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Federal act preempts state law claims

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The Indiana Court of Appeals held that the Federal Employees’ Group Life Insurance Act preempts state law claims brought by a man’s first ex-wife seeking to keep her and her grandchildren as beneficiaries of the man’s life insurance policy.

In Phyllis Hardy, et al. v. Mary Jo Hardy,  No. 51A01-1005-PL-248, Phyllis Hardy filed a complaint, on her behalf and the behalf of her two grandchildren, for declaratory judgment/constructive trust over insurance proceeds. Phyllis was married to Carlos Hardy for 30 years and when they divorced, the decree stated that Phyllis and their two grandchildren shall be designated as equal beneficiaries of his FEGLI policy. Carlos later remarried to Mary Jo and he designated her as the beneficiary on his policy by submitting a designation of beneficiary form. Carlos and Mary Jo divorced seven years later, and when he died a year after their divorce, Mary Jo was named the beneficiary of the $98,000 policy.

The trial court granted summary judgment for Mary Jo and denied Phyllis’ motion for summary judgment. The court ruled that federal law preempted state law and that FEGLIA barred the creation of a constructive trust and seizure of the life insurance proceeds or any portion thereof from Mary Jo.

The Court of Appeals agreed with the lower court that FEGLIA preempts the plaintiffs’ state law claims. Phyllis cited a majority of state courts addressing this issue that have concluded that an equitable claim for constructive trust and some other claims under state law aren’t preempted by FEGLIA.

The FEGLIA contains a preemption clause that says the provisions under any contract of this chapter which related to the coverage or benefits shall supersede and preempt state law or regulation issued thereunder that relates to group life insurance to the extent that the law or regulation is inconsistent with the contractual provisions. The 7th Circuit Court of Appeals in Metropolitan Life Insurance Co. v. Christ, 979 F.2d 575, 578 (7th Cir. 1992), held that this clause broadly preempts any state law that is inconsistent with the FEGLIA master policy.

FEGLIA also states that the beneficiary of the policy would be paid first, but a domestic decree could alter that order. To do so, a certified copy must be sent to the Office of Personnel Management before the policy holder’s death. Carlos didn’t send the divorce decree to the office.

The judges also relied on the Indiana Supreme Court ruling in Ridgway v. Ridgway, 454 U.S. 46, 102 S. Ct. 49 (1981), to affirm the trial court’s ruling. Ridgway dealt with the Servicemen’s Group Life Insurance Act and held that the beneficiary’s designation prevailed over a constructive trust which a state court imposed on the policy proceeds.

“While the Plaintiffs cite opinions from some of our sister states, we find the approach taken by the Seventh Circuit and numerous federal and state courts to be the more compelling approach. Accordingly, we conclude that FEGLIA preempts the Plaintiffs’ state law claims,” wrote Judge Elaine Brown.

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  1. Thank you, John Smith, for pointing out a needed correction. The article has been revised.

  2. The "National institute for Justice" is an agency for the Dept of Justice. That is not the law firm you are talking about in this article. The "institute for justice" is a public interest law firm. http://ij.org/ thanks for interesting article however

  3. I would like to try to find a lawyer as soon possible I've had my money stolen off of my bank card driver pressed charges and I try to get the information they need it and a Social Security board is just give me a hold up a run around for no reason and now it think it might be too late cuz its been over a year I believe and I can't get the right information they need because they keep giving me the runaroundwhat should I do about that

  4. It is wonderful that Indiana DOC is making some truly admirable and positive changes. People with serious mental illness, intellectual disability or developmental disability will benefit from these changes. It will be much better if people can get some help and resources that promote their health and growth than if they suffer alone. If people experience positive growth or healing of their health issues, they may be less likely to do the things that caused them to come to prison in the first place. This will be of benefit for everyone. I am also so happy that Indiana DOC added correctional personnel and mental health staffing. These are tough issues to work with. There should be adequate staffing in prisons so correctional officers and other staff are able to do the kind of work they really want to do-helping people grow and change-rather than just trying to manage chaos. Correctional officers and other staff deserve this. It would be great to see increased mental health services and services for people with intellectual or developmental disabilities in the community so that fewer people will have to receive help and support in prisons. Community services would like be less expensive, inherently less demeaning and just a whole lot better for everyone.

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