Maretta v. Hillman ( 2012 )

Present: All the Justices
JUDY A. MARETTA
OPINION BY
v. Record No. 102042 CHIEF JUSTICE CYNTHIA D. KINSER
January 13, 2012
JACQUELINE HILLMAN
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Michael F. Devine, Judge
Judy A. Maretta (Maretta), as the named beneficiary of a
Federal Employees' Group Life Insurance (FEGLI) policy, received
FEGLI benefits upon the death of her ex-husband. The question
on appeal is whether federal law preempts Code § 20-111.1(D),
which otherwise would make Maretta liable to her ex-husband's
widow, Jacqueline Hillman (Hillman), for those benefits.
In the event of a decree of annulment or divorce from the
bond of matrimony, Code § 20-111.1(A) revokes "any revocable
beneficiary designation contained in a then existing written
contract owned by one party that provides for the payment of any
death benefit to the other party." However, Code § 20-111.1(D),
the subsection at issue, provides that
[if Code § 20-111.1(A)] is preempted by federal
law with respect to the payment of any death
benefit, a former spouse who, not for value,
receives the payment of any death benefit that
the former spouse is not entitled to under this
section is personally liable for the amount of
the payment to the person who would have been
entitled to it were this section not preempted.
In contrast to these statutory provisions, the Federal
Employees' Group Life Insurance Act (FEGLIA), 5 U.S.C. § 8701 et
seq. (2006 & Supp. II 2008), contains an order of precedence
that directs to whom benefits under a FEGLI policy are paid:
[T]he amount of group life insurance and group
accidental death insurance in force on an
employee at the date of his death shall be paid,
on the establishment of a valid claim, to the
person or persons surviving at the date of his
death, in the following order of precedence:
First, to the beneficiary or beneficiaries
designated by the employee in a signed and
witnessed writing received before death in the
employing office . . . .
Second, if there is no designated
beneficiary, to the widow or widower of the
employee.
5 U.S.C. § 8705(a). FEGLIA also contains a preemption
provision, which states:
The provisions of any contract under this
chapter [5 U.S.C. § 8701 et seq.] which relate to
the nature or extent of coverage or benefits
(including payments with respect to benefits)
shall supersede and preempt any law of any State
or political subdivision thereof, or any
regulation issued thereunder, which relates to
group life insurance to the extent that the law
or regulation is inconsistent with the
contractual provisions.
5 U.S.C. § 8709(d)(1). 1
1
The "contractual provisions" referenced in 5 U.S.C.
§ 8709(d)(1) with which state law must be consistent are simply
the provisions of FEGLIA. See O'Neal v. Gonzalez, 839 F.2d
1437, 1440 (11th Cir. 1988) (noting that the insurance policy is
not a traditional contract between an insured and the insurer
but a federal policy governed by federal law). Section
8709(d)(1) "broadly preempts any state law that is inconsistent
with the FEGLIA master policy." Metropolitan Life Ins. Co. v.
Christ, 979 F.2d 575, 579 (7th Cir. 1992).
2
Because Congress intended for FEGLI benefits to be paid and
to belong to a designated beneficiary, we conclude that FEGLIA
preempts Code § 20-111.1(D). Therefore, we will reverse the
circuit court's judgment.
FACTS AND PROCEEDINGS
The relevant facts are not in dispute. In December 1996,
Warren Hillman (Warren) named Maretta, his wife at the time, as
the beneficiary of his FEGLI policy. The two divorced in
December 1998 and Warren married Hillman in October 2002.
Warren, however, never changed the beneficiary designation in
his FEGLI policy. Hillman and Warren were still married when,
in July 2008, Warren died. After her husband's death, Hillman
filed a claim for benefits under Warren's FEGLI policy but was
told the proceeds would be distributed to Warren's designated
beneficiary, Maretta. Maretta filed a claim for and received
the death benefits under the FEGLI policy in the amount of
$124,558.03.
Hillman then filed an action against Maretta, claiming that
pursuant to Code § 20-111.1(D), Maretta was liable to her for
the death benefits received as the beneficiary of Warren's FEGLI
policy. Hillman sought an order directing Maretta to pay those
proceeds to Hillman or, alternatively, a judgment against
Maretta in the amount received from the FEGLI policy. Maretta
filed a demurrer and plea in bar. Citing numerous federal
3
cases, Maretta claimed that Code §§ 20-111.1(A) and -111.1(D)
are preempted by 5 U.S.C. §§ 8705 and 8709 because the state
statutes grant FEGLI benefits to someone other than the named
beneficiary in violation of FEGLIA's terms. In a letter
opinion, the circuit court overruled Maretta's demurrer and plea
in bar, concluding that Code § 20-111.1(D) is not preempted by
FEGLIA. Hillman then moved for summary judgment. Finding no
material facts in dispute, the circuit court granted Hillman's
motion and entered judgment against Maretta in the amount of
$124,558.03.
We granted Maretta this appeal. The sole issue is whether
the circuit court erred in determining that Hillman's claim
under Code § 20-111.1(D) is not preempted by FEGLIA. That issue
is a question of law reviewed de novo on appeal. See Johnson v.
Hart, 279 Va. 617, 623, 692 S.E.2d 239, 242 (2010).
