The power of life insurance beneficiary designationsArticle added by Nicholas Paleveda MBA J.D. LL.M on August 4, 2014
Nick Paleveda MBA J.D. LL.M

Nicholas Paleveda MBA J.D. LL.M

Sanford, NC

Joined: March 27, 2012

The facts: Dennis Hall began work at Newmont USA Limited in August 1988. Through his employment at Newmont, Dennis obtained a life insurance policy issued by MetLife. In 1991, Dennis designated his son, Dennis Hall II, as the beneficiary of the life insurance policy. Under the terms of the governing employee-benefit plan (“the plan”), MetLife is expressly granted “discretionary authority to interpret the terms of the plan and to determine eligibility for and entitlement to plan benefits in accordance with the terms of the plan.” The plan also informs Newmont employees how they may change the beneficiary or beneficiaries of their policy:
    You may designate a beneficiary in your application or enrollment form. You may change your beneficiary at any time. To do so, you must send a signed and dated written request to the policyholder using a form satisfactory to [MetLife]. Your written request to change the beneficiary must be sent to the policyholder within 30 days of the date you sign such request.
Jane Hall married Dennis in May 2001. Around March 2010, Jane and Dennis began traveling regularly to the Mayo Clinic in Rochester, Minnesota, for medical examinations and treatment relating to Dennis's cancer diagnosis. In November 2010, Dennis filled out and signed (but never submitted) a beneficiary designation form naming Jane Hall as the sole beneficiary of his policy.

On January 25, 2011, Jane and Dennis traveled to Rochester for a routine appointment at the Mayo Clinic scheduled for the next day. In the early hours of January 26, Dennis awoke, partially paralyzed. After he was rushed to the Mayo Clinic, Dennis was informed that he had a very short time to live. On the next day, at the clinic, Dennis executed a will. The will provided, in relevant part, that “the following specific bequests be made from my estate․ Any and all life insurance and benefits shall be distributed to Jane Marie Hall. If this beneficiary does not survive me, this bequest shall be distributed with my residuary estate.”

Dennis died later that day.On February 2, 2011, after learning of Dennis's death, a Newmont representative sent MetLife a copy of the 1991 form naming Dennis Hall II as the beneficiary of the life insurance policy. The representative informed MetLife that the 1991 form was the most recent document on file, but noted that Jane Hall “claim[s] she has a will.”
On February 10, 2011, Jane Hall sent MetLife a letter asserting that Dennis had learned of his impending death without adequate time to obtain an approved form from MetLife, but had intended his will to designate Jane as the beneficiary of his life insurance policy. As a result, she contended, she was entitled to the proceeds. MetLife denied Jane Hall's claim, explaining that “[a] will has no bearing on a group life insurance benefit,” and that the beneficiary of record was Dennis Hall II based on the 1991 form. Jane Hall appealed MetLife's decision, again arguing that Dennis had done all that he could in the circumstances to ensure that she would receive the life insurance proceeds. She later informed MetLife of the form Dennis had signed in November 2010 but never submitted, naming her as the sole beneficiary. After considering this information, MetLife upheld its denial of Jane Hall's claim. Two days later, MetLife distributed the life insurance proceeds to Dennis Hall II.

Jane Hall argues that MetLife abused its discretion by refusing to recognize either Dennis's will or the November 2010 form as a sufficient written request under the plan to change the beneficiary from Dennis Hall II to Jane Hall. Jane Hall asserted that Dennis's will effected a change in beneficiary. The will “direct[s] that the following specific bequests be made from my estate․ Any and all life insurance and benefits shall be distributed to Jane Marie Hall. If this beneficiary does not survive me, this bequest shall be distributed with my residuary estate.” MetLife responds that the will was not a written request “satisfactory to [MetLife]” for two reasons: (1) a will cannot dispose of non-probate assets, such as the proceeds of an insurance policy, and (2) even if a will could do so, this will did not purport to designate Jane Hall as the beneficiary of the policy proceeds; rather, it identified the person to whom “life insurance and benefits” payable to Dennis's estate should be distributed. According to MetLife, a life insurance policy payable to someone other than Dennis's estate, such as this one, is unaffected by the terms of the will.

The court ruled:
    We conclude that MetLife reasonably determined that the will was inadequate to effect a change in beneficiary. Dennis's will addressed bequests from his estate. The estate was not a beneficiary of the policy, and Dennis's will — unlike the will in Liberty Life Assurance Co. of Boston v. Kennedy, 358 F.3d 1295, 1297 (11th Cir.2004) — did not expressly address the distribution of assets that were not part of the estate. Although Dennis's will directed that “[a]ny and all life insurance and benefits shall be distributed to Jane Marie Hall,” that command followed shortly after the direction “that the following specific bequests be made from my estate.” It was thus reasonable for MetLife to construe the will to address only life insurance proceeds that were property of the estate. MetLife did not abuse its discretion simply because the will might be amenable to an alternative interpretation. See Rutledge v. Liberty Life Assurance Co. of Bos., 481 F.3d 655, 659 (8th Cir.2007).
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