Hillman v. Maretta - 569 U.S. 483, 133 S. Ct. 1943 (2013)

Rule:

Like the National Service Life Insurance Act of 1940 and the Servicemen’s Group Life Insurance Act of 1965 (SGLIA), the Federal Employees’ Group Life Insurance Act of 1954 (FEGLIA), 5 U.S.C.S. § 8701 et seq., creates a scheme that gives highest priority to an insured’s designated beneficiary. 5 U.S.C.S. § 8705(a). Indeed, the FEGLIA includes an “order of precedence” that is nearly identical to the one in the SGLIA. Both require that the insurance proceeds be paid first to the named beneficiary ahead of any other potential recipient. The FEGLIA’s implementing regulations further underscore that an employee’s right of designation cannot be waived or restricted. 5 C.F.R. § 843.205(e). In the FEGLIA, as in these other statutes, Congress spoke with force and clarity in directing that the proceeds belong to the named beneficiary and no other.

Facts:

Warren Hillman participated in a life insurance program that was established under the Federal Employees’ Group Life Insurance Act of 1954 (FEGLIA), 5 U.S.C.S. § 8701 et seq., and in 1996 he named respondent Judy Maretta, his then-spouse, as his beneficiary. Warren divorced respondent in 1998; however, he did not change the beneficiary designation at that time or after he married petitioner Jacqueline Hillman four years later. After Warren died in 2008, the Office of Personnel Management paid the proceeds of the policy to respondent, and petitioner sued respondent in a Virginia court, seeking an order under Va. Code Ann. § 20-111.1 which required respondent to pay the proceeds to her. Although the state trial court issued an order under § 20-111.1(D) which required respondent to pay the proceeds to the petitioner, the Virginia Supreme Court reversed the trial court's order. The U.S. Supreme Court granted certiorari.

Issue:

Was the respondent required to pay the proceeds of the deceased to the petitioner widow, notwithstanding the fact that respondent was the named beneficiary of the policy?

Answer:

No.

Conclusion:

The U.S. Supreme Court found that § 20-111.1(D) was preempted by the Federal Employees’ Group Life Insurance Act of 1954 (FEGLIA), 5 U.S.C.S. § 8701 et seq. According to the Court, Congress created a scheme in 5 U.S.C.S. § 8705(a) that gave the highest priority to an insured’s designated beneficiary and underscored that an employee’s right of designation could not be waived or restricted, and § 20-111.1(D) interfered with that scheme. This conclusion was confirmed by another provision of FEGLIA, §8705(e), which created a limited exception to the order of precedence by allowing proceeds to be paid to someone other than the named beneficiary, if, and only if, the requisite documentation was filed with the Government before the employee's death, so that any departure from the beneficiary designation was managed within, not outside, the federal system. Accordingly, the Court affirmed the Virginia Supreme Court’s judgment.