ANALYSIS
4
The Supremacy Clause in the United States Constitution
provides that the laws of the United States "shall be the
supreme law of the land . . . any thing in the Constitution or
laws of any state to the contrary notwithstanding." U.S. Const.
art. VI, cl. 2. Accordingly, state laws in conflict with
federal law are "without effect." Altria Group, Inc. v. Good,
555 U.S. 70, 76 (2008) (internal quotation marks omitted). The
preemption doctrine "has its roots" in the Supremacy Clause and
"requires us to examine congressional intent." Fidelity Fed.
Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 152 (1982).
" '[T]he purpose of Congress is the ultimate touchstone' in
every pre-emption case." Altria Group, 555 U.S. at 76 (quoting
Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996)).
"Pre-emption may be either express or implied, and is
compelled whether Congress' command is explicitly stated in the
statute's language or implicitly contained in its structure and
purpose." de la Cuesta, 458 U.S. at 152-53 (internal quotation
marks omitted). Even when Congress has stopped short of totally
displacing state law in a specific area, state law is
nevertheless preempted "to the extent that it actually conflicts
with federal law. Such a conflict arises when compliance with
both federal and state regulations is a physical impossibility,
or when state law stands as an obstacle to the accomplishment
and execution of the full purposes and objectives of Congress."
5
Id. at 153 (citations and internal quotation marks omitted); see
also, Dugan v. Childers, 261 Va. 3, 8, 539 S.E.2d 723, 725
(2001) (" 'The pertinent questions are whether the right as
asserted conflicts with the express terms of federal law and
whether its consequences sufficiently injure the objectives of
the federal program to require nonrecognition.' ") (quoting
Hisquierdo v. Hisquierdo, 439 U.S. 572, 583 (1979));
Metropolitan Life Ins. Co. v. Potter, 533 So. 2d 589, 591 (Ala.
1988) ("Preemption may occur from explicit preemptive language
in a statute, from implied congressional intent, or where state
law stands as an obstacle to the accomplishment of the full
purposes and objectives of Congress."). While there is a
presumption against preemption "in areas of traditional state
regulation such as family law," Egelhoff v. Egelhoff, 532 U.S.
141, 151 (2001), "[the] relative importance to the State of its
own law is not material when there is a conflict with a valid
federal law, for the Framers of our Constitution provided that
the federal law must prevail." Ridgway v. Ridgway, 454 U.S. 46,
54 (1981) (internal quotation marks omitted).
In addition to the order of precedence set forth in 5
U.S.C. § 8705(a) and the preemption provision in 5 U.S.C.
§ 8709(d)(1), FEGLIA and the regulations promulgated thereunder
contain provisions relevant to the specific preemption question
before us. Pursuant to 5 C.F.R. § 870.802(f), an insured under
6
a FEGLI policy can change his or her beneficiary "at any time
without the knowledge or consent of the previous beneficiary.
This right cannot be waived or restricted." 2 Id. The insured's
beneficiary designation takes precedence over any court order
for divorce, annulment, or separation unless that order has been
received by the appropriate office prior to the insured's death.
5 U.S.C. § 8705(e); 5 C.F.R. § 870.801(d). In addition, any
"designation, change, or cancellation of beneficiary in a will
or any other document not witnessed and filed as required by [5
C.F.R. § 870.802] has no legal effect with respect to [FEGLI]
benefits." 5 C.F.R § 870.802(c).
Contrary to these provisions, Code § 20-111.1(A) revokes a
beneficiary designation upon entry of a decree of annulment or
divorce from the bond of matrimony and thus alters the order of
precedence in 5 U.S.C. § 8705(a), which directs payment of FEGLI
benefits first to the designated beneficiary regardless of
marital status. As the parties acknowledged before the circuit
court, FEGLIA preempts Code § 20-111.1(A). See Metropolitan
Life Ins. Co. v. Bell, 924 F. Supp. 63, 65 (E.D. Tex. 1995)
(holding that 5 U.S.C. § 8709(d)(1) "certainly preempts any
direct payment to anyone other than a listed beneficiary when a
beneficiary is actually designated").
2
"Federal regulations have no less pre-emptive effect than
federal statutes." de la Cuesta, 458 U.S. at 153.
7
Unlike Code § 20-111.1(A), Code § 20-111.1(D) does not
alter the direct payment of FEGLI benefits to a designated
beneficiary. Instead, it grants a third party the right to
recover those benefits from a designated beneficiary who is the
former spouse of the insured. Code § 20-111.1(D). If Congress
intended for FEGLI benefits to belong to the designated
beneficiary to the exclusion of all others, then Code § 20-
111.1(D) "stands as an obstacle to the accomplishment and
execution of the full power and objectives of Congress" and is
therefore preempted by FEGLIA. de la Cuesta, 458 U.S. at 153.
Hillman argues, and courts have generally agreed, that
FEGLIA manifests a congressional intent for administrative
convenience. See, e.g., Kidd v. Pritzel, 821 S.W.2d 566, 569-70
(Mo. Ct. App. 1991) (holding that purpose of 5 U.S.C. § 8705 is
"to provide for the speedy and economical settlement of claims")
(citing cases); cf. Egelhoff, 532 U.S. at 148 (stating that the
principal goal of Employee Retirement Income Security Act is to
provide "a set of standard procedures to guide processing of
claims and disbursement of benefits") (internal quotation marks
omitted). But many courts have concluded that Congress also
intended to grant an insured the right to name without
restriction, and to the exclusion of all others, the person who
will receive the benefits from a FEGLI policy. See, e.g.,
Metropolitan Life Ins. Co. v. Zaldivar, 413 F.3d 119, 120-21
8
(1st Cir. 2005) (FEGLIA preempts the imposition of a
constructive trust on FEGLI proceeds once paid); Metropolitan
Life Ins. Co. v. Christ, 979 F.2d 575, 578-79 (7th Cir. 1992)
(same); O'Neal v. Gonzalez, 839 F.2d 1437, 1440 (11th Cir. 1988)
("Congress intended to establish . . . for the benefit of
designated beneficiaries, an inflexible rule that the
beneficiary . . . would receive the policy proceeds, regardless
of other documents or the equities in a particular case.").
