Bank Employee Not Liable for Failure to Pay Insurance Premiums of Estate

bankBanks often act as executors for estates and handle all business necessary for the maintenance of trusts and other estate planning instruments. The Court of Appeals of Tennessee recently ruled that a bank employee was acting only in a representative capacity in a dispute involving the payment of insurance premiums.

The case of Russo v. SunTrust Bank involved an estate established by the plaintiff’s former husband. At the time of his death, the deceased was enrolled in a COBRA health plan. The plan insured the deceased and the plaintiff, as well as their child. The insurance policy listed the plaintiff as the decedent’s spouse, even though the evidence indicated that the two had been divorced some years prior and had never remarried. After the decedent’s death in 2006, his estate was managed by the defendant bank, as executor of the estate.

The plaintiff contacted an executive with the bank in order to discuss the COBRA policy covering herself and her son. The bank executive allegedly informed the plaintiff that the bank would pay the premium out of estate funds. However, the bank made only one premium payment in that manner. It failed to make any additional payments. As such, coverage under the policy lapsed due to non-payment.

When the plaintiff brought suit against the bank, the trial court granted partial summary judgment in favor of the bank in its capacity as estate executor. The trial court held that the bank could not be held liable for any promises made beyond the capacity of executor. The bank executive then filed a pleading, stating that he did not act in any capacity other than as the executor of the estate. The executive averred that he was not acting on behalf of the bank in any other capacity.

In response, counsel for the plaintiff submitted affidavits contending that the bank executive had been informed multiple times to make insurance premium payments. The attorney also attached copies of correspondence between himself and the bank executive to the same effect. However, the trial court held these documents were inadmissible hearsay and granted the bank’s motion for summary judgment.

On appeal, the plaintiff argued that the trial court erred in ruling that the documents were hearsay, and that the executive did not have the authority to bind the bank. The appeals court examined the executive’s role in communications regarding the payment of insurance premiums. The evidence, according to the appellate court, could only support the conclusion that the executive was acting on behalf of the bank only as executor. Therefore, his actions could not obligate the bank.

Moreover, according to the appeals court, the statute of frauds precluded any assertion that the bank was individually liable for the failure to pay the premiums. There was no evidence in the record that the bank executive’s alleged promises were ever made in writing. The statute of frauds specifically provides that legal action may not be brought against an executor upon a special promise to answer any debt or damages out of an individual’s estate unless the promise is in writing. Accordingly, the appeals court affirmed the trial court’s dismissal of claims against the bank.

If you or someone you know needs assistance administering an estate or has experienced a dispute with the executor of an estate, contact the Nashville estate litigation attorneys at Martin Heller Potempa & Sheppard. Our skilled attorneys can discuss the facts of your case and provide knowledgeable legal guidance. To speak with one of our attorneys, contact us online or call (615) 800-7096.

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