Supreme Court Reaffirms Validity of Court Orders

December 19, 2013

The Tennessee Supreme Court has ruled that an insurance company properly relied upon a juvenile court order prior to paying a claim to the financial guardian of a minor beneficiary.

In 2002, David Ray Hood purchased a $100,000 life insurance policy from The Old Line Life Insurance Company of America. After Hood died in 2007, his 16-year-old son, Erik, who was the sole beneficiary, requested payment of the proceeds from Old Line. An independent insurance agent in Knoxville helped Erik and his 26-year-old half-sister, Casey Jenkins, obtain the necessary paperwork, which included the establishment of financial guardianship. No attorneys were involved in the process. At Casey’s request, the Juvenile Judge for Grainger County appointed her as guardian for her brother, but initially failed to specify that the guardianship was for financial purposes.

The Old Line insurance representative asked the juvenile court to clarify the financial nature of the guardianship and verify that the order had been validly entered. After receiving written assurances from the juvenile court clerk and judge, the representative issued a check for $100,854.88 to Casey for the benefit of Erik.

When the entire amount was depleted eight months later, Erik filed a lawsuit against both his sister and Old Line, claiming that Casey had spent most of the money for her own benefit and that Old Line should have ensured that the juvenile judge had considered all legal requirements pertaining to the guardianship, such as a management plan and a bond, before sending Casey the check.

The trial court agreed and entered judgments against Casey and Old Line. The Court of Appeals affirmed the judgment against Old Line, holding that the order entered by the juvenile judge was “woefully deficient” and that Old Line had not acted in good faith.

While acknowledging that the juvenile judge had failed to address some legal requirements for the creation of a financial guardianship, the Supreme Court reversed, holding that the order had been signed and entered by a court with authority in the case, and that Old Line was entitled to rely upon a “facially valid” judgment. Citing the rule that all citizens should ordinarily be able to rely upon the integrity of a court order, the state’s high court also held that Old Line had conducted a good faith investigation before paying the claim and that the loss, in this instance, should be the sole responsibility of the guardian.

Read the Erik Hood v. Casey Jenkins et al. opinion authored by Chief Justice Gary R. Wade.