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Thursday, January 19, 2012

Divorce - Ex-wife, not widow, gets life insurance

Ex-Wife, Not Widow, Gets Life Insurance

By Deborah Elkins
Published: January 18, 2012

Tags: Divorce Attorney, , ,
 
An employee’s ex-wife collects his life insurance benefits after his death as the named beneficiary of a Federal Employees’ Group Life Insurance policy because federal law preempts Va. Code § 20-111.1(D), which otherwise would make the ex-wife liable to her ex-husband’s widow for those benefits; the Virginia Supreme Court reverses the decision for the widow.

In December 1996, Warren Hillman named his wife Judy Maretta the beneficiary of his FEGLI policy. They divorced in 1998 and Warren married his wife Jacqueline (Hillman); they were still married when Warren died in 2008. Maretta received the $124,558 death benefits. Hillman sued Maretta, arguing that under Va. Code § 20-111.1(D), Maretta was liable to Hillman for the death benefits. The trial court ruled for Hillman.
In the event of divorce, Code § 20-111.1(A) revokes any revocable beneficiary designation contained in a then-existing written contract owned by one party that provides on the payment of any death benefit to the other party. But subsection (D) says if subsection (A) is preempted by federal law with respect to payment of a death benefit, a former spouse who, not for value, receives the death benefit is personally liable to the person who have been entitled without preemption.

In contrast, the Federal Employees’ Group Life Insurance Act, 5 U.S.C. § 8701 et seq., contains an order of precedence that directs to whom benefits under a FEGLI policy are paid. FEGLIA also contains a preemption provision. In addition to the order of precedence in 5 U.S.C. § 8705(a) and the preemption provision in 5 U.S.C. § 8709(d)(1), FEGLIA and the regulations promulgated thereunder contain provisions relevant to the specific preemption question before us.

Code § 10-111.1(D) conflicts with federal law by standing as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. Therefore, we hold that Code § 20-111.1(D) is preempted by FEGLIA.

We are aware that our decision today stands in contrast to a majority of state court decisions.
Because Congress intended for FEGLI benefits to be paid and to belong to a designated beneficiary, we conclude that FEGLIA preempts Code § 20-111.1(D).

Reversed, and final judgment for Maretta.

Dissent

McClanahan, J., joined by Millette, J.: In my opinion, the high threshold for imposing preemption in the instant case has not been met. I do not believe Code § 20-111.1(D) (triggered itself upon federal preemption of subsection A of the statute) is preempted by the Federal Employees’ Group Life Insurance Act.

I agree with the majority of state courts in other jurisdictions that have addressed the issue of preemption under FEGLIA and have similarly concluded their state domestic relations laws, in creating an equitable claim for an amount equal to the FEGLI insurance proceeds that have been paid to the named beneficiary, are not preempted by FEGLIA. I would affirm the judgment of the circuit court.

Maretta v. Hillman (Kinser) No. 102042, Jan. 13, 2012; Fairfax Cir.Ct. (Devine) George O. Peterson, Tania M.L. Saylor for appellant; Daniel H. Ruttenberg for appellee. VLW 012-6-009, 32 pp.

Please contact us if you have questions about divorce.

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Charlottesville, Virginia
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