Justia Insurance Law Opinion Summaries

Kimberly Blalock appealed a circuit court order holding Crimson Sutphin was the rightful beneficiary of a policy insuring the life of Loyd Sutphin, Jr. ("Loyd"), issued by New York Life Insurance Company. Loyd took out a $250,000 individual whole life-insurance policy, naming his daughter, Sutphin, as the sole beneficiary. In October 2012, Loyd married Blalock, and they lived together at his home in Henegar. Soon after, in December 2012, Loyd submitted a change-of-beneficiary-designation form to New York Life, designating Blalock and Sutphin each as a 50% beneficiary under the policy. A few years later, in February 2016, Loyd and Blalock divorced; however, the life-insurance policy was not addressed in the divorce judgment, and Loyd never changed the beneficiary designation following the divorce. Loyd died later that year on December 23, 2016. In April 2017, Sutphin filed a action seeking a judgment declaring that she was the rightful beneficiary of the entire proceeds of the New York Life policy because, she asserted, pursuant to section 30-4-17, Ala. Code 1975, Blalock's beneficiary designation had been revoked upon her divorce from Loyd. Blalock moved to dismiss the action, arguing that Tennessee, not Alabama, law should govern and, thus, that the DeKalb Circuit Court did not have subject-matter jurisdiction to hear the case. The circuit court denied the motion to dismiss; Blalock filed a motion to reconsider the denial. At an evidentiary hearing on her motion to reconsider, Blalock again argued that the DeKalb Circuit Court lacked subject-matter jurisdiction but also asserted that the application of 30-4-17 in this instance violated section 22 of the Alabama Constitution of 1901; the circuit court denied Blalock's motion to reconsider. The case proceeded to a bench trial, at which Blalock argued that she and Loyd had established a common-law marriage after their divorce and before his death, thereby reviving her beneficiary designation under the policy. The circuit court heard testimony from numerous witnesses on this issue, most of whom testified on Blalock's behalf. In 2018, the circuit court issued a final order in the case, holding that Sutphin was the rightful beneficiary under the policy because Blalock's beneficiary designation had been revoked by virtue of 30-4-17 and no common-law marriage existed to revive that designation before Loyd's death. Finding that Blalock's beneficiary designation was revoked under 30-4-17 by virtue of her divorce, the Alabama Supreme Court affirmed the circuit court. View "Blalock v. Sutphin" on Justia Law

Minnesota law provides that “the dissolution or annulment of a marriage revokes any revocable . . . beneficiary designation . . . made by an individual to the individual’s former spouse,” Minn. Stat. 524.2–804. If an insurance policyholder does not want that result, he may rename the ex-spouse as beneficiary. Sveen and Melin were married in 1997. Sveen purchased a life insurance policy, naming Melin as the primary beneficiary and designating his children from a prior marriage as contingent beneficiaries. The marriage ended in 2007. The divorce decree did not mention the insurance policy. Sveen did not revise his beneficiary designations. After Sveen died in 2011, Melin and the Sveen children claimed the insurance proceeds. Melin argued that because the law did not exist when the policy was purchased, applying the later-enacted law violated the Contracts Clause. The Supreme Court reversed the Eighth Circuit, holding that the retroactive application of Minnesota’s law does not violate the Contracts Clause. The test for determining when a law crosses the constitutional line first asks whether the state law has “operated as a substantial impairment of a contractual relationship,” considering the extent to which the law undermines the contractual bargain, interferes with a party’s reasonable expectations, and prevents the party from safeguarding or reinstating his rights. If such factors show a substantial impairment, the inquiry turns to whether the state law is drawn in a “reasonable” way to advance “a significant and legitimate public purpose.” Three aspects of Minnesota’s law, taken together, show that the law does not substantially impair pre-existing contractual arrangements. The law is designed to reflect a policyholder’s intent and to support, rather than impair, the contractual scheme. The law is unlikely to disturb any policyholder’s expectations at the time of contracting, because an insured cannot reasonably rely on a beneficiary designation staying in place after a divorce. Divorce courts have wide discretion to divide property upon dissolution of a marriage. The law supplies a mere default rule, which the policyholder can easily undo. View "Sveen v. Melin" on Justia Law

