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First National Bank & Trust Company of Mountain Home v. Stonebridge Life Insurance Co.

March 20, 2007

FIRST NATIONAL BANK & TRUST COMPANY OF MOUNTAIN HOME, SPECIAL ADMINISTRATOR FOR THE ESTATE OF DEBRA HULSE KNIGHTON, DECEASED PLAINTIFF
v.
STONEBRIDGE LIFE INSURANCE COMPANY; EMC NATIONAL LIFE COMPANY; MINNESOTA LIFE INSURANCE COMPANY; AND FLOYD KNIGHTON DEFENDANTS STONEBRIDGE LIFE INSURANCE COUNTER PLAINTIFF CROSS PLAINTIFF
v.
THIRD PARTY PLAINTIFF FIRST NATIONAL BANK & TRUST COMPANY OF MOUNTAIN HOME, SPECIAL ADMINISTRATOR FOR THE ESTATE OF DEBRA HULSE KNIGHTON, DECEASED COUNTER DEFENDANT FLOYD KNIGHTON CROSS DEFENDANT CROSS PLAINTIFF MARSHA SMITH; DONNIE GARVIN; AND VINCENT KNIGHTON THIRD-PARTY DEFENDANTS



The opinion of the court was delivered by: Wm. R. Wilson, Jr. United States District Judge

ORDER TO INTERPLEAD FUNDS

Pending are Defendants EMC National Life Company's ("EMC") and Stonebridge Life Insurance Company's ("Stonebridge") Motions to Interplead Funds and to Discharge them from Liability.*fn1 Cross Defendant and Cross Plaintiff Floyd Knighton ("Knighton") responded to EMC's interpleader motion,*fn2 but did not respond to Stonebridge's motion. Also pending are Motions to Dismiss*fn3 filed by EMC and Stonebridge, to which Knighton has responded.*fn4

This is an action brought by Plaintiff First National Bank & Trust Company, the Administrator of the Estate of Debra Knighton, to claim the proceeds of insurance policies for the Estate. Because of conflicting claims to insurance proceeds, EMC and Stonebridge interpled the policy funds. Knighton cross-claimed against EMC and Stonebridge for bad-faith and asserts that EMC and Stonebridge should not be discharged from further liability.

I. Background

EMC issued a $150,000.00 life insurance policy to Debra Knighton in 1997. The policy names her husband, Floyd Knighton, as primary beneficiary, and her Estate as contingent beneficiary.*fn5 Stonebridge issued a $50,000.00 life insurance policy to Debra Knighton in 1995 which states that the policy proceeds will go to her spouse, if living; and otherwise to her children and step-children in equal parts.*fn6

Debra Knighton died on May 23, 2004 as a result of a gunshot wound to the head inflicted by her husband. The State of Arkansas charged Knighton with second degree murder, but the charges were nolle prossed in June 2006. In July 2006, the Estate sued EMC and Stonebridge for the insurance benefits. The Third-Party Defendants are the children of Debra Knighton.

Knighton filed cross-claims alleging that the failure to pay the face amount insurance benefits was due to "bad faith and affirmative misconduct" by EMC and Stonebridge. Knighton asserts that EMC should not be allowed to interplead the funds until discovery is conducted to determine if the delay in payment was intentional and malicious.

II. Motion to Dismiss Standard

When ruling on a motion to dismiss, a court assumes that all the complaint's factual allegations are true, and draws all reasonable inferences from those facts.*fn7 But the complaint must contain facts, not conclusions, and a court is not "required to read in missing facts necessary to perfect the claim."*fn8

The complaint must allege facts that state a claim as a matter of law.*fn9

III. Authority

A. Bad Faith

The standard of establishing a claim for bad faith is rigorous and difficult to satisfy.*fn10 In order to state a claim for bad faith, one must allege that the defendant engaged in affirmative misconduct that was dishonest, malicious, or oppressive.*fn11 Bad faith has been defined as misconduct carried out with a state of mind characterized by hatred, ill will, or a spirit of revenge.*fn12 Negligence or bad judgment is insufficient to establish bad faith.*fn13 In view of this definition, denial of a claim alone generally does not give rise to the tort of bad faith because there must be affirmative misconduct.*fn14 Knighton's claims were ...


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