Most relevant is the decision of the Supreme Court of the United
States in Ridgway. Although Ridgway involved the Servicemen's
Group Life Insurance Act (SGLIA), both FEGLIA and SGLIA contain
identical "order of precedence" provisions. Compare 5 U.S.C.
§ 8705(a) with 38 U.S.C. § 1970(a). Regulations promulgated
pursuant to SGLIA are also similar to those under FEGLIA. See
38 C.F.R. § 9.4(3)(b) (change in beneficiary may be made at any
time). We thus agree with those courts that have considered
Ridgway to be "highly persuasive, if not binding, in construing
[FEGLIA]." See Zaldivar, 413 F.3d at 120 (citing cases in
support).
In Ridgway, the insured serviceman named his wife as the
beneficiary of his SGLIA benefits. 454 U.S. at 48. When the
parties subsequently obtained a divorce, the state-law judgment
ordered the insured to keep in force any existing life insurance
policies for the benefit of his children. Id. The insured
9
remarried and, contrary to the command of the divorce order,
changed the policy's beneficiary designation so that the
proceeds would be paid pursuant to the statutory order of
precedence set forth in 38 U.S.C. § 770(a), i.e., to his widow.
Id. Both the widow and ex-wife, the latter on behalf of the
insured's children, filed claims for the SGLIA policy proceeds.
Id. at 49. The ex-wife also filed suit, asking that a
constructive trust be placed on any proceeds paid to the widow.
Id. The Supreme Judicial Court of Maine concluded that the
widow should be named as the constructive trustee of the policy
benefits and directed that the benefits be paid to the ex-wife
on behalf of the insured's children. Id. at 50 (citing Ridgway
v. Prudential Ins. Co. of America, 419 A.2d 1030, 1035 (Me.
1980)).
On a writ of certiorari, the Supreme Court first described
the history and terms of SGLIA, including its specified order of
precedence for paying benefits, 38 U.S.C. § 770(a), and its
anti-attachment provision. Id. at 52-53. The latter shielded
policy payments from creditors' claims and from "'attachment,
levy, or seizure by or under any legal or equitable process
whatever, either before or after receipt by the beneficiary.' "
Id. (quoting 38 U.S.C. § 770(g)). Noting that "a state divorce
decree, like other law governing the economic aspects of
domestic relations, must give way to clearly conflicting federal
10
enactments," the Court then turned to its previous decision in
Wissner v. Wissner, 338 U.S. 655 (1950). Ridgway, 454 U.S. at
55.
In Wissner, the trial court held that benefits paid under
the National Service Life Insurance Act (NSLIA), which allowed
an insured to designate and change a beneficiary and contained
an anti-attachment provision, were community property. Wissner,
338 U.S. at 658-59. Although the insured service member named
his parents as beneficiaries of his NSLIA policy, the trial
court nevertheless directed that proceeds be paid to the
insured's widow. Id. at 657-58. The Supreme Court in Wissner
reversed, finding that the trial court's judgment "nullifie[d]
the soldier's choice and frustrate[d] the deliberate purpose of
Congress." Id. at 659.
Quoting that language from Wissner, the majority in Ridgway
then held:
The present case, we feel, is controlled by
Wissner. [J]ust as . . . in Wissner, the insured
service member possesses the right freely to
designate the beneficiary and to alter that
choice at any time by communicating the decision
in writing to the proper office. Here, as there,
it appropriately may be said: "Congress has
spoken with force and clarity in directing that
the proceeds belong to the named beneficiary and
no other."
Ridgway, 454 U.S. at 55-56 (quoting Wissner, 338 U.S. at 658).
Finding that a state law imposing a constructive trust on SGLIA
benefits was preempted by SGLIA, the Court explained: "Federal
11
law and federal regulations bestow upon the service member an
absolute right to designate the policy beneficiary. That right
is personal to the member alone. [O]nly [the insured] had the
power to create and change a beneficiary interest in his SGLIA
insurance." Id. at 59-60.
Under a separate heading, the Supreme Court then held that
placing a constructive trust on the policy proceeds was also
inconsistent with SGLIA's anti-attachment provision. Id. at 60-
62. Notably, the Court pointed out that it had similarly
invoked NSLIA's identical anti-attachment provision as an
independent ground for the result reached in Wissner. Id. at
60.
In light of the virtually identical language used in FEGLIA
and SGLIA, we conclude pursuant to Ridgway that it is Congress'
intent that "only [the insured] [has] the power to create and
change a beneficiary interest," that the right to do so cannot
be waived or restricted, and that the FEGLI benefits belong to
the named beneficiary. Ridgway, 454 U.S. at 60; see Christ, 979
F.2d at 579 (state's divorce decree and constructive trust
conflicted with the rights of the insured specified under
FEGLIA). Just as with SGLIA, "Congress has spoken with force
and clarity in directing that the [FEGLI] proceeds belong to the
12
named beneficiary and no other." 3 See id. at 56 (emphasis
added). That is, Congress did not intend merely for the named
beneficiary in a FEGLI policy to receive the proceeds, only then
to have them subject to recovery by a third party under state
law. Simply put, "no persons other than [the beneficiary] have
an interest in the policy benefits pursuant to FEGLIA."