Minnesota law provides that “the dissolution or annulment of a marriage revokes any revocable . . . beneficiary designation . . . made by an individual to the individual’s former spouse,” Minn. Stat. 524.2–804. If an insurance policyholder does not want that result, he may rename the ex-spouse as beneficiary. Sveen and Melin were married in 1997. Sveen purchased a life insurance policy, naming Melin as the primary beneficiary and designating his children from a prior marriage as contingent beneficiaries. The marriage ended in 2007. The divorce decree did not mention the insurance policy. Sveen did not revise his beneficiary designations. After Sveen died in 2011, Melin and the Sveen children claimed the insurance proceeds. Melin argued that because the law did not exist when the policy was purchased, applying the later-enacted law violated the Contracts Clause. The Supreme Court reversed the Eighth Circuit, holding that the retroactive application of Minnesota’s law does not violate the Contracts Clause. The test for determining when a law crosses the constitutional line first asks whether the state law has “operated as a substantial impairment of a contractual relationship,” considering the extent to which the law undermines the contractual bargain, interferes with a party’s reasonable expectations, and prevents the party from safeguarding or reinstating his rights. If such factors show a substantial impairment, the inquiry turns to whether the state law is drawn in a “reasonable” way to advance “a significant and legitimate public purpose.” Three aspects of Minnesota’s law, taken together, show that the law does not substantially impair pre-existing contractual arrangements. The law is designed to reflect a policyholder’s intent and to support, rather than impair, the contractual scheme. The law is unlikely to disturb any policyholder’s expectations at the time of contracting, because an insured cannot reasonably rely on a beneficiary designation staying in place after a divorce. Divorce courts have wide discretion to divide property upon dissolution of a marriage. The law supplies a mere default rule, which the policyholder can easily undo. View "Sveen v. Melin" on Justia Law

Husband Patrick Steiner was an active duty military service member and had a group life insurance policy issued under the Servicemen's Group Life Insurance Act of 1965 (the SGLIA). As part of a status-only dissolution judgment, Husband and Alicja Soczewko Steiner (Wife), stipulated to an order requiring Husband to maintain Wife as the beneficiary of all of Husband's current active duty survivor and/or death benefits pending further court order. Notwithstanding the stipulated order, Husband changed the beneficiary of his life insurance policy to Husband's sister, Mary Furman, who received the policy proceeds upon Husband's death. The court subsequently found applicable federal law preempted the stipulated order and Furman was entitled to the policy proceeds. Wife appealed, contending federal law did not preempt the stipulated order or, alternatively, the fraud exception to federal preemption applies. The Court of Appeal concluded to the contrary on both points and affirmed the order. View "Marriage of Steiner" on Justia Law

In 2003, Robert Loppi purchased a life insurance policy from United Investors Life Insurance Co. in which he initially named Marilyn Loppi, his wife, as the beneficiary. In 2008, after Marilyn filed for divorce from Robert, Robert applied to United Investors to change the beneficiary on his life insurance policy to his uncle, David Loppi. In 2009, during the course of the divorce proceeding, the family court entered an interlocutory order ordering that Robert’s life insurance policies be cashed in and that the cash surrender value be divided equally between Robert and Marilyn. Before Robert complied with the interlocutory order, Robert died. Thereafter, United Investors declined to pay the life insurance death benefit to either David or Marilyn. David filed this action seeking a declaratory judgment that he alone was entitled to the life insurance policy death benefit. The hearing justice granted David’s petition for declaratory judgment stating that David was entitled to 100 percent of the policy proceeds. The Supreme Court affirmed, holding that Marilyn was not entitled to any portion of the life insurance proceeds at issue. View "Loppi v. United Investors Life Ins. Co." on Justia Law

Prior to his death and after consulting a lawyer about divorcing Wife, Husband changed the beneficiary on his term life insurance policy from Wife to Respondents, his parents and sister. Less than four months before Husband’s death, Wife petitioned for dissolution of marriage to Husband. Following Husband’s death, the district court dismissed the dissolution proceeding. Wife subsequently filed suit against Respondents, alleging that Husband’s transfer violated Minn. Stat. 518.58(1)(a), which prohibits the transfer of “marital assets” by a party who contemplates commencing a marriage dissolution. The district court granted summary judgment to Respondents. The court of appeals affirmed, holding that section 518.58(1)(a) did not apply to Wife’s claim because her dissolution proceeding abated upon Husband’s death and the statute applies only in current dissolution proceedings. The Supreme Court affirmed, holding that because the language of section 518.58(1)(a) limits the statute’s application to pending dissolution proceedings, the statute did not provide Wife, who was no longer a party to a marital dissolution proceeding, a remedy in this case. View "Nelson v. Nelson" on Justia Law

