Dietrichson v. Pacific All Risk Ins. Co.

Re: Life Insurance, Accident Policies/ Double Indemnity (1944)

What is a double indemnity clause?  When can an insurance company deny a life insurance claim?

Sources:

Diamond v. New York Life Ins. Co., 286 N.Y.S. 625 (N.Y. Sup. Ct. 1936).

Funk v. New York Life Ins. Co., 60 N.Y.S.2d 349 (N.Y. Sup. Ct. 1946).

National Life & Accident Ins. Co. v. Edwards, 119 Cal.App.3d 326 (Cal. App. 1981).

People v. Snyder, 159 N.E. 408 (N.Y. 1927).

Prudential Ins. Co. of Am. v. Snyder, 254 N.Y.S. 732 (N.Y. Sup. Ct. 1928).

American Council of Life Insurers (ACLI). "ACLI 2022 Life Insurers Fact Book."

Centers for Disease Control and Prevention (CDC).  Mortality in the United States, 2021.  NCHS Data Brief No. 456, December 2022. https://www.cdc.gov/nchs/products/databriefs/db456.htm

Crowley & Shih, “What to do if Your Life Insurance Claim is Denied?” Policygenius (April 10, 2023).  https://www.policygenius.com/life-insurance/what-to-do-if-a-life-insurance-claim-is-denied/

Written, Researched, and Recorded by Céleste Young, 2023-2025.
Music: Out On My Skateboard - Mini Vandals

Waitisthatlegal@gmail.com

Transcript

            On January 13th, 1928 a picture appeared in the New York Daily News.  It featured a woman, masked and strapped to a chair, taken mid-electrocution in the execution chamber at New York’s Sing Sing Prison the day before.  The woman was Ruth Snyder who had been sentenced to death for her part in the scandalous plot to murder her husband for an insurance payout.  Ruth and her boyfriend, Judd Gray, had staged the death of Albert Snyder as a home invasion gone wrong.  Two years before the murder, Ruth had taken out a $50,000 life insurance policy on her husband without his knowledge.  The sensational story was only boosted in the public’s consciousness at the time by the grim picture of Ruth’s execution.  The story directly influenced the 1936 novella, Double Indemnity, by James M. Cain and the later movie adaptation in 1944 starring Fred MacMurray and Barbara Stanwyck.  The plot of Double Indemnity shares a lot of the same details that were present in the real crime, including how the life insurance policy was purchased by the wife without her husband’s knowledge.

            The movie basically ends at a point where the accident insurance policy is no longer a factor, but had the ending gone a bit differently would the wife have gotten the normal pay out and the double indemnity pay out for the husband’s unusual accident?  What about the insurance Ruth Snyder took out on her husband, obviously she wasn’t going to need the money, but what about the Snyder’s daughter, Lorraine?

            First, we should probably cover some basics about life insurance and indemnity clauses.  Life insurance is a type of insurance policy that covers the life of the insured person.  It typically pays out to a named beneficiary, or beneficiaries, upon the death of the insured life.  Some life insurance policies also contain disability benefits that can be accessed by the insured in the event that they are unable to work due to an accident or illness.  Life insurance can come in a variety of different types, like: term, whole, group, and credit life insurance.  The type of insurance dictates how the premiums are paid, how long the coverage lasts (for a specific term, or the whole life of the insured), and what is actually covered (credit insurance is used to pay debts; accident insurance will only cover accidental deaths or disabilities).  Each policy is generally tailored to the insured’s specific needs and is based on their health, income, and lifestyle.  

            The coverage provided by a life insurance policy with disability benefits is usually adequate for the insured’s needs.  However, for people with highly lucrative special skills it is a sometimes a good idea to have accident insurance.  For example, if you are a neurosurgeon and have your hands crushed in a car accident it would be less devastating financially if you had accident insurance, especially if you don’t have superhero back-up plans to be a mystical wizard with a powerful amulet.  Or if you are a professional ballerina and your leg has to be amputated after getting an infection while snorkeling on vacation.  You will never dance at the same level again but you will have some financial support.  For people with highly lucrative skills that put them in regular danger, accident insurance is probably not going to be an option, or it will have really high premiums.  So if you make your living doing stunts on Tik Tok, you will need to make other financial arrangements.

            Indemnity clauses are a special provision added to an insurance policy that pays out a multiple of the face value of the policy.  They are usually double or triple indemnity clauses and generally are paid in the event that the insured person death is caused by an accident.  While this might seem like a sweet deal for the beneficiaries and a weird thing for an insurance company to offer, it’s actually not that common that the multiple indemnity will even pay out.  According to the Centers for Disease Control, accidental deaths only accounted for 5.9% of all deaths in the U.S. in 2020 (approximately 57 in every 100,000 deaths), and 6.5% of deaths in 2021 (about 65 per 100,000 deaths).  Accidents were the 4th leading cause of deaths in 2020, but the leading 3 causes (heart disease, cancer, and Covid-19) accounted for 48.8% of all deaths in the U.S.  Also, the data likely includes deaths caused by accidents that would not qualify under a multiple indemnity clause.  What the CDC might classify as an accidental death will not be the same definition used by an insurance company.  The fine details will be specific to the actual indemnity clause, but in general, accidental deaths caused by the insured’s negligence, gross negligence, or on purpose are excluded from indemnity collection.  Suicides, deaths that occur in a dangerous workplace, and murder of the insured by a beneficiary or someone associated with a beneficiary are also excluded.  A beneficiary might not succeed on claiming the double or triple indemnity amount, but they will often still be paid the face amount of the policy.

