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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. I'm not sure what's more depressing: the fact that people would pay $35,000 per year to attend an unaccredited law school, or the fact that the same people "are hanging in there and willing to follow the dean’s lead in going forward" after the same school fails to gain accreditation, rendering their $70,000 and counting education worthless. Maybe it's a good thing these people can't sit for the bar.

  2. Such is not uncommon on law school startups. Students and faculty should tap Bruce Green, city attorney of Lufkin, Texas. He led a group of studnets and faculty and sued the ABA as a law student. He knows the ropes, has advised other law school startups. Very astute and principled attorney of unpopular clients, at least in his past, before Lufkin tapped him to run their show.

  3. Not that having the appellate records on Odyssey won't be welcome or useful, but I would rather they first bring in the stray counties that aren't yet connected on the trial court level.

  4. Aristotle said 350 bc: "The most hated sort, and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it. For money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of an modes of getting wealth this is the most unnatural.

  5. Oh yes, lifetime tenure. The Founders gave that to the federal judges .... at that time no federal district courts existed .... so we are talking the Supreme Court justices only in context ....so that they could rule against traditional marriage and for the other pet projects of the sixties generation. Right. Hmmmm, but I must admit, there is something from that time frame that seems to recommend itself in this context ..... on yes, from a document the Founders penned in 1776: " He has refused his Assent to Laws, the most wholesome and necessary for the public good."

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