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Ex-wife gets death benefits under preemption ruling

The U.S. Supreme Court has ruled that a divorced Virginia woman could not be forced to surrender the proceeds of a federal employee life insurance policy that she received as her ex-husband’s named beneficiary.

A unanimous court decided that the Federal Employees’ Group Life Insurance Act (FEGLIA) preempts a Virginia law that would have allowed the decedent’s current spouse to bring an action against the ex-wife to recover the funds.

“In short, where a beneficiary has been duly named, the insurance proceeds she is owed under FEGLIA cannot be allocated to another person by operation of state law,” wrote Justice Sonia M. Sotomayor in Monday’s ruling in Hillman v. Maretta. The decision upholds a 2012 decision from the Supreme Court of Virginia in favor of Judy Maretta. In 1996, Warren Hillman named Maretta the beneficiary of his federal employee life insurance policy when the two were married. They divorced in 1998.

Four years later, Warren married the plaintiff in the case, Jacqueline Hillman. Warren died unexpectedly in 2008 without changing the named beneficiary under his life insurance policy. As a consequence, the policy’s administrator refused to pay the proceeds to Jacqueline, instead paying the $125,000 benefit to Maretta as the named beneficiary at the time of death.

Jacqueline sued Maretta in state court, arguing that she was entitled to recover the policy proceeds by operation of two state laws. One Virginia statute automatically revokes a benefi­ciary designation in any contract that provides a death benefit to a former spouse when there has been a change in the decedent’s mari­tal status. A second state law makes a former spouse personally liable for distributions when federal law preempts the automatic revocation of beneficiary designations.

Like the state high court, the U.S. Supreme Court found that Virginia’s personal liability statute was preempted by FEGLIA, which requires the payment of benefits to designated beneficiaries.

Sotomayor explained that giving effect to the Virginia law would frustrate the scheme created by Congress under FEGLIA that gives highest priority to an insured’s designated beneficiary.

“It makes no difference whether state law requires the transfer of the proceeds … or creates a cause of action … that enables another person to receive the proceeds upon filing an action in state court,” Sotomayor wrote. “In either case, state law displaces the beneficiary selected by the insured in accordance with FEGLIA and places someone else in her stead.”

Justices Clarence Thomas and Samuel A. Alito Jr. each filed separate opinions concurring in the judgment.

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— Pat Murphy, Dolan News Wire

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