A common claim to invalidate a life insurance beneficiary designation is that the designation was procured by undue influence.  Undue influence factors vary from state to state, but generally involve evidence that someone applied pressure to the owner of the policy in order to wrongly influence a beneficiary designation.   

The evidence is generally circumstantial: rarely is their evidence of such obvious Godfather style influence of a gun to the head/offer that can't be refused.  But undue influence can often be a viable claim where the policy owner depended upon the alleged influencer for general life needs.  Or if the influencer held a power of attorney over the policy owner. Evidence of a policy owner's diminished physical and/or mental capacity can provide powerful support for an undue influence claim. Alcohol and drug use or dependency will also be relevant. 

Policies obtained through an employer are generally governed by ERISA.  There is something of a tension between undue influence claims and ERISA's goal of certainty and predictability for plan administrators.  Courts regularly hold that state laws interfering with such certainty can be preempted by ERISA.  Claims that a designation is the product of influence obviously interject substantial uncertainty into who should receive the benefits and can place a plan administrator of having to evaluate claims of undue influence that involve often complex circumstances. Altough insurers typically avoid this problem by simply filing an interpleader lawsuit and depositing the disputed proceeds into a court's registry. 

Courts typically find that ERISA technically preempts state undue influence laws. But that does not mean that designations can not be challenged on that basis.  Because there is no federal common law of undue influence, federal courts often "borrow" from the undue influence law of the forum state where the court is located.

In Tinsley v. Generam Motors Corp. (227 F.3d 700), the Sixth Circuit Court of Appeals in Michigan considered an undue influence challenge to an ERISA beneficiary designation.  The district court found that the affidavits the contestant submitted in support of her claim were not sufficient to support an undue influence claim.

The court of appeals disagreed.  It first found that ERISA did not block the undue influence claim. The court acknowledged the typical rule in ERISA cases that courts need not look beyond a beneficiary designation form to determine the appropriate beneficiary.  But an undue influence claim involves a challenge to the underlying validity of the designation itself. 

As to the merits of the undue influence claim, the court of appeals noted that:

The challenger's evidence of undue influence included:

• The policy owner was in poor physical health at the time he purportedly changed beneficiaries
• The change was made shortly before his death in order to benefit a neighbor rather than a blood relative
• The neighbor exerted some control over the policy owner's finances 

The court of appeals found this was enough evidence to at least raise an issue of undue influence sufficient to get to trial. 

Whether you are contesting or defending a life insurance designation, it is very important to retain experienced legal counsel as soon as possible in the process.