The Mississippi Supreme Court appears to have set a new standard for insurance companies and dealing with payment of funds to guardianships and conservatorships in the recent opinion of Samson v. Unum Life Insurance Company of America.
The Court held that an insurance company owes a general duty of care to the insured, independent of any contractual obligation “to use that degree of diligence and care with reference thereto which a reasonably prudent man would exercise in the transaction of his own business.” In applying that rule here, the Court ruled that when insurance companies issue payments to fiduciaries, the insurance company must ensure that the beneficiary receives the funds or that they are otherwise protected. Or as the Court stated it, the insurance company“… owed a general duty of care to properly deliver the guardianship funds for the beneficiaries.”
In Samson, the insurance company received the order appointing the mother guardian for the minor children. The order provided directions that the funds were to be issued to the Guardianship of the minor. The insurance company however issued payment to the Guardian, on behalf of the minor. This allowed the mother to use the funds without any restriction and direct the benefits away from the children. Once the mother’s actions were discovered, a new representative for the children sued the insurance company arguing that its actions allowed their funds to be taken. The Supreme Court set aside the insurance company’s dismissal and returned the case to the Circuit Court for trial on whether the Insurance company’s action in fact breached its duty to the children.