            It is actually very rare that a life insurance claim will be outright denied by the insurance company.  According to data from the American Council of Life Insurers, in 2021 only 0.02% of claims were delayed or denied.  Reasons that life insurance claims might be denied include: failure to pay premiums, lying on the application or omitting important details, violation of the terms of the policy, or because the death is of a type excluded by the policy.  Again, a beneficiary that is involved in the murder of the insured person will not be able to claim the insurance benefit.  The policy will likely prohibit it, but State Slayer Statutes also prevent beneficiaries and heirs connected to the murder of the insured person from benefitting from their crime.  In these cases, the benefit or inheritance will usually go to another, uninvolved, beneficiary, or revert to the deceased estate to be distributed in accordance with state law where the murderers, or “slayers”, are removed or treated as though they predeceased the victim.

            In cases where the insured person commits suicide, the beneficiaries are not always barred from making a claim.  Most life insurance policies will have a suicide clause with a stated amount of time the policy must be in effect before the insurance company will pay out on an intentional self-caused death of the insured.  This period can vary, but it is usually 2 to 3 years.  This is to try and discourage people from purchasing life insurance solely for the purpose of committing suicide.

            When the insurance company denies a claim, the beneficiary can dispute the decision and can even take the insurance company to court.  I searched New York and California insurance cases (because the Snyder case took place in New York, and Double Indemnity is set in California) and the cases I found involved denials based on fraud or the language of the policy.  For example, there were a couple New York cases that dealt with indemnity clauses that excluded deaths related to aviation.  These were from the first half of the 20th century, and commercial air travel was still relatively new, so the Courts were wrangling with the wording of the policies and whether they actually refer to flying a private plane rather than a paying passenger dying in the crash of a commercial airliner.  In one case from 1946, the New York Court stated that a fare paying passenger is not engaging in aviation, as it was worded in the policy; and [quote] “that if an insurance company desired to exclude liability for double indemnity where the insured was riding as a passenger in any kind of aircraft, it should have so stated in plain, unambiguous language; that insurance contracts, above all others, should not be couched in language as to the construction of which lawyers and courts may honestly differ; that a policy of life insurance should be so worded as to be understood, not by a savant or rhetorician, but by a person of ordinary business intelligence.” [end quote]  In another New York case, a man died from accidental carbon monoxide inhalation, but the Court decided that the wording of the double indemnity clause specifically excluded deaths caused by the intentional or unintentional inhalation of a toxic gas, even if his death was not ruled a suicide.  A California case from 1981, upheld the interpretation of life insurance policies as contracts, by declining to extend a public policy condition where disability benefits are retroactive to the date of the injury.  The California Court argued that a double indemnity clause provision limiting the time between an automobile accident and the resulting death to a 90 day window was an acceptable limitation that was clearly stated.  In all these cases, the issue of whether the beneficiaries could collect the face amount of the insurance was not in dispute.  Most multiple indemnity cases hinge solely on the wording of the policy and whether the policy can be easily understood to exclude the type of death that has occurred.

            In the real-life Albert Snyder case, there was no indemnity clause.  Also the insurance agent was not involved in the murder.  However, he did conspire with Ruth to sell her a life insurance policy on her husband without the husband’s knowledge or consent.  This part played out in the movie about the same as it did in the real case.  In the real case, the agent was asked by Ruth Snyder to sell her husband life insurance.  Albert Snyder was not interested in a larger policy and instead only wanted a $1,000 20-year endowment policy that did include accidental death benefits and a double indemnity clause. Ruth wanted her husband insured for $50,000 and because the commission on that amount was a whole lot more the agent had Mr. Snyder sign two forms: the $1,000 policy and a blank form.  Ruth and the agent then filled out the blank form with the details of the $50,000 policy.  Although later he had to split the policy into a $45,000 policy with accidental death benefits or disability income benefits and a $5,000 policy without the benefits, because the insurance company’s policy at the time was not to pay out the disability benefits on a $50,000 plan.  Ruth paid the premiums on the 2 policies adding up to $50,000 and then conspired with her boyfriend, Judd Gray, to kill Mr. Snyder.  After the two were arrested, convicted, and executed, Ruth’s mother, on behalf of the Snyder’s minor daughter, put in a claim to collect the full $50,000 amount on the 2 secret policies, and the $1,000 amount on the policy Mr. Snyder actually knew about.  The insurance company did not dispute the payout on the $1,000 policy, but they argued that because the insured person for the $50,000 policy was not aware of its existence it could only have been considered an application for the insurance policy and not an actual contract for insurance.  The New York Court agreed with the insurance company that there had been no agreement by Mr. Snyder for the policies and the agent that sold the policies to Ruth did so without the knowledge of his employer or the insured.  In the end Lorraine Snyder received the $1,000 benefit and the return of the premiums paid on the invalid policies.