Metropolitan Life Ins. Co. v. Armstrong-Lofton, 19 F. Supp. 2d
1134, 1137 (C.D. Cal. 1998); see also O'Neal, 839 F.2d at 1440
(Congress' intent under FEGLIA was to establish an "inflexible
rule" that only the beneficiary would receive the policy
proceeds, "regardless of other documents or the equities in a
particular case."). Code § 20-111.1(D), by making liable "a
former spouse who, not for value, receives the payment of any
death benefit that the former spouse is not entitled to under"
Code § 20-111.1(A), "create[s] a beneficiary interest" in the
policy proceeds for someone other than the named insured.
Ridgway, 454 U.S. at 60. In other words, Code § 20-111.1(D)
"nullifies the [insured's] choice and frustrates the deliberate
purpose of Congress." Wissner, 338 U.S. at 659. Thus, Code
3
In fact, Congress' preemptive intent is more apparent in
FEGLIA than in SGLIA, which contains no provision similar to 5
U.S.C. § 8709(d)(1). See Potter, 533 So.2d at 594 (holding that
given FEGLIA's express preemption provision, it is even more
appropriate to conclude that Congress "'has spoken with force
and clarity in directing that the proceeds belong to the named
beneficiary and no other'") (quoting Ridgway, 454 U.S. at 55-
56).
13
§ 20-111.1(D) "actually conflicts with federal law [by]
stand[ing] as an obstacle to the accomplishment and execution of
the full purposes and objectives of Congress." de la Cuesta,
458 U.S. at 153 (internal quotation marks omitted). Therefore,
we hold that Code § 20-111.1(D) is preempted by FEGLIA.
We are aware, as Hillman argues on brief, that our decision
today stands in contrast to a majority of state court decisions.
Unlike federal courts, state courts have generally held that
FEGLIA does not preempt a state-law constructive trust on FEGLI
proceeds for the benefit of someone other than the named
beneficiary. See generally McCord v. Spradling, 830 So. 2d 1188,
1202 (Miss. 2002) (citing cases and finding persuasive state
court holdings that the "distinction between beneficiary status
and ultimate equitable entitlement obviates any issue of federal
preemption of state-court action"); Fagan v. Chaisson, 179
S.W.3d 35, 42 (Ct. App. Tex. 2005) (citing cases); but see,
Potter, 533 So.2d at 593 (holding that FEGLIA preempted state
court divorce judgment ordering insured to maintain ex-wife as
beneficiary of existing life insurance policies). In doing so,
however, these courts have misconstrued Ridgway, specifically
its reliance on Wissner, and the separate, independent
discussion of SGLIA's anti-attachment provision. See Christ,
979 F.2d at 581 ("SGLIA's anti-attachment provision . . . was a
separate ground" for finding preemption); Metropolitan Life Ins.
14
Co. v. McShan, 577 F. Supp. 165, 169 (N.D. Cal. 1983) ("In both
Wissner and Ridgway the existence of an anti-attachment
provision was an independent basis upon which the Supreme Court
found preemption."). In Fagan, for example, the court stated
that "Ridgway was decided on two points," the first being that
SGLIA's order of precedence for the payment of benefits merely
conferred a right on the insured to designate a beneficiary.
179 S.W.3d at 44; see also Kidd, 821 S.W.2d at 570 (same). That
interpretation is incorrect. The Court's first holding in
Ridgway, made in reliance on its decision in Wissner, emphasized
that the insured's right to designate a beneficiary and to alter
that choice at any time evinced Congress' intent for the policy
proceeds to "belong to the named beneficiary and no other." 4
Ridgway, 454 U.S. at 56 (internal quotation marks omitted).
Hillman, and the courts on which she relies, fail to account for
Ridgway's reliance on Wissner. According to the Supreme Court,
Wissner controlled the outcome in Ridgway, id. at 55, and we
conclude that Ridgway, in turn, controls the result in the case
now before us.
State courts distinguishing Ridgway also fail to
acknowledge what is apparent from a plain reading of the
decision, i.e., that its holding based on SGLIA's anti-
4
The court in Fagan also mistakenly referred to the second
holding in Ridgway based on SGLIA's anti-attachment provision as
the "most important[]." Fagan, 179 S.W.2d at 44.
15
attachment provision was a separate, independent basis for the
result. See, e.g., McCord, 830 So.2d at 1197 (distinguishing
Ridgway solely on the grounds that SGLIA contained an anti-
attachment provision). Ridgway's discussion of SGLIA's anti-
attachment provision began with the statement: the "imposition
of a constructive trust is also inconsistent with the anti-
attachment provision." Ridgway, 454 U.S. at 60 (emphasis
added). In other words, Ridgway is not distinguishable on the
basis that FEGLIA does not contain an anti-attachment provision.
In sum, the circuit court erred in concluding that Code
§ 20-111.1(D) is not preempted by FEGLIA.
CONCLUSION
For these reasons, we will reverse the judgment of the
circuit court. Because we conclude that FEGLIA preempts Code
§ 20-111.1(D), we will enter judgment for Maretta.
Reversed and final judgment.
JUSTICE McCLANAHAN, with whom JUSTICE MILLETTE joins,
dissenting.
