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Justices rule for first time on FEGLIA preemption issue

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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.

 

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  1. Can I get this form on line,if not where can I obtain one. I am eligible.

  2. What a fine example of the best of the Hoosier tradition! How sad that the AP has to include partisan snark in the obit for this great American patriot and adventurer.

  3. Why are all these lawyers yakking to the media about pending matters? Trial by media? What the devil happened to not making extrajudicial statements? The system is falling apart.

  4. It is a sad story indeed as this couple has been only in survival mode, NOT found guilty with Ponzi, shaken down for 5 years and pursued by prosecution that has been ignited by a civil suit with very deep pockets wrenched in their bitterness...It has been said that many of us are breaking an average of 300 federal laws a day without even knowing it. Structuring laws, & civilForfeiture laws are among the scariest that need to be restructured or repealed . These laws were initially created for drug Lords and laundering money and now reach over that line. Here you have a couple that took out their own money, not drug money, not laundering. Yes...Many upset that they lost money...but how much did they make before it all fell apart? No one ask that question? A civil suit against Williams was awarded because he has no more money to fight...they pushed for a break in order...they took all his belongings...even underwear, shoes and clothes? who does that? What allows that? Maybe if you had the picture of him purchasing a jacket at the Goodwill just to go to court the next day...his enemy may be satisfied? But not likely...bitterness is a master. For happy ending lovers, you will be happy to know they have a faith that has changed their world and a solid love that many of us can only dream about. They will spend their time in federal jail for taking their money from their account, but at the end of the day they have loyal friends, a true love and a hope of a new life in time...and none of that can be bought or taken That is the real story.

  5. Could be his email did something especially heinous, really over the top like questioning Ind S.Ct. officials or accusing JLAP of being the political correctness police.

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