTS IN PART Prudential's motion for judgment on the pleadings. Fifth, it DENIES Prudential's request for attorneys' fees.

         A. ...


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