Court Rules that ERISA Preempts State Statute

October 12, 2004 ( - Citing a Supreme Court decision as precedent, an Ohio Court of Appeals has ruled that the Employee Retirement Income Security Act (ERISA) preempts a state statute with regards to insurance distribution after a person is murdered by a spouse.

>In the case of Ahmed v. Ahmed, the Ohio Court of Appeals overturned a lower court’s ruling, asserting that the state’s ‘Slayer Statute’ was overruled by ERISA. The statute asserts that in the case of spousal murder, life insurance benefits should be distributed as if the killer had predeceased the murdered party.

>In this case, Nawaz Ahmed killed his wife, Lubaina, and was sentenced to death. Lubaina’s life insurance named Nawaz as the primary and secondary beneficiary, with one of the couple’s two children, Ibtisam, being the contingent beneficiary. Upon Lubaina’s murder, the life insurance company applied to the ‘Slayer Statute’, passing over Nawaz and distributing half of the proceeds to Ibtisam. The company withheld half of the benefits pending resolution of a dispute regarding whether the couple’s other child, Ahsan, was entitled to any benefits.

>Ahsan filed a lawsuit, claiming that under the statute, the insurance proceeds should be put in a constructive trust for the benefit of both children. The lower state court found that Ibtisam was entitled to the entire plan proceeds.

>The Ohio Court of Appeals, however, has overturned this ruling, asserting that ERISA rules, as interpreted by the Supreme Court in Egelhoff v. Egelhoff, supersede the state statute. Because the life insurance policy was an ERISA-governed employee benefit plan (the insurance plan had been provided by Lubaina’s employer), ERISA preempted the statute.

>In a unanimous ruling, Judge Mary DeGenaro, writing the opinion for the court, stated that while the court did not know how to exactly distribute the proceeds of the life insurance plan, they would still apply ERISA. The statute interfered with nationally uniform plan administration, which is one of the goals of ERISA, DeGenaro said. The proceeds must therefore be instead awarded to Lubaina’s estate, from which they will be distributed according to future instructions.

>Explaining this decision, DeGenaro said that the court would apply the plain language of the policy, and not speculate regarding who Lubaina would have named as the beneficiary if she was murdered by her spouse. The court remanded the case to determine the eventual distribution of the insurance proceeds through Lubaina’s estate.

>The case is  Ahmed v. Ahmed, 2004-Ohio-5120.