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.)