A beneficiary is a beneficiary is a beneficiary, SCOTUS says

This is not a typical insurance claim story. The insurance company, in fact, barely makes an appearance. Nor is it a story about Florida. What it is is a story about the power of the insurance contract.

The insurance contract in question was a life insurance policy. The insured was a man who worked for the federal government and, so, was insured through the Federal Employees’ Group Life Insurance plan. He died in 2008, leaving behind a widow and, importantly, an ex-wife. And, of course, an insurance policy.

He and his widow had been married for about six years when he died. During that time, either by accident or intentionally, he had not changed the beneficiary of his life insurance policy. There it was in black and white: the name of his ex-wife, where the name of his widow should have been — according to his widow.

The state where all of this happened had a law that would have rectified the situation. When a couple divorced or annulled their marriage, the law said, death benefits, including life insurance proceeds, would be distributed as if the ex-spouse had predeceased the insured. Furthermore, if federal law allowed the former spouse to collect the proceeds, the former spouse would be personally liable to the “rightful” beneficiary.

In this case, then, the law allowed the widow to sue the ex-wife for the insurance policy proceeds — worth almost $125,000. Her claim, however, ran smack up against a specific provision in the insurance contract that stated that the payout would go to the named beneficiary first; if that beneficiary predeceased the insured, then the payout would go to the surviving spouse.

The policy also included a provision that said that the terms of the policy trump state law.

What happened in court? We’ll discuss that in our next post.

Source: Courthouse News Service, “Justices Side With First Wife on Insurance Policy,” Barbara Leonard, June 3, 2013

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