A now-deceased man’s estate planning oversight yielded a dispute that will now be decided by the U.S. Supreme Court. The case of Hillman v. Maretta pits the man’s ex-wife, whom he named, and never replaced, as the death beneficiary on a life insurance policy, and the man’s current wife, who claimed that the ex-wife lost her claim to the money when she and the man divorced.
In 1996, Warren Hillman named Judy Maretta, his wife, as the primary beneficiary on his Federal Employees’ Group Life Insurance (FEGLI) policy. Two years later, the couple divorced. Hillman married his subsequent wife, Jacqueline, in 2002. Warren and Jacqueline remained married until Warren died in 2008. However, Warren never updated his insurance policy to remove Judy and name a new beneficiary.
Jacqueline filed a claim for the policy benefit, which was nearly $125,000. Judy also filed a claim for the benefit. The money went to the ex-wife, as she remained the named beneficiary under the policy. Jacqueline sued, arguing that, under Virginia law, Warren and Judy’s divorce automatically revoked the beneficiary designation naming Judy. Judy contended, and the Virginia Supreme Court agreed, that the Virginia statute did not control here. The federal statutes governing FEGLI expressly state that the order of precedence for receiving a death benefit gives first priority to “the beneficiary or beneficiaries designated by the employee,” (5 USC 8705(a)) and also that the “provisions of any contract under this chapter 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… to the extent that the law or regulation is inconsistent with the contractual provisions” (5 USC 8709(d)(1).) The Virginia court determined that these federal statutes clearly pre-empted Virginia law and mandated awarding the funds to Judy.
The U.S. Supreme Court agreed to take the case as a split had emerged over the question, with the Virginia and Alabama high courts, along with the federal 7th Circuit and 11th Circuit appellate courts, ruling that FEGLI’s governing statutes pre-empted state law, but the high courts in Indiana and Mississippi concluding that the federal statutes regarding FEGLI did not pre-empt state law.