Post-Mortem Beneficiary Change Delivery Falls Short

November 17, 2003 ( - A change of beneficiary designation delivered after a participant's death wasn't effective, according to a federal appellate court.

>The employee, who participated in an employer-sponsored ERISA plan providing life insurance benefits, had named his sister as his beneficiary.   However, following his marriage, he signed a change-of-beneficiary form naming his wife as beneficiary instead, according to EBIA weekly.  

>Although he asked his wife to “take care” of the form and other papers, she instead stuck them in a napkin holder in the dining room.   When he asked her about the paperwork a few months later, she admitted that she hadn’t – whereupon he took them back from her, and stored them in his lunch pail (which he called his “traveling file cabinet,” according to the report). After his death, his wife found the form there, and forwