FEGLI Beneficiary Designation Trumps State Law

Wednesday, June 26, 2013

The United States Supreme Court, in Hillman v. Maretta (No. 11-1221, 6/3/13), invalidated a Virginia law that had automatically changed a life insurance beneficiary designation after a married couple divorced. The late Warren Hillman, a federal employee, had life insurance under the Federal Employees’ Group Life Insurance program. He named his wife Judy Maretta his beneficiary in 1996. Although they divorced in 1998 and he married Jacqueline Hillman in 2002, he never changed the named beneficiary under his FEGLI policy.

Hillman died in 2008 and Maretta, the previous wife, filed a claim with OPM for the proceeds and collected $124,558.03. Judy Hillman, the widow, sued Maretta in a lower Virginia court, claiming that under Virginia state law she was owed the proceeds. That court upheld the claim.

The Virginia Supreme Court reversed, holding that the FEGLI act “clearly instructed that the insurance proceeds should be paid to a named beneficiary.” The U.S. Supreme Court affirmed the decision, ruling that the federal law preempted a state law that automatically assigned an interest in the proceeds of a FEGLI policy to anyone other than the named beneficiary.

This case is an important reminder to federal employees to keep their beneficiary designations up to date, especially after major life changes such as divorce or the death of a spouse or other designated beneficiary.