ERISA life insurance: Can the proceeds be waived in a divorce?

ERISA preempts state laws that attempt to revoke life insurance beneficiary designations in favor of a former spouse. This can lead to difficult results if the insured no longer wanted to their former spouse to receive the proceeds, but had simply failed to update their beneficiary designation before they died. The result is particularly tragic if the insured had remarried and started a new family. The new family could be cut out of the proceeds in favor of the former spouse.

Federal courts have consistently rejected efforts to prevent the life insurance company (ERISA administrator) from paying the benefits to the former spouse who remained the designated beneficiary. That is the case even if the divorce decree stated the divorcing couple was waiving and releasing any claims they may to each others life insurance proceeds. The reasoning of the federal courts is that the administrator requires certainty in who to pay. It would be inefficient to require the administrator to review the terms of decrees to determine if they contain legally enforceable waivers. Particularly when they are created under state law.

But what if the estate of the insured waits until after the former spouse receives the life insurance policy proceeds and then sues to recover the benefits? Is that claim preempted by federal law? A number of courts have held that such a claim is not preempted. That is because the divorce decree is a state law order that typically enforces the agreements of the divorcing couple regarding their division of assets.

For example, in Metlife Life & Annuity Co. of Connecticut v. Akpele, 886 F.3d 998, 1007 (11th Cir. 2018), the federal court of appeals held:

This court likewise holds as mandated by the Supreme Court in Kennedy that a party who is not a named beneficiary of an ERISA plan may not sue the plan for any plan benefits. A party, however, may sue a plan beneficiary for those benefits, but only after the plan beneficiary has received the benefits.

Also, in Culwick v. Wood, 384 F.Supp.3d 328, 349 (E.D.N.Y. May 18, 2019), the court noted:

Although distributing the proceeds of the pension and annuity would undoubtedly have been simpler had the decedent changed the beneficiary on the plan documents, it does not follow that allowing the Estate to sue after benefits were distributed would introduce such confusion as to undermine ERISA's system of uniform plan administration

This is an extremely complex and evolving area of the law. If you are involved in a dispute regarding waiver of ERISA life insurance benefits in a divorce decree, it is extremely important to contact an experienced life insurance beneficiary lawyer.