Articles Posted in Life Insurance

The Federal Employee Group Life Insurance (“FEGLI”) program is governed by Federal Law.  This law was enacted in 1954 and is found at 5 U.S.C., section 8701.  A 2024 opinion from the Northern District of Texas, Fort Worth Division, discussed FEGLI and how it applied to the case at issue.  The facts are lengthy and the discussion is somewhat complicated.  A reading of the opinion is necessary to comprehend and apply.  The opinion is styled, Metropolitan Life Insurance Company vs. Rebecca D. Vasquez, et al.

Metropolitan Life Insurance Company (“MetLife”), as of the date of this post handles all FEGLI cases for the Federal government.  The issues in most FEGLI cases are disputes over who is entitled to the life insurance proceeds.  As a result, like this case, they are interpleader cases.

If you have a FEGLI case, read the opinion and seek legal help for advice.

Most life insurance policies are regulated by State Law.  But, what if the life insurance policy at issue is governed by Federal Law?  It’s simple, Federal Law pre-empts State Law.  This is illustrated in the 2001, United States Supreme Court opinion styled, Egelhoff v. Egelhoff.

The Egelhoff opinion, the Supreme Court held that the Employee Retirement Income Security Act (ERISA) preempts a state law that revokes a life insurance policy beneficiary designation when spouses divorce.  The state statute as issue in the Egelhoff opinion provided that if the life insurance beneficiary designation of an ex-spouse was made before the divorce, that designation was considered revoked.  Because the insurance was part of an employee benefit plan, the Supreme Court held that ERISA preempted state law so that the benefits would be paid in accordance with the plan documents.  The insured had not changed the beneficiary designation according to the plan, so his ex-wife received the benefits.  Texas has a statute which would be prevented, that statute being Texas Family Code, section 9.301.

Here are a few cases discussing who is entitled to life insurance benefits.  All life insurance attorneys have to know these cases.

The Forth Worth Court of Appeals said in a 1994 opinion styled, Street v. Skipper, that one spouse can designate his or her estate as the beneficiary of the policy, at the expense of the other spouse, absent any showing of actual or constructive fraud.

According to the Eastland Court of Appeals in a 1981 opinion styled, Pilot Life Insurane Co v. Koch, policies may contain provisions automatically divesting a spouse of any interest in the proceeds, if the parties are “legally separated” or divorced.

Here is a 1994 opinion regarding whether an estate can be the beneficiary of a life insurance policy.  The opinion is from the Fort Worth Court of Appeals and is styled Street v. Skipper.

Here the Court held the surviving wife’s share of proceeds from community life insurance policy that was gifted to husband’s estate was not unfair to surviving wife because husband had bequeathed to wife other portions of his share of community estate that balanced gift of insurance proceeds and that aptly made up the difference.

Here are some relevant facts and law from the opinion.

Some life insurance policies have language in them regarding divorces.  This was the case in the 1981 opinion from the Eastland Court of Appeals.  The opinion is styled Pilot Life Insurance Co. v. Koch.

This is a declaratory judgment case.  Here are the facts legal conclusion of the Court.

Pilot Life Insurance Company sought a judgment declaring that it had no duty to pay life insurance proceeds to Lawrence A. Koch because of the death of his wife.  Pilot Life had issued a policy of group insurance to Koch’s employer.  The policy afforded life insurance coverage for employees and their eligible dependents. Eligible dependents were defined to include “your husband or wife, unless you were legally separated or divorced.”  Pilot Life alleged that Mr. and Mrs. Koch were legally separated on the date of her death.  Koch filed a counterclaim seeking the policy proceeds of $5,000, 12% penalty and reasonable attorney’s fees.  The jury found that Mr. and Mrs. Koch were separated at the time of her death.  Although that separation was pursuant to a “temporary” court order entered in the pending divorce proceedings between Mr. and Mrs. Koch, the trial court entered judgment for Koch notwithstanding the verdict on the theory that under Texas law there is no status of legal separation of a husband and wife before the marriage is dissolved by a decree of divorce.  Pilot Life Insurance Company appeals. We affirm.

How does a divorce affect the named beneficiary in a divorce decree?  This is answered in a 1987 opinion from the 14th Court of Appeals.  The opinion is styled, Novotny v. Wittner.  The opinion is an appeal from a bench trial.  Here is are the facts and discussion.

Appellant and the decedent were divorced on May 24, 1982.  On June 14, 1982, just twenty-one days after the divorce, and before the formal divorce decree had been signed, Joseph Patrick Novotny died from a gunshot wound inflicted by Appellant.  At the time of his death he had not changed Appellant’s designation as beneficiary on his life insurance policy.  Appellant requested payment of the policy proceeds from the carrier, Massachusetts Indemnity and Life Insurance Company.  The carrier filed a petition for interpleader and paid the funds, totalling over fifty thousand dollars, into the registry of the court and was subsequently discharged from the suit.  The suit was then transferred to the probate court presiding over the decedent’s estate proceedings.  After a trial, the probate court awarded the proceeds of the life insurance policy to decedent’s children, Misty Marie and Robyn Lee Novotny, as his heirs at law.  Appellee, administrator of the estate of Joseph Patrick Novotny, does not object to this award.

Appellant maintains that the trial court erred in awarding the insurance proceeds to the decedent’s heirs and not to her.  She contends the language of the divorce decree was not specific enough to terminate Appellant’s beneficial interest in the insurance policy.

Life insurance and a subsequent divorce will present problems, one of which was addressed by the United States 5th Circuit Court of Appeals.  This is a June 2024, opinion styled, Transamerica Life Insurance Company v. Holly L. Moore versus Jeffrey H. Simpson.

Texas Family Code, section 9.301 generally operates to strip “the insured’s spouse” of beneficiary interests in insurance policies once a divorce decree renders the policy beneficiary an ex-spouse.  This case turns on whether “the insured’s spouse” includes someone who was named a policy beneficiary before she became the insured’s spouse: Ian Simpson took out a life insurance policy and named his fiancée Holly Moore primary beneficiary and his father Jeffrey Simpson contingent beneficiary.  The couple then married, then divorced, and then Ian died without ever changing the policy beneficiaries.

The district court held that section 9.301 comes into play only if the insured and the beneficiary were married when the insurance policy was purchased.  The court reasoned that because a policy purchased prior to marriage did not name “the insured’s spouse,” a later divorce decree would not divest the beneficiary of insurance proceeds.  But section 9.301’s text indicates that “the insured’s spouse” centers on an individual’s status at the time a divorce decree is rendered, regardless of when a policy was first obtained.  Therefore, the Court reversed the district court’s judgment awarding Ian’s policy proceeds to Holly and rendering judgment in favor of Jeffrey Simpson.