How to Deal With Family Disputes Over Life Insurance

Disputes about life insurance proceeds among family members are not only emotionally difficult, but they can also negatively affect financial affairs of those who relied on the proceeds of a life insurance policy after a loved one’s untimely death.

Law surrounding estate planning, family, divorce, child support, trusts and wills may all come into a play after a person’s death. Dealing with financial affairs after a family member’s death may become a real problem because of the complexity of laws and the amount of documents involved.


Notice of Claim

Every life insurance policy has a provision outlining a procedure for filing a claim.

It usually describes how soon after the insured’s death a claim for benefits should be submitted. It specifies such details as the deadline for submitting a new life insurance claim, notice of claim, and proof of loss. It also describes what claim may be rejected if filed improperly.

One of the reasons a life insurance claim may be denied is because a claimant failed to submit Notice of Claim and Proof of Loss in a timely manner.


Symetra Paid More Than $1 Billion to Life Insurance Beneficiaries.

Departments of Insurance of several states announced a $1.2 million settlement agreement with Symetra Life Insurance and Symetra National Life Insurance Company in connection with the insurer’s use of the Social Security Administration’s Death Master File[1].

The settlement was a result of a multi state investigation led by Illinois, Florida, New Hampshire, North Dakota, Pennsylvania, and California.


FEGLI and Community Property State Laws

State community property laws offer certain protections to spouses in case of marriage dissolutions and often require a division of marital assets between the divorcing spouses and in the event of a spouse’s death.

In case of a spouse’s death, community property state laws may be involved in a life insurance dispute. Such laws are complex, especially if they are viewed in conjunction with federal laws controlling such life insurance claims as FEGLI claims.

The federal laws controlling FEGLI claims usually preempt state laws, including those of community property states. Courts across the country have ruled on the issue of a FEGLI claim dispute in community property states.

Thus, the United States District Court of California ruled in MetLife v. Armstrong-Lofton[1] that a state law claim to the benefits of a FEGLI policy is preempted by federal laws.


Denied FEGLI Claims Due to Invalid Beneficiary Designation

Beneficiary changes under a FEGLI policy may be deemed invalid if not performed according to the laws controlling Federal Employees’ Group Life Insurance policies. In many cases, the validity of a change of a FEGLI beneficiary nomination is disputed after the insured’s death and after two or more competing claims have been filed under the same FEGLI policy.

Beneficiary Change and State Court Orders

If a federal employee had been divorced or had children who required child support, a state court order may be involved. A state court order may direct an individual to maintain a life insurance policy on his/her life for the benefit of the ex spouse or their children. A state court order may also restrain the divorcing individual from changing beneficiaries on his/her life insurance policy.

Usually, if an individual restrained by a state court order from making any changes on a life insurance policy decides to rename beneficiaries in the future, he/she may be found in violation of a court order and such a beneficiary change may be deemed invalid.

This is not the case, however, with FEGLI policies. Federal laws control whether the insured’s change of a beneficiary under a FEGLI policy takes precedence over a state court order prohibiting a change of a designated beneficiary.