When a plan participant dies, who gets the death benefit? Very often, that is not an easy question, particularly when the participant has a spouse (or former spouse) and one or more children each claiming all or part of the benefit. Here is what the Court did in Matschiner v. Hartford Life and Accident Insurance Company, No. 09-3576 (8th Cir. 2010).
In this case, RoJane Lewis obtained life insurance under a group policy issued by Hartford Life and Accident Insurance Company (“Hartford”) to her employer, Inacom Corporation. In 1991, she submitted a beneficiary designation form granting sixty percent of the death benefit under the policy to her husband, Alan Lewis, and twenty percent to each of her daughters, Katherine and Kristina Matschiner (the “1991 beneficiary designation”). After RoJane’s death, Katherine Matschiner claimed that Kristina had a more recent beneficiary designation and that Alan Lewis intended to disclaim his share of the $122,000 death benefit. Hartford contacted Alan, who stated that he wished to collect his share of the death benefit and submitted a signed claim form. The daughters also submitted claim forms, and Kristina faxed Hartford a copy of a year 2000 divorce decree in which a Nebraska state court awarded Alan and RoJane, individually, the “cash values of any life insurance policies currently owned by him or her or the cash proceeds . . . to be received therefrom.” When neither daughter submitted a more recent beneficiary designation, Hartford paid the policy benefits in accordance with the 1991 beneficiary designation.
The Matschiners sued Hartford and Alan Lewis in state court to recover the benefit paid to Alan. Hartford removed the action because the policy was an employee welfare benefit plan governed by ERISA. The district court granted summary judgment to the Matschiners, concluding that Hartford abused its discretion by paying the death benefit in accordance with the 1991 beneficiary designation. Hartford appealed. The Eighth Circuit Court of Appeals found that Hartford paid the death benefit in accordance with the plan documents and therefore complied with ERISA as construed by the Supreme Court in Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 129 S.Ct. 865 (2009). Accordingly, the Court overturned the district court’s summary judgment.
The Court first ruled that Kennedy applies to any plan subject to ERISA, including an employee welfare benefit plan. Kennedy requires that a death benefit be paid in accordance with the plan documents. As relevant here, Hartford’s Group Insurance Policy provided, as to the death benefit:
Payment will be made in a lump sum to the beneficiary or beneficiaries named in writing by you, provided the names are on file with the Policyholder.
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You may change your beneficiary at any time by:
(1) making such change in writing on a form acceptable to The Hartford; and (2) filing the form with the Policyholder.
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Payment for loss of life will be made: (1) according to the beneficiary designation in effect when payment is made, or, if none is in effect; (2) to your estate.
In applying these provisions, the 2000 divorce decree was irrelevant, because RoJane never signed and submitted a beneficiary designation form eliminating Alan as a designated beneficiary, in accordance with that decree, to the Policyholder (her employer) or to Hartford. There is evidence of a 1997 beneficiary designation, which reduces Alan’s share of the death benefit from sixty to forty percent, but there is no evidence that this designation was ever submitted to the Policyholder or Hartford before the death benefit was paid. Katherine Matschiner had advised Hartford of a later beneficiary designation, but did not furnish one before the death benefit was paid. Rather, Hartford paid the death benefit in accordance with the only designation in its files, namely the 1991 beneficiary designation, as the provisions of the policy required. As such, the Court ruled in Hartford’s favor.
The Lesson: As always, keep your beneficiary designation up to date.