            In contrast to the real life case, the movie Double Indemnity, has insurance agent Walter Neff, played by Fred MacMurray, stopping by the Dietrichson’s house in order to sell Mr. Dietrichson a renewal policy on his car insurance.  Instead, he is propositioned by Mrs. Phyllis Dietrichson, played by Barbara Stanwyck, to also sell accident insurance to her husband.  Neff immediately puts the pieces together that Phyllis intends to kill her husband, but he decides he wants to help her.  Neff uses the blank policy-posing as a duplicate form-trick to get Mr. Diectrichson’s signature and later he fills out the blank form for accident insurance with a $125 per week disability benefit, or a $50,000 capital sum in the event of an accidental death.  He also explains to Phyllis that the policy contains a double indemnity clause for accidental deaths that are statistically unlikely to occur.  I can’t remember if the $50,000 sum is the double indemnity amount, or the base pay out amount, but it doesn’t really matter.  Phyllis mentions that she needs this policy to protect herself because her husband is an oil executive and spends a lot on time on site where accidents are a regular occurrence.  Mr. Dietrichson already has life insurance, but the beneficiary is Lola, his teenaged daughter from his first marriage.

            Neff then devises a plan to murder Mr. Dietrichson and stage it as a death from falling from a train.  Neff explains that accidental deaths involving trains are considered very statistically unlikely and will trigger the double indemnity clause giving Phyllis twice the face value amount of the policy.  The staged accident ends up being even more believable because Mr. Dietrichson injures his leg prior to his trip and is on crutches.  The death is determined to be accidental and the police decline to further investigate the death.  Initially, the insurance company agrees to pay the double indemnity amount on the policy, but one of the higher ups in the company thinks it was a suicide and then the claims supervisor re-evaluates the death and comes to believe Lola’s boyfriend (that her father hated) and Phyllis murdered Mr. Dietrichson.    Suicide and murder by the beneficiary would both invalidate the double indemnity clause.  No one suspects Neff of being involved, he could have walked away with his commission, but he becomes suspicious of Phyllis after learning she probably killed Mr. Dietrichson’s first wife.  Had Neff and Phyllis both kept to the plan, they probably would have gotten away with murder and Phyllis would have at least been able to claim the face value amount on the insurance policy, if not the double indemnity amount, too.

            All the life insurance dispute websites I found said the same thing about appealing a denied claim: to keep all documentation, like police reports, coroner reports, autopsy records, and communications with the insurance company.  In the movie’s case, the police barely investigate and rule the death as an accident.  It is not mentioned if there was an autopsy or coroner’s report; so it seems the official cause of death is an accident.  Forensic science was certainly not as advanced as today so I’m not sure if they even would have been able to determine that Mr. Dietrichson was actually strangled.  The claims supervisor, Keyes, has done his own investigation, which causes Neff to believe that the ensuing legal case might cause the police to reopen the investigation.  This is a possibility, but it would be really difficult for the State to prosecute a murder case based on the very circumstantial evidence presented.  Keyes only has the “little man inside him” (his gut feeling) to go on.  The man that encountered Mr. Dietrichson on the train did not get a good look at him, only that he looked younger than Mr. Dietrichson’s picture.  He does not immediately place Neff on the train even if he thinks he looks a little familiar.  Keyes also finds it unlikely that someone could die falling off a slow moving train, but he doesn’t have any proof.  He also thinks it’s strange Mr. Dietrichson took out an accident policy and didn’t put a claim in on the workplace accident that caused his leg injury.  Unlike the real life Snyder case where there was a separate insurance agent, in the movie only Neff and Phyllis know that Mr. Dietrichson never agreed to the accident policy so the insurance company cannot even deny the claim based on fraud.  Overall, Keyes might have enough evidence to convince a civil jury or judge that Mr. Dietrichson’s accidental death was not an accident, which could invalidate the double indemnity claim.  There was no evidence of fraud or that Phyllis was involved in Mr. Dietrichson’s murder at all, so the insurance company would have to pay out on the base policy.  This would have been the safest bet for Phyllis as well, to drop the double indemnity claim and walk away with the single claim amount.  Instead, Phyllis goes through with orchestrating the murder of her husband only to end up the same as her real world counterpart and with no one getting the insurance money to show for it.

Thank You for Listening.  This show is researched, written, and recorded by me, Céleste Young.  None of the legal advice or opinions expressed in this episode are intended as specific or individualized legal advice.  Please like, subscribe, rate, or review this podcast if you enjoyed it.  If you have any questions or comments, please e-mail them to Waitisthatlegal@gmail.com.  You can find the Podcast on Twitter, Facebook, and Instagram.

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