ILNews

Justices rule for first time on FEGLIA preemption issue

Back to TopCommentsE-mailPrintBookmark and Share

In a dispute between two ex-wives over the life insurance policy of their deceased husband, the Indiana Supreme Court has ordered the trial court determine how much money each woman is entitled to.

Carlos Hardy was married to Phyllis Hardy when he held a life insurance policy issued as part of a federal employee benefit plan. When they divorced in 1998, the divorce decree and property settlement required Carlos Hardy to maintain the life insurance policy and designated Phyllis Hardy and their two grandchildren as equal beneficiaries. Carlos Hardy later married Mary Jo Hardy and changed his beneficiary to her and increased his coverage. They divorced after several years of marriage.

When Carlos Hardy died, a dispute arose over who was entitled to the life insurance proceeds. The trial court determined that the Federal Employees’ Group Life Insurance Act preempted Phyllis Hardy’s equitable state law claims and the proceeds belonged to Mary Jo Hardy. The Indiana Court of Appeals affirmed.

The high court had never addressed whether FEGLIA preempts equitable state law claims; other jurisdictions have split over the decision. But the Indiana justices decided that FEGLIA doesn’t preempt equitable state law claims to recover FEGLIA proceeds that have been paid in accordance with FEGLIA’s provisions and the regulations promulgated under it. A different conclusion would run afoul of the strong presumption against preemption in this traditional area of state regulation, wrote Justice Steven David in Phyllis Hardy, Alax Keith Furnish and Megan Jessica Furnish, by next friend Phyllis Hardy v. Mary Jo Hardy, No. 51S01-1106-PL-366.

“We agree that FEGLIA and the regulations promulgated under it control who holds legal title to the proceeds. But we see nothing in the preemption clause that precludes equitable state law claims. To interpret the preemption clause as preventing the imposition of a constructive trust extends the clause’s scope beyond its plain language,” he wrote.

The justices also decided that Ridgway v. Ridgway, 454 U.S. 46 (1981), did not support the conclusion that FEGLIA precludes a court from imposing a constructive trust on life insurance proceeds, as Mary Jo Hardy argued.

“Ultimately, the lack of an anti-attachment provision within FEGLIA, the divergent purposes underscoring FEGLIA and SGLIA, and the 1998 amendment to section 8705 of FEGLIA compel us to conclude that Ridgway is not controlling here,” David wrote.

The justices held the divorce decree and property settlement agreement undoubtedly entitle Phyllis and the grandchildren to whatever the death benefit under Option A would have been at the date of Carlos’ death, as Carlos had to “maintain” his policy for the benefit of Phyllis and the grandchildren. Mary Jo Hardy argued that she should be entitled to whatever amount accrued once she married Carlos Hardy. They remanded the issue to the trial court.

 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. You can put your photos anywhere you like... When someone steals it they know it doesn't belong to them. And, a man getting a divorce is automatically not a nice guy...? That's ridiculous. Since when is need of money a conflict of interest? That would mean that no one should have a job unless they are already financially solvent without a job... A photographer is also under no obligation to use a watermark (again, people know when a photo doesn't belong to them) or provide contact information. Hey, he didn't make it easy for me to pay him so I'll just take it! Well heck, might as well walk out of the grocery store with a cart full of food because the lines are too long and you don't find that convenient. "Only in Indiana." Oh, now you're passing judgement on an entire state... What state do you live in? I need to characterize everyone in your state as ignorant and opinionated. And the final bit of ignorance; assuming a photo anyone would want is lucky and then how much does your camera have to cost to make it a good photo, in your obviously relevant opinion?

  2. Seventh Circuit Court Judge Diane Wood has stated in “The Rule of Law in Times of Stress” (2003), “that neither laws nor the procedures used to create or implement them should be secret; and . . . the laws must not be arbitrary.” According to the American Bar Association, Wood’s quote drives home this point: The rule of law also requires that people can expect predictable results from the legal system; this is what Judge Wood implies when she says that “the laws must not be arbitrary.” Predictable results mean that people who act in the same way can expect the law to treat them in the same way. If similar actions do not produce similar legal outcomes, people cannot use the law to guide their actions, and a “rule of law” does not exist.

  3. Linda, I sure hope you are not seeking a law license, for such eighteenth century sentiments could result in your denial in some jurisdictions minting attorneys for our tolerant and inclusive profession.

  4. Mazel Tov to the newlyweds. And to those bakers, photographers, printers, clerks, judges and others who will lose careers and social standing for not saluting the New World (Dis)Order, we can all direct our Two Minutes of Hate as Big Brother asks of us. Progress! Onward!

  5. My daughter was taken from my home at the end of June/2014. I said I would sign the safety plan but my husband would not. My husband said he would leave the house so my daughter could stay with me but the case worker said no her mind is made up she is taking my daughter. My daughter went to a friends and then the friend filed a restraining order which she was told by dcs if she did not then they would take my daughter away from her. The restraining order was not in effect until we were to go to court. Eventually it was dropped but for 2 months DCS refused to allow me to have any contact and was using the restraining order as the reason but it was not in effect. This was Dcs violating my rights. Please help me I don't have the money for an attorney. Can anyone take this case Pro Bono?

ADVERTISEMENT