SCOTUS Issues Rare Life Insurance Opinion

This week, the United States Supreme Court decided Hillman v. Maretta, which concerned an area the nation’s highest court rarely addresses: life insurance. I don’t want to mislead you; the case is just a plain-old Supremacy Clause case that just happens to concern life insurance benefits. But, hey, when it comes to SCOTUS insurance cases, you take what you can get.

Anyway, the benefits in Hillman arose under the Federal Employees’ Group Life Insurance Act, or FEGLIA. That statute says that benefits go to the named beneficiary under the policy. That meant that decedent’s ex-wife, who was still the named beneficiary under the policy (the decedent never sent in the divorce decree), was supposed to, and did, get his $125,000 in insurance benefits.

The General Assembly of Virginia, however, had passed a law stating that life insurance proceeds are automatically redirected to the current spouse or, if that scheme was pre-empted by FEGLIA–and it was–Virginia law would create a cause of action for the current spouse to sue the ex-spouse for the value of the life insurance policy. So that’s exactly what the decedent’s current wife did–she sued his ex-wife for all of the benefits and obtained summary judgment at the trial court. The Virginia Supreme Court reversed because, oh yeah, the Supremacy Clause.

The parties both agreed that the Virginia provisions allocating the death benefits to the current spouse was preempted by FEGLIA–which meant that the ex-wife was supposed to get the money. But the current wife argued that FEGLIA didn’t preempt her right to file a suit to yank that check right out of the ex-wife’s hands. Justice Sotomayor dispensed with that argument, holding that Virginia’s cause of action effectively substituted the widow for the named beneficiary, which was directly contrary to Congress’s directions in FEGLIA.

The most important takeaway from Hillman is something that can’t be repeated enough: keep your beneficiary designations up-to-date.

(Special thanks to Julianne Sicklesteel for her assistance with this post.)

About Brian Jones

I represent clients in all aspects of business litigation, but focus my practice on complex litigation and arbitration matters concerning insurance and reinsurance, antitrust, class actions, securities, real estate disputes, and contract matters. I am the co-chair of the Bose McKinney & Evans Insurance Group. I was listed in the 2017 and 2016 "Best Lawyers in America" for Insurance Coverage and named a "Rising Star" in Insurance Coverage by Super Lawyers in Indiana in 2014. I was also named a "Rising Star" in Business Litigation by Super Lawyers in Indiana in 2013 and 2012, and a 2010 “Rising Star” in Business Litigation in Texas. I am a member of the State Bars of Indiana and Texas, the Defense Research Institute, a former member of the Pro Bono College of the State Bar of Texas, and I am licensed to practice before all state courts in Indiana and Texas, as well as all federal courts in Indiana, the Northern, Western, and Southern Districts of Texas, the Northern District of Illinois, and the United States Courts of Appeals for the Fifth, Seventh, and Eleventh Circuits. I received my bachelor’s degree, cum laude, in political science and my master’s degree in teaching from Trinity University, where I was elected to Phi Beta Kappa. I received my doctor of jurisprudence degree from the University of Texas School of Law, where I was the Director of Communications for the Legal Research Board and a member of the Phi Delta Phi Honor Society. Before attending law school, I taught high school geography, government and economics in San Antonio, Texas.
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1 Response to SCOTUS Issues Rare Life Insurance Opinion

  1. Bill says:

    You are 100% correct Brian. Far too often, people forget to update their beneficiary and the wrong person gets the money or there is a court battle which could have been prevented just by calling the insured company when things have changed in their life.


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