I.
The constitutional standard governing preemption under the
Supremacy Clause, as contained in Article VI of the Constitution
of the United States, presents a "'high threshold'" for the
invalidation of a state statute alleged to conflict with federal
16
law. Chamber of Commerce of the U.S. v. Whiting, 563 U.S. ___,
___, 131 S. Ct. 1968, 1985 (2011) (quoting Gade v. National Solid
Wastes Mgmt. Ass'n, 505 U.S. 88, 110 (1992) (Kennedy, J.,
concurring in part and concurring in judgment)). Accordingly,
courts are to address preemption claims "with the starting
presumption that Congress does not intend to supplant state
law." New York State Conf. of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co., 514 U.S. 645, 654 (1995). The threshold for
invoking preemption is even higher where, as here, the state
statute at issue represents a state legislature's exercise of
its police power in the area of domestic relations. Rose v.
Rose, 481 U.S. 619, 625 (1987); Hisquierdo v. Hisquierdo, 439
U.S. 572, 581 (1979); United States v. Yazell, 382 U.S. 341, 352
(1966). That is because " 'the whole subject of domestic
relations . . . belongs to the laws of the States and not to the
laws of the United States.' " Rose, 481 U.S. at 625 (quoting In
re Burrus, 136 U.S. 586, 593-94 (1890)).
Thus, as the United States Supreme Court has stated,
" 'when state family law has come into conflict with a federal
statute,' " courts should limit their Supremacy Clause review to
a determination of " 'whether Congress has "positively required
by direct enactment" that state law be pre-empted.' " Id.
(quoting Hisquierdo, 439 U.S. at 581 (quoting Wetmore v. Markoe,
196 U.S. 68, 77 (1904))). Indeed, "[b]efore a state law
17
governing domestic relations will be overridden," the Supreme
Court has further explained, the state law " 'must do "major
damage" to "clear and substantial" federal interests.' " Id.
(quoting Hisquierdo, 439 U.S. at 581 (quoting Yazell, 382 U.S.
at 352)) (emphasis added). 1
In my opinion, this high threshold for imposing preemption
in the instant case has not been met. That is, I do not believe
Code § 20-111.1(D) (triggered, itself, upon federal preemption
of subsection A of the statute) is preempted by the Federal
Employees' Group Life Insurance Act (FEGLIA), 5 U.S.C. § 8701 et
seq. (2006 & Supp. II 2008).
II.
Subsection A of Code § 20-111.1 provides, in relevant
part: "Upon the entry of a decree of annulment or divorce from
the bond of matrimony . . . any revocable beneficiary
designation contained in a then existing written contract owned
by one party that provides for the payment of any death benefit
to the other party is revoked. A death benefit prevented from
1
See Brandon v. Travelers Insur. Co., 18 F.3d 1321, 1326
(5th Cir. 1994) (observing in preemption case that "[f]ederal
respect for state domestic relations law has a long and
venerable history" and that "[w]hen courts face a potential
conflict between state domestic relations law and federal law,
the strong presumption is that state law should be given
precedence" because "family relations [law] has been a
sacrosanct enclave" (emphasis added)).
18
passing to a former spouse by this section shall be paid as if
the former spouse had predeceased the decedent. . . ." 2
In revoking the beneficiary designation of a former spouse
to a life insurance policy upon divorce, Code § 20-111.1(A)
operates as a companion to the revocation-by-divorce statute in
Virginia applicable to wills of former spouses, Code § 64.1-59. 3
Addressing the latter statute, this Court has explained that its
passage was "a statutory declaration of public policy concerning
wills of divorced testators, which provided . . . that a
divorced spouse is to be denied any benefits under a will
executed prior to divorce" based on the testator's presumed
change of intent upon divorce. Papen v. Papen, 216 Va. 879,
882-83, 224 S.E.2d 153, 155 (1976). "The General Assembly, in
evaluating the advisability of [enacting Code § 64.1-59],
undoubtedly concluded that the number of forgetful testators who
would be benefited by the statute far exceeded the number of
careful testators who might be inconvenienced by its enactment."
2
The terms of Code § 20-111.1(A) are expressly inapplicable
"(i) to the extent a decree of annulment or divorce from the
bond of matrimony, or a written agreement of the parties
provides for a contrary result as to specific death benefits, or
(ii) to any trust or any death benefit payable to or under any
trust," none of which is presented in this case. Code § 20-
111.1(C).
3
Code § 64.1-59 provides, in relevant part: "If, after
making a will, the testator is divorced a vinculo matrimonii or
his marriage is annulled, the divorce or annulment revokes any
disposition or appointment of property made by the will to the
former spouse. . . ."
19
Id. at 883, 224 S.E.2d at 155-56. The General Assembly no doubt
adhered to a similar conclusion in subsequently enacting Code
§ 20-111.1(A) with its analogous revocation of a designation of
a former spouse as a beneficiary on a life insurance policy upon
divorce. See generally Alan S. Wilmit, Note, Applying the
Doctrine of Revocation by Divorce to Life Insurance Policies, 73
Cornell L. Rev. 653 (1988).
