Winstead v. Peoples Bank

The owner of a life insurance policy pledges the policy to a bank as collateral for farm operating loans. The bank is not, however, designated as a beneficiary of the policy. Upon the death of the owner of the policy, the bank elects to satisfy a part of the policy owner’s indebtedness by appropriating to itself the entire proceeds of the policy. Under these circumstances, is the beneficiary named in the policy entitled to subrogation to the claim which the bank would have had against the decedent’s estate absent the availability to the bank of the life insurance policy proceeds?

Yes.

We…