Insurance – Life Insurance Proceeds – Beneficiary Change

A Richmond U.S. District Court declines to dismiss an insurance carrier’s declaratory judgment action to resolve who was entitled to decedent’s $54,800 in employee life insurance benefits, his ex-wife who claimed under a property settlement agreement, or his second wife and children.

The carrier, Metlife, paid the benefits to the second wife and children, and the ex-wife challenged that action. Metlife then filed this dec action to determine if it improperly paid the wrong beneficiaries. As Metlife appears entitled to a declaratory judgment resolving its questions, the court does not lack jurisdiction for want of a case or controversy.

Since this court considers Metlife’s complaint on a motion to dismiss for failure to state a claim, the question is not whether Metlife has paid benefits improperly, but whether, in light of the well pleaded factual allegations, Metlife’s concerns are “plausible.”

While the provisions of ERISA and ERISA plan documents generally preempt state laws or court decisions related to an employee benefit plan, in some situations a “qualified domestic relations order” may supercede contrary ERISA language. Whether the 1984 divorce judgment and PSA constitute a QDRO is uncertain because ERISA draws a distinction between “employee welfare plans,” which include life insurance, and “employee benefit plans,” such as pensions. While QDROs are an exception to the alienation restrictions on employee benefit plans, employee welfare plans are not subject to similar restrictions and this has led to uncertainty regarding the ability of state court judgments resembling QDROs to limit the beneficiary choices of ERISA plan participants.

As there are numerous precedents that have resolved similar insurance coverage issues through declaratory judgments, it does not seem that Metlife has failed to allege a basis for a claim upon which relief can be granted.

Metlife’s complaint for a declaratory judgment should be allowed to proceed.

Metropolitan Life Ins. Co. v. Leich-Brannan (Spencer, J.) No. 3:09cv572, Dec. 15, 2009; USDC at Richmond, Va. VLW 010-3-003, 10 pp.