As appellant correctly asserts, however, Code § 20-
111.1(A), as applicable to the facts in this case, is
inconsistent with FEGLIA's directive as to whom life insurance
benefits under a FEGLIA policy "shall be paid," as set forth in
5 U.S.C. § 8705(a). Under the 5 U.S.C. § 8705(a) statutory
"order of precedence," the first payee of the life insurance is
"the beneficiary or beneficiaries designated by the employee in
a signed and witnessed writing received before death in the
employing office . . . ." 4 Id. Consequently, in this case,
pursuant to 5 U.S.C. § 8705(a), the FEGLI policy holder's former
spouse, appellant, as the designated beneficiary on the policy,
received payment of the insurance proceeds through the federal
Office of Personnel Management (the federal agency that
administers FEGLIA). Under Code § 20-111.1(A), the policy
4
Several other alternative payees are then listed under 5
U.S.C. § 8705(a) in order of priority in the event there is no
designated beneficiary, the first of these being the widow or
widower of the deceased policy holder.
20
holder's widow, appellee, would have received the insurance
proceeds from her deceased husband's FEGLI policy.
Addressing such conflicts with state law, FEGLIA provides
under 5 U.S.C. § 8709(d)(1) that "[t]he provisions of any
contract under this chapter [5 USCS §§ 8701 et seq.] which
relate to the nature or extent of coverage or benefits
(including payments with respect to benefits) shall supersede
and preempt any law of any State or political subdivision
thereof, or any regulation issued thereunder, which relates to
group life insurance to the extent that the law or regulation is
inconsistent with the contractual provisions."
The majority thus concludes, and I agree, that Code § 20-
111.1(A) is therefore preempted under the express terms of 5
U.S.C. § 8709(d)(1), as Code § 20-111.1(A) would otherwise
negate the payment dictated by 5 U.S.C. § 8705(a) where, as
here, the designated beneficiary was a former spouse, and the
designation was made prior to the divorce of the former spouse
and the federal employee policy holder.
III.
The issue on appeal is thus whether Code § 20-111.1(D),
which is triggered upon the federal preemption of subsection A
of the statute, is itself preempted under FEGLIA.
The General Assembly amended Code § 20-111.1 in 2007 by
adding subsection D to the statute, which provides as follows:
21
"If this section is preempted by federal law with respect to the
payment of any death benefit, a former spouse who, not for
value, receives the payment of any death benefit that the former
spouse is not entitled to under this section is personally
liable for the amount of the payment to the person who would
have been entitled to it were this section not preempted." See
2007 Acts ch. 306.
Passage of this amendment no doubt reflects the General
Assembly's recognition that subsection A of Code § 20-111.1 was
preempted by FEGLIA pursuant to 5 U.S.C. § 8709(d)(1). The
General Assembly dealt with this impediment to implementation of
its public policy embodied in subsection A's revocation-by-
divorce provision for life insurance policies by establishing,
in subsection D of Code § 20-111.1, an equitable remedy in favor
of a third party who otherwise would have been entitled to
receive the insurance proceeds pursuant to subsection A –- in
this case, the decedent's widow. Under the new provision, the
former spouse, as the designated beneficiary, is made personally
liable to the third party for an amount equal to the insurance
proceeds paid to the former spouse upon the death of the federal
employee policy holder.
Thus, as the majority acknowledges, unlike subsection A,
subsection D "does not alter the direct payment of FEGLI
benefits to a designated beneficiary" in establishing the
22
equitable remedy against the former spouse. After assessing
this key factor against the limited federal interest implicated
under 5 U.S.C. § 8705(a)'s payment provision for FEGLI benefits,
I believe that Code § 20-111.1(D) does no "major damage" to that
federal interest. Rose, 481 U.S. at 625 (citations and internal
quotation marks omitted).
Viewed through the prism of our governing standard of
review, FEGLIA simply does not evince congressional intent to
shield a former spouse from liability against a third party
claim involving FEGLI proceeds that have already been paid to
the former spouse. Rather, as the majority also acknowledges, 5
U.S.C. § 8705(a)'s "order of precedence" for the payment of
FEGLI benefits was enacted for the purpose of providing
"administrative convenience" for the federal Office of Personnel
Management (OPM) and the insurer in processing claims and
distributing benefits. See Kidd v. Pritzel, 821 S.W.2d 566,
568-70 (Mo. Ct. App. 1991) (detailing the legislative history of
5 U.S.C. § 8705 and cited by the majority). Addressing this
point, the Missouri Court of Appeals in Kidd aptly explains that
[section] 8705 serves a valuable and worthwhile
purpose by keeping the OPM and the insurance company
out of legal entanglements. It fulfills the
congressional intention by reducing their
administrative and legal hassles. Regardless of what
claims are brought to recover the proceeds once they
are paid out to the designated beneficiary, the
purpose of § 8705 has been served. Neither the
insurance carrier nor the government can be burdened
23
by participation in a state judicial proceeding to
recover the proceeds.
Id. at 572 (emphasis added). And this administrative
convenience – the ability of the OPM and the insurer to simply
pay the life insurance proceeds to the named beneficiary as
directed by 5 U.S.C. § 8705, close the file, and move on to the
next claim, as they did in this case – remains completely intact
with the application of Code § 20-111.1(D). Accordingly, FEGLIA
should not be held to preempt Code § 20-111.1(D).
I thus agree with the majority of state courts in other
jurisdictions that have addressed the issue of preemption under
FEGLIA and have similarly concluded that their state domestic
relations laws, in creating an equitable claim for an amount
equal to the FEGLI insurance proceeds that have been paid to the
named beneficiary, are not preempted by FEGLIA. See, e.g.,
Fagan v. Chaisson, 179 S.W.3d 35, 42 (Tex. App. 2005); McCord v.
