IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                               FILED
                                                                             March 17, 2009
                                         No. 08-40144
                                                                         Charles R. Fulbruge III
                                                                                 Clerk
ROYAL INDEMNITY COMPANY; FIRST COLONY LIFE INSURANCE
COMPANY

                                                     Plaintiffs - Appellees
v.

KATHY BATES,

                                                     Defendant - Appellee
v.

JAMES T KOONCE; STEPHANIE KOONCE; SANDY DIAZ ALVARADO;
TAMMY STEINBURG; TINA ROBERTSON; DORIS SHIRLEY MEYER;
ZANNA KOONCE RUSSELL

                                                     Defendants - Appellants


                      Appeal from the United States District Court
                           for the Eastern District of Texas
                                USDC No. 5:06-CV-112


                                 On Petition for Rehearing

Before JONES, Chief Judge, JOLLY, Circuit Judge, and MONTALVO,* District
Judge.
E. GRADY JOLLY, Circuit Judge:**


       *
           District Judge of the Western District of Texas, sitting by designation.
       **
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
       For the reasons that follow, we GRANT the petition for panel rehearing
in part and DENY it in part.
       As petitioner Kathy Bates (“Bates”) correctly asserts, the interpleaded
funds did not vest with the heirs of James B. Koonce (James T. Koonce;
Stephanie Koonce Mendez; Sandy Diaz Alvarado; Tammy Steinburg; Tina
Robertson; and Doris Shirley Meyer, individually and as guardian of minors
Christina Koonce, Christopher Koonce, and Alexander Koonce) when James B.
Koonce died. The unpaid annuity proceeds instead vested with Mr. Koonce’s
heirs only as the annuity payments came due. We therefore strike the following
sentence from the second full paragraph at page six of the opinion: “If there was
no properly designated beneficiary at the time of Koonce’s death, the proceeds
belong to Koonce’s heirs.” We replace that text with the following sentence:
“Because there was never a properly designated beneficiary, the proceeds belong
to Koonce’s heirs.” To this limited extent, we GRANT in part the petition for
panel rehearing.
       Bates’s other arguments lack merit. The overarching issue is whether
Royal Indemnity Co. (“Royal”)1 directed First Colony Life Insurance Co. (“First
Colony”)2 to designate Bates as Mr. Koonce’s survivor-beneficiary. As Royal and
First Colony acknowledged during our oral argument, the record correctly
reflects that no such direction ever occurred. In the light of this fact, Royal and
First Colony’s decision “not to contest” the purported designation of Bates has


R. 47.5.4.
       1
        Effective September 2007, Royal Indemnity Co. became known as Arrowood
Indemnity Co. We nevertheless will refer to the entity as “Royal.”
       2
        First Colony’s successor in interest, Genworth Life Insurance and Annuity Company,
is now party to this action. We nevertheless will refer to “First Colony.”

                                            2
no material effect. The decision’s timing also is immaterial. So too is whether
Royal and First Colony were free to disregard the annuity contract’s formalities
when deciding “not to contest” the purported designation. The controlling
determinant of this case is that Royal never directed First Colony to designate
Bates as Mr. Koonce’s survivor-beneficiary; and, consequently, First Colony
never did. Bates was not designated as beneficiary, and therefore she is not
entitled to the annuity’s proceeds.
      Also, Texas Probate Code § 450 does not apply under the facts of this case:
the annuity contract contained no provision that, after Mr. Koonce’s death, the
annuity’s remaining proceeds would be paid to a person whom he designated
either in the annuity contract or a separate writing. And finally, our holding in
this case does not require actually paying a new beneficiary to effect a change
in beneficiary. We DENY in part the petition for panel rehearing.
                                      GRANTED in part and DENIED in part.




                                       3