'ES' Beneficiary Designation on Insurance Form Thrown Out

February 3, 2005 (PLANSPONSOR.com) - A federal appeals court has ruled that a man who entered a relationship code on a life insurance beneficiary designation form to indicate his estate did not validly complete the process.

The US 9 th Circuit Court of Appeals threw out a lower court ruling that Scott Parker had properly designated his estate on the form provided as part of a Bank of America-sponsored life insurance policy and sent the case back to determine the proper recipient of Parker’s benefits.

Circuit Judge Jay Bybee, in writing for the court, asserted that simply by entering an “ES” code, Parker was not specifying a particular beneficiary.

“[T]he relationship codes do not identify a beneficiary; rather, they identify categories of persons or entities who might be beneficiaries. The relationship codes describe the relationship of the named beneficiary to the plan participant and serve to classify or clarify the named beneficiary,” Bybee wrote, in overturning a ruling by US District Judge James Teilborg of the US District Court for the District of Arizona.

Teilborg held that, although Parker wrote “as indicated in my will” as the name of his beneficiary, that designation was invalid under the Employee Retirement Income Security Act because it did not designate an “individual.”   Teilborg then looked at Parker’s selection of “ES” as the relationship code portion of the form and found that this designation was consistent with his designation of “as indicated in my will” as his selected beneficiary.

According to the court ruling, in 1990, Parker executed a will naming his then wife, Eileen Marrero, as his beneficiary. Parker andMarrero divorced in 1991. Within weeks of the divorce, Parker executed a beneficiary designation form for his life insurance. According to the court, the beneficiary designation form contained five boxes: “Name;” “Relationship to You,” “Relationship Code;” “% of Benefits to be Allocated,” and “Social Security Number.”

In completing his beneficiary designation, Parker filled in only three of the five boxes. Parker indicated in these boxes that 100% of his benefits were to be paid “as indicated in my will.” In addition, under the relationship code section, Parker wrote “ES,” which was the abbreviation the form used for “estate.”

The Participant’s Death

Nine years later, Parker married Anita Pietrofitta. Several months later, Parker died without having revised or altered his 1990 will or his 1991 beneficiary designation form, according to the court. AnArizona probate court determined that Parker’s 1990 will was revoked under Arizona law when he divorced Marrero. The probate court then found that, there being no valid will, Parker died intestate. The probate court then awarded Parker’s estate to Pietrofitta, according to the court.

However, “a wrinkle appeared” during the probate proceedings when it was discovered that Parker had a son from another relationship who was born five months after his death, the appeals court noted. The probate court amended its decision and decided that Parker’s son was an heir and entitled to half of Parker’s estate.

After accepting Parker’s ES designation, the district court found that Parker had validly designated his estate as his beneficiary and that the benefits would thus pass to Pietrofitta and Parker’s son.

The decision in Metropolitan Life Insurance Co. v. Parker, 9th Cir., No. 03-16518, 2/2/06, is here .