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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. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

  2. As a lawyer who grew up in Fort Wayne (but went to a real law school), it is not that hard to find a mentor in the legal community without your school's assistance. One does not need to pay tens of thousands of dollars to go to an unaccredited legal diploma mill to get a mentor. Having a mentor means precisely nothing if you cannot get a job upon graduation, and considering that the legal job market is utterly terrible, these students from Indiana Tech are going to be adrift after graduation.

  3. 700,000 to 800,000 Americans are arrested for marijuana possession each year in the US. Do we need a new justice center if we decriminalize marijuana by having the City Council enact a $100 fine for marijuana possession and have the money go towards road repair?

  4. I am sorry to hear this.

  5. I tried a case in Judge Barker's court many years ago and I recall it vividly as a highlight of my career. I don't get in federal court very often but found myself back there again last Summer. We had both aged a bit but I must say she was just as I had remembered her. Authoritative, organized and yes, human ...with a good sense of humor. I also appreciated that even though we were dealing with difficult criminal cases, she treated my clients with dignity and understanding. My clients certainly respected her. Thanks for this nice article. Congratulations to Judge Barker for reaching another milestone in a remarkable career.

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