Spradling, 830 So. 2d 1188, 1203 (Miss. 2002); Sedarous v.
Sedarous, 666 A.2d 1362, 1363 (N.J. Super. Ct. App. Div. 1995);
Eonda v. Affinito, 629 A.2d 119, 123 (Pa. Super. Ct. 1993);
Kidd, 821 S.W.2d at 575; In re Estate of Anderson, 552 N.E.2d
429, 434-35 (Ill. App. Ct. 1990); Roberts v. Roberts, 560 S.W.2d
438, 439-40 (Tex. App. 1977).
Unlike my colleagues, my view of congressional intent
reflected in FEGLIA is not altered by Ridgway v. Ridgway, 454
24
U.S. 46 (1981), or Wissner v. Wissner, 338 U.S. 655 (1950) (the
case that the United States Supreme Court relied upon in
deciding Ridgway), where the Court imposed post-payment
protection for the life insurance proceeds paid to the
respective armed services member's designated beneficiary in
each of those cases. I believe Ridgway, a Servicemen's Group
Life Insurance Act (SGLIA) case, and Wissner, a National Service
Life Insurance Act (NSLIA) case, are distinguishable from the
instant FEGLIA case.
NSLIA, as the predecessor to SGLIA, placed into effect a
system of life insurance benefits specifically designed for our
armed services members shortly before the beginning of World War
II. It then lapsed at the end of the Korean War, when private
commercial insurance generally became available for service
members. Ridgway, 454 U.S. at 50-51. SGLIA was subsequently
enacted in response to private carriers' restrictions on
coverage for service members as a result of the escalating
Vietnam conflict. Id. at 50. Like federal employees under
FEGLIA, armed services members possessed the right under both
NSLIA and SGLIA to designate the beneficiaries of their choice.
Id. at 55-56. Both NSLIA and SGLIA, however, contained an
identical anti-attachment provision that was not included in
FEGLIA. Id. at 60. Under the anti-attachment provision,
"[p]ayments to the named beneficiary 'shall be exempt from the
25
claims of creditors, and shall not be liable to attachment,
levy, or seizure by or under any legal or equitable process
whatever, either before or after receipt by the beneficiary
. . . .' " Wissner, 338 U.S. at 659 (quoting 38 U.S.C. § 816)
(emphasis added).
Assessing the beneficiary designation and anti-attachment
provisions together, the Supreme Court in Ridgway explained:
" 'Possession of government insurance, payable to the relative
of his choice, might well directly enhance the morale of the
serviceman. The exemption provision is his guarantee of the
complete and full performance of the contract to the exclusion
of conflicting claims. The end is a legitimate one within the
congressional powers over national defense, and the means are
adapted to the chosen end.' " Ridgway, 454 U.S. at 56-57
(quoting Wissner, 338 U.S. at 660-61 (emphasis added)). The
Supreme Court then concluded its analysis by explaining that,
with the anti-attachment clause, "Congress has insulated the
proceeds of SGLIA insurance from attack or seizure by any
claimant other than the beneficiary designated by the insured or
the one first in line under the statutory order of precedence.
That is Congress' choice. It remains effective until legislation
providing otherwise is enacted." Id. at 63.
FEGLIA, by contrast, simply made group life insurance
available to federal employees so as to " 'appl[y] to Government
26
service the best practices of progressive, private employers.' "
Fagan, 179 S.W.3d at 45 (quoting Kidd, 821 S.W.2d at 568; some
internal quotation marks omitted). Manifestly, its passage was
"not attended by the exigenc[ies] that motivated" Congress when
passing NSLIA and SGLIA in the context of national defense. Id.
The omission of an anti-attachment clause in FEGLIA should thus
be viewed as answering in the negative the question of whether
Congress intended to preempt a state law like Code § 20-111.1(D)
– one that impacts FEGLI benefits, if at all, only after the
benefits have been paid to the designated beneficiary. With a
comprehensive statutory scheme like FEGLIA, such an "omission[]"
is a "significant one[]." Mackey v. Lanier Collection Agency &
Serv., Inc., 486 U.S. 825, 837 (1988) (addressing absence of
anti-alienation provisions under ERISA as to welfare benefit
plans). As the Texas Court of Appeals stated in an analogous
FEGLIA case, " '[i]f Congress had desired to totally pre-empt
all state law claims[,] it would have included an anti-
attachment provision [in] FEGLIA. Ridgway expressly stated that
if Congress chose to avoid the result in that case, it could do
so by enacting legislation which did not include an anti-
attachment provision. That is precisely what Congress did when
it enacted FEGLIA.' " Fagan, 179 S.W.3d at 45 (quoting Kidd,
821 S.W.2d at 571); see Sedarous, 666 A.2d at 1367 ("[I]f
Congress had intended the same immunity of proceeds from state
27
court action in FEGLIA as it provided for in SGLIA, it could
easily have done so by the simple expedient of including SGLIA's
anti-attachment provision in FEGLIA.").
I also find support for my position in both federal and
state court decisions addressing preemption under the federal
Employee Retirement Income Security Act of 1974 (ERISA), 29
U.S.C. § 1001 et seq., a statutory scheme more analogous to
FEGLIA than either NSLIA or SGLIA.
Like FEGLIA's "order of precedence" under 5 U.S.C.
§ 8705(a) dictating payment of the insurance proceeds to the
designated beneficiary, ERISA requires payment of life insurance
benefits provided under an ERISA employee welfare benefit plan
to the designated beneficiary. Central States Se. & Sw. Areas
Pension Fund, Inc. v. Howell, 227 F.3d 672, 677 (6th Cir. 2000);
see Kennedy v. Plan Adm'r for DuPont Sav. & Inv. Plan, 555 U.S.
