Griffin v. McCoach

Background

A Texas citizen, Colonel Gordon, took out a life insurance policy that was handled and delivered in New York. A New York oil association and later a Protection Syndicate paid the premiums and were named as beneficiaries, with later changes giving one-eighth to Gordon, one-eighth to his wife, and seven-eighths to a trustee for the syndicate members. After some members assigned portions to third parties, the insured died and competing claims arose between Gordon’s estate and the trustee and assignees for the policy proceeds.

Reasoning

The federal trial and appellate courts treated the policy and later assignments as New York contracts and applied New York law, awarding most proceeds to the trustee and assignees. The Supreme Court explained that federal courts sitting in diversity must follow the conflict-of-laws rules of the state where they sit. The Court reversed and sent the case back so Texas law can be applied to decide whether Texas’s public policy would bar enforcement of those foreign assignments because the assignees lacked an insurable interest.

Real world impact

On remand Texas courts must decide whether their public policy prevents strangers to a Texas citizen’s life from collecting insurance proceeds. The decision says a state may refuse to enforce a foreign contract if enforcement would deeply offend the state’s public policy. The outcome could allow or block payouts depending on how Texas law is applied.