Dohnalik v. Somner

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
October 6, 2006
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
05-50072
DELORES DOHNALIK,
Plaintiff-Appellee,
v.
MAHAMALEA SOMNER,
Defendant-Appellant.
Appeal from the United States District Court for the
Western District of Texas
Before JOLLY, DAVIS, and BENAVIDES, Circuit Judges.
BENAVIDES, Circuit Judge:
This case presents a new twist on a long-resolved issue. The
question is whether Samuel P. King’s (“King”) designation of
Delores Dohnalik (“Dohnalik”) as the beneficiary of his
Serviceman’s Group Life Insurance policy survives the divorce
decree that purports to divest her of any interest in his life
insurance policies. We agree with the district court that
Dohnalik’s beneficiary status did survive the divorce decree and
AFFIRM.
I. FACTS AND STANDARD OF REVIEW
The facts are undisputed. King and Dohnalik married in 1993.
In February, 2002, King attained an insurance policy under the
Servicemembers Group Life Insurance Act (“SGLIA”) that listed
Dohnalik as the principal beneficiary and his mother, Mahamalea
Somner (“Somner”), as the contingent beneficiary. Several months
after the policy took effect the District Court of Bell County,
Texas entered its decree finalizing a divorce between King and
Dohnalik. The decree provided, in relevant part, that Dohnalik was
“divested of all right, title, interest and claim in . . . [a]ll
policies of insurance (including cash values) insuring [King’s]
life.” The decree was signed as “consented to” by both parties and
was entered on December 19, 2002.
Just fifteen days after their divorce was finalized, King died
on January 3, 2003. King never changed his SGLIA beneficiary
designation. Dohnalik was still listed as the primary beneficiary
and Somner the contingent beneficiary. After King’s death, both
Dohnalik and Somner filed claims for the SGLIA policy proceeds.
The office of Servicemembers Group Life Insurance informed both
parties that it viewed Dohnalik—the designated beneficiary—as the
rightful claimant. After failed negotiations, Dohnalik brought
this action for a judgment declaring her the beneficiary.
The parties filed cross motions for summary judgment. The
district court found that Dohnalik was the rightful beneficiary of
King’s SGLIA policy and Somner brings this appeal. This Court
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reviews the district court’s grant of summary judgment de novo.
Gowesky v. Singing River Hosp. Sys., 321 F.3d 503, 507 (5th Cir.
2003).
II. DISCUSSION
The question raised is whether the designation of an SGLIA
policy beneficiary survives a state divorce decree purporting to
divest the designee of any such interests. The district court,
relying on Ridgway v. Ridgway, 454 U.S. 46 (1981), held that the
designation survives. We agree.
A. RIDGWAY V. RIDGWAY
In Ridgway v. Ridgway, an SGLIA policy holder had designated
his first wife as his policy’s principal beneficiary. When the two
divorced, a state court entered a divorce decree agreed to by both
parties that required him “to keep in force the life insurance
policies on his life now outstanding for the benefit of the
parties' three children.” Id. at 51. Shortly after the decree was
entered, he defied its terms by designating his second wife as the
new principal beneficiary. After his death, both women filed
claims seeking his policy proceeds.
The Supreme Court held that the plain terms of the SGLIA
dictate that the named designee receives the policy’s proceeds and
that “a state divorce decree . . . must give way to clearly
conflicting federal enactments.” Id. at 55. It further held that
“Congress has insulated the proceeds of SGLIA insurance from attack
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or seizure by any claimant other than the beneficiary designated by
the insured.” Id. at 63.
While Ridgway favors Dohnalik, as the named beneficiary of the
SGLIA policy, it is distinguishable. In Ridgway, the divorce
decree circumscribed the policy holder’s right to freely choose his
beneficiary under the SGLIA. It required him to maintain his three
children as beneficiaries of his policy, thereby frustrating the
SGLIA’s purpose of allowing policy holders to freely choose their
beneficiaries. Here, the appellant points out that the divorce
decree in no way restricts King’s right to choose his designee; it
merely acts as a waiver of Dohnalik’s rights under the policy.
Since Ridgway left open the possibility that “wrongdoing by the
named beneficiary” may extinguish a designee’s claim, 454 U.S. at
63 n.12, the appellant argues that a voluntary waiver may also
revoke a designee’s beneficiary status.
While this narrow reading of Ridgway is plausible, it fails
to appreciate the hardline stance that the Court applied. Like
this case, Ridgway involved a consensual divorce decree. Id. at
48, 53-54. When the policy holder breached that voluntary
agreement, the Court did not undertake any analysis as to whether
his consent to the decree operated a waiver of his right to freely
choose the beneficiaries under the SGLIA. Id. (attaching no
significance to fact that decree resulted from “voluntary
agreement”).
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Ridgway took a strong stance that the provisions of the SGLIA
govern these disputes and that the party designated as the
principal beneficiary prevails, regardless of any contrary state
court decrees. This Court has recognized that, under the pertinent
administrative regulations, a change of beneficiary under the SGLIA
“will take effect only if it is in writing, signed by the insured
and received prior to the death of the insured.” Prudential Ins.
Co. v. Smith, 762 F.2d 476, 478 (5th Cir. 1985) (citations
omitted). Even before Ridgway, this Circuit recognized that an
SGLIA beneficiary “designation can be changed only by a document
and procedure [complying with the statutory formalities].” Coomer
v. United States, 471 F.2d 1, 6 (5th Cir. 1973).
This stronger reading of Ridgway is supported by our sister
circuits. For instance, the Eighth Circuit noted that “the only
way to change a beneficiary under the SGLIA is to communicate that
decision in writing to the proper office. . . . To allow a change
of beneficiary by other means would be contrary to the terms
established by Congress as addressed in Ridgway.” Prudential Ins.