285, 300 (2009) (holding that the plan administrator must
distribute benefits according to the plan documents pursuant to
29 U.S.C. § 1104(a)(1)(D), in order to satisfy ERISA's goal of
establishing efficiency in benefit administration). Also like
FEGLIA, ERISA expressly preempts "all State laws" that "relate
to" an ERISA plan. 29 U.S.C. § 1144(a). And, like FEGLIA,
ERISA contains no anti-attachment or anti-alienation provision
as to welfare benefit plans, which are the plans under ERISA
that govern life insurance benefits. See Mackey, 486 U.S. at
28
836-37. Furthermore, while ERISA does contain an anti-
alienation provision for pension plans under 29 U.S.C.
§ 1056(d)(1), this provision simply requires each pension plan
to "provide that benefits provided under the plan may not be
assigned or alienated." As such, section 1056(d)(1) is much
more limited in scope than the anti-attachment provision
contained in both NSLIA and SGLIA (which, again, is absent from
FEGLIA).
Addressing this statutory framework under ERISA, the Sixth
Circuit held in Central States that ERISA did not preempt the
imposition of a constructive trust, under state law, on the life
insurance benefits provided under an ERISA employee welfare
benefit plan once those benefits had been distributed to the
designated beneficiary according to the plan documents. Central
States, 227 F.3d at 678-79. More specifically, as the Sixth
Circuit explained:
In this case, [appellee] seeks to impose a
constructive trust on [her former husband's] ERISA
welfare benefit plan benefits. [He] changed the
beneficiary designation in accordance with the plan
documents [thereby removing appellee as the
beneficiary]. On this issue, our precedents are clear
– the beneficiary card controls the person to whom the
plan administrator must pay the benefits. However, we
hold today that once the benefits have been released
to the properly designated beneficiary, the district
court has the discretion to impose a constructive
trust upon those benefits in accordance with
applicable state law if equity so requires.
Id. at 679.
29
The Supreme Court of Michigan reached the same conclusion
in Sweebe v. Sweebe, 712 N.W.2d 708 (Mich. 2006). There, the
appellant/former wife and the decedent/former husband entered
into an agreement at the time of their divorce giving up any
interest in any insurance policy of the other. The decedent had
a life insurance policy governed by ERISA on which he had
designated appellant as the beneficiary several years before
their divorce, and never changed the designation after the
divorce. Id. at 710. Appellee, decedent's subsequent
wife/widow, acting on behalf of the decedent's estate,
instituted an action under state law seeking to enforce the
former wife's waiver to any claim to the proceeds from the
decedent's life insurance policy. Id. The Michigan Supreme
Court held that ERISA did not preempt the estate's state law
claim to the insurance proceeds, and affirmed the lower court's
order directing the former wife "to pay an amount equal to the
insurance proceeds to the decedent's estate." Id. In reaching
its decision, the Court recognized that, "under ERISA
preemption, Michigan law cannot affect ERISA's determination of
the proper beneficiary," and "ERISA provides that a plan
administrator must distribute the proceeds of the insurance
policy to the named beneficiary." Id. at 711 (citations
omitted). The Court concluded, however, that after the benefits
are properly distributed under ERISA, as they were there, the
30
issue of whether the former wife could "lawfully retain them"
was an issue "governed exclusively by Michigan law." Id.
In Guidry v. Sheet Metal Workers Nat'l Pension Fund, 39
F.3d 1078 (10th Cir. 1994), the Tenth Circuit reached a similar
conclusion even as to ERISA pension benefits. There, the Court
held that, while the anti-alienation provision of ERISA
precluded a state claim for garnishment against pension benefits
before their distribution to a plan participant or beneficiary,
nothing in the legislative scheme protected the benefits
following their distribution to such participant or beneficiary.
Id. at 1082-83. That is, a creditor could "collect directly
from the participant or beneficiary or, as [there], initiate an
enforce[ment] procedure against a third-party bank [that held]
the funds paid to the participant or beneficiary." Id.; see
Pardee v. Pardee, 112 P.3d 308, 315-16 (Okla. Civ. App. 2005)
(holding that ERISA did not preempt allocation of a percentage
of the pension plan funds to appellee pursuant to state law
following distribution of the funds, as the funds "were no
longer entitled to ERISA protection once [they] were
distributed"); Hoult v. Hoult, 373 F.3d 47, 54-55 (1st Cir.
2004) (holding that the anti-alienation provision under ERISA
applies to pension funds "only while held by the plan
administrator and not after they reach the hands of the
beneficiary"); Wright v. Riveland, 219 F.3d 905, 919-21 (9th
31
Cir. 2000) (same); Trucking Employees of North Jersey Welfare
Fund, Inc. v. Colville, 16 F.3d 52, 54-56 (3rd Cir. 1994)
(same); see also DaimlerChrysler Corp. v. Cox, 447 F.3d 967, 974
(6th Cir. 2006) (recognizing principle).
IV.
For the above-stated reasons, I would affirm the judgment
of the circuit court in this case. In my opinion, the circuit
court, in a thorough and well-reasoned opinion, correctly
concluded that Code § 20-111.1(D) is not preempted by FEGLIA.
Therefore, I dissent from the majority's decision reversing the
circuit court's judgment.
32