Reverend Flesher participated in benefits plans administered by the Ministers and Missionaries Benefit Board (MMBB), a New York not‐for‐profit corporation. Flesher entered into the plans while married to Snow. Snow, also a reverend and MMBB policyholder, was listed as the primary beneficiary on both of Flesher’s plans. Snow’s father was the contingent beneficiary. When Flesher and Snow divorced in 2008 they signed a Marital Settlement Agreement; each agreed to relinquish rights to inherit from the other and was allowed to change the beneficiaries on their respective MMBB plans. Flesher, then domiciled in Colorado, died in 2011 without changing his beneficiaries. MMBB , unable to determine how to distribute the funds, and filed an interpleader suit. The district court discharged MMBB from liability, applied New York law, and held that Flesher’s estate was entitled to the funds. The Second Circuit certified to the New York Court of Appeals the question: whether a governing‐law provision that states that the contract will be governed by and construed in accordance with the laws of New York, in a contract not consummated pursuant to New York General Obligations Law 5‐1401, requires the application of New York Estates, Powers & Trusts Law 3‐5.1(b)(2), which may, in turn, require application of the law of another state. View "Ministers & Missionaries Benefit Bd. v. Snow" on Justia Law

Jones was murdered, leaving no will. He owned a life insurance policy through his employer. He did not designate a beneficiary. The policy provided that the proceeds ($307,000) would go first to a surviving spouse (Jones never married), second to surviving children, third to surviving parents, and fourth to his estate. Quincy claimed to be Jones’s son; Moore, claimed to be his daughter. The insurance company filed an interpleader action. After paying $24,000 for funeral expenses and $137,000 to Quincy, the company deposited the remainder with the court. Jones’s biological sister also claimed the proceeds, arguing that Jones was homosexual and had not fathered children. Jones’s income tax returns showed that he had claimed various children as dependents, sometimes omitting Quincy. A DNA test established that Moore was not his daughter. The district judge declined to order a test for Quincy because Jones had held Quincy out as his biological son and had signed an order in 1996 acknowledging Quincy (then six years old) as his son. The judge awarded Quincy the deposited funds.. The Seventh Circuit affirmed. Rule 35 would have allowed, but did not require, the judge to order a DNA test, given the presumption of paternity under Illinois law. View "MN Life Ins. Co. v. Jones" on Justia Law

Allen suffered a fatal heart attack in 2009, leaving a wife of three years, Arlene, and three adult children from a previous marriage. At the time of Allen’s death, his daughter and her children lived with Allen and Arlene. Allen had a will bequeathing $100,000, but his assets passed outside of probate, leaving his estate with insufficient funds for the bequest. Allen had designated his children as beneficiaries of assets, including a home, life insurance policies, retirement accounts, and other savings accounts. Allen had one life insurance policy as part of his compensation package as a pharmacist, which provided $74,000 in basic coverage and $341,000 in supplemental coverage. If the policyholder failed to designate a beneficiary by his date of death, the proceeds would pass to the policyholder’s spouse by default. The insurer never received any indication that Allen wished to designate a beneficiary. In the days following Allen’s death, however, the children found a change-of-beneficiary form, allegedly completed by their father more than a year before his death, but never submitted. The district court ruled in Arlene’s favor, finding that even if Allen had filled out a change-of-beneficiary form he had not substantially complied with policy requirements for changing beneficiaries. The Seventh Circuit affirmed. View "Kagan v. Kagan" on Justia Law

The Federal Employees’ Group Life Insurance Act (FEGLIA) permits an employee to name a beneficiary of life insurance proceeds, and specifies an “order of precedence” providing that an employee’s death benefits accrue first to that beneficiary ahead of other potential recipients, 5 U.S.C. 8705(a). A Virginia statute revokes a beneficiary designation in any contract that provides a death benefit to a former spouse where there has been a change in the decedent’s marital status, Va. Code 20–111.1(A). When the provision is preempted by federal law, Section D of that law provides a cause of action rendering the former spouse liable for the proceeds to the party who would have received them were Section A not preempted. Hillman named then-spouse, Maretta, as beneficiary of his FEGLI policy. After their divorce, he married Jacqueline but never changed his named FEGLI beneficiary. After Hillman’s death, Maretta, still the named beneficiary,collected the FEGLI proceeds. A Virginia Circuit Court found Maretta liable to Jacqueline under Section D for the FEGLI policy proceeds. The Virginia Supreme Court reversed, concluding that Section D is preempted by FEGLIA because it conflicts with the purposes and objectives of Congress. The Supreme Court affirmed. FEGLIA creates a scheme that gives highest priority to an insured’s designated beneficiary and underscores that the employee’s “right” of designation “cannot be waived or restricted.” Section D interferes with this scheme, because it directs that the proceeds actually belong to someone other than the named beneficiary by creating a cause of action for their recovery by a third party. FEGLIA establishes a clear and predictable procedure for an employee to indicate who the intended beneficiary shall be and evinces Congress’ decision to accord federal employees an unfettered freedom of choice in selecting a beneficiary and to ensure the proceeds actually belong to that beneficiary. View "Hillman v. Maretta" on Justia Law