Co. v. Hinkel, 121 F.3d 364, 367 (8th Cir. 1997). It further held
that “a divorce decree cannot operate as a waiver or restriction of
an insured’s right to change the beneficiary when federal
regulations conflict.” Id. Similarly, the Eleventh Circuit read
Ridgway as requiring strict construction of the designee provisions
to ease administrative costs and uncertainty. See Lanier v. Traub,
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934 F.2d 287, 289 (11th Cir. 1991).
That this case concerns a potential beneficiary’s waiver,
rather than the policy holder’s, is of little significance. In
either case the waiver would only be effective if a state divorce
decree could override the explicit terms of the SGLIA. Ridgway is
quite clear that a policy holder’s explicit designation “pre-empts
all state law that stands in its way.” 454 U.S. at 61 (citing
Hisquierdo v. Hisquierdo, 439 U.S. 572, 584 (1979)). While the
Court recognized that this formalism could lead to “unpalatable”
results, it is what the SGLIA dictates. Id. at 62.
King was free at any time to change his designated
beneficiary.1 He chose not to, and there is no indication in the
record that he intended to, so his designation of Dohnalik as the
policy’s principal beneficiary is controlling.
B. ERISA WAIVER CASES ARE INAPPLICABLE
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Since King could have removed Dohnalik as the SGLIA policy
beneficiary at any time, it is difficult to conceptualize what a
waiver of Dohnalik’s rights might entail. Query how one waives a
right they do not have. Dohnalik had no right to remain a
designee. That status was entirely contingent on King’s
discretion, so there was no future entitlement for her to waive.
Perhaps such a waiver prohibits the policy holder from ever
designating the waivee as a beneficiary, just nullifies any prior
designation but allows for a subsequent one, or maybe Dohnalik
remained the beneficiary but just waived her right to claim the
proceeds. As curious as a waiver concept may be in this context,
we have previously discussed it in similar terms. See Guardian
Life Ins. Co. of America v. Finch, 395 F.3d 238, 240 (5th Cir.
2004).
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Appellant points out that, in this Circuit, designated
beneficiaries under the Employee Retirement Income Security Act
(“ERISA”) may waive their entitlements through divorce decrees.
See Guardian Life Ins. Co. of Am. v. Finch, 395 F.3d 238 (5th Cir.
2004); Clift v. Clift, 210 F.3d 268 (5th Cir. 2000). She argues
that these cases apply equally to SGLIA beneficiaries. We
disagree.
We need not delve into the statutory differences between ERISA
and SGLIA. Suffice it to say that the Supreme Court has provided
clear guidance that a properly designated SGLIA beneficiary cannot
be displaced by state divorce decrees, Ridgway, 454 U.S. at 61
(SGLIA designation “pre-empts all state law that stands in its
way”), but has never made so strong a statement with regard to
ERISA beneficiaries.
While Ridgway held that the SGLIA preempts all state law,
including court orders, the preemptive power of ERISA is limited to
state statutory law. See Finch, 395 F.3d at 242-43. That was this
Court’s explicit basis for finding that a divorce decree may
override an ERISA beneficiary designation. Finch held that recent
relevant Supreme Court authority “does not address the application
of federal common law to ERISA plans. . . . Egelhoff only addresses
whether ERISA preempts a state statute.” Id. (citing Egelhoff v.
Egelhoff, 532 U.S. 141 (2004)). Thus, Egelhoff was narrowly
construed as applying only to state statutory law.
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Ridgway’s holding is not so limited. This is clear since
Ridgway did not concern a statute at all, but a divorce decree.
The facts of Ridgway also implicated the common law waiver
doctrine, since the divorce decree was consented to by both
parties, but the Court seemed unmoved by the voluntary nature of
the divorce decree. In short, the Court in Ridgway took a hardline
stance that the SGLIA provisions override any law to the contrary.
While the Court did reserve judgment as to situations “where the
named beneficiary murders the insured service members,” 454 U.S. at
60 n.9, this only strengthens the point since even in such a
drastic situation the Court was not willing to fully retreat from
its formalistic approach.
While limiting ERISA’s preemptive force to state statutes and
allowing beneficiaries to waive ERISA claims is consistent with
Supreme Court precedent—albeit fairly contested2—the same waiver
analysis cannot apply to the SGLIA in light of Ridgway.
III. CONCLUSION
2
See McGowan v. NJR Service Corp., 423 F.3d 241, 245 (3d Cir.
2005) (“ERISA imposes a fiduciary duty on plan administrators to
discharge their duties ‘in accordance with the documents and
instruments governing the plan.’”); Metropolitan Life Ins. Co. v.
Pressley, 82 F.3d 126, 130 (6th Cir. 1996) (“[ERISA] establish[es]
a clear mandate that plan administrators follow plan documents to
determine the designated beneficiary.”); Krishna v. Colgate
Palmolive Co., 7 F.3d 11, 16 (2d Cir. 1993) (“It would be
counterproductive to compel the Policy administrator to look beyond
those designations into varying state laws regarding wills, trusts
and estates, or domestic relations to determine the proper
beneficiaries of Policy distributions.”).
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If an SGLIA policy-holder wishes to change his designated
beneficiary, he must communicate that decision to the proper
office. King failed to do so, and the provisions of the SGLIA
dictate that Dohnalik remains the designated beneficiary. Ridgway
requires that we strictly construe the SGLIA provisions, and it is
agreed that Dohnalik is the beneficiary under those terms. We
therefore agree with the district court that Dohnalik is the
rightful claimant and AFFIRM.
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