In a recent FEGLI beneficiary dispute case, the United States District Court in New York reviewed issues of the FEGLI beneficiary designation form, a decedent’s intent in changing beneficiaries and state law claims seeking damages for unjust enrichment, conversion, misrepresentation and promissory estoppel.
In Smith v. Smith[1], the surviving spouse of a FEGLI insured decedent filed a claim for unjust enrichment, conversion, misrepresentation and promissory estoppel against the decedent’s mother after the insurance company paid the mother the FEGLI benefits under the decedent’s FEGLI policy. The decedent was a federal employee and was provided with a FEGLI policy.
Prior to meeting his spouse, he designated his parents as beneficiaries on his FEGLI policy. His father predeceased him leaving his mother as the sole beneficiary of the FEGLI policy pursuant to the Designation of Beneficiary form signed by the insured in 1992.
Subsequently, the decedent got married in 2000. His surviving spouse claims that in 2001 the decedent executed and submitted to his employer an updated Designation of Beneficiary of the FEGLI policy.
However, the newly signed form was never received by the employer. She claimed that two impartial witnesses witnessed the decedent sign the change of beneficiary form making her the sole beneficiary. She claimed that the decedent repeatedly told her and his friend that she was the only beneficiary on his FEGLI policy.
After the decedent’s death, the federal Office of Personnel Management (“OPM”) informed the spouse that the only FEGLI Beneficiary Designation form that it was able to locate was the 1992 Designation listing the decedent’s mother as the sole beneficiary.
The FEGLI proceeds were released to the mother as per the Beneficiary Designation on file. Consequently, the spouse filed a lawsuit claiming that the mother would be unjustly enriched if the court allowed her to keep the FEGLI proceeds.
The court ruled in the mother’s favor and against the surviving spouse.
The case was controlled by FEGLIA which preempts any state law claims and provides that an employee may designate a beneficiary to receive the proceeds of his life insurance policy at the time of his death and that upon an employee’s death, life insurance benefits are paid only to the beneficiary designated on the policy and no one else.
Further, the court stated that FEGLIA requires strict compliance with the rules controlling a beneficiary change.
In order to change beneficiaries on a FEGLI Policy, the insured must sign the Designation of Beneficiary in the presence of two impartial witnesses and submit this form to the appropriate employing office. The form must be received by the office before the insured’s death. Since in Smith v. Smith, the beneficiary change form was never received by the employer, the change was invalid under FEGLIA.
Under the law, the surviving spouse was not the rightful recipient of the proceeds of the decedent’s FEGLI policy. Even though the decedent may have wished to change beneficiaries, his intent was not relevant in deciding who should get the FEGLI benefits.
Any consideration of the decedent’s intent in changing the beneficiary of the FEGLI policy was foreclosed by the inflexible, mandatory language of the FEGLI order of precedence and FEGLIA’s express preemption of conflicting state law.
Laws governing FEGLI claims are complex. If your claim has been denied or if you are in the middle of a beneficiary dispute, call our FEGLI lawyer now to learn about your legal rights. Our FEGLI attorney will guide you through the process of collecting a denied FEGLI claim and will fight for your rights in a beneficiary dispute.
Call (888) 510-2212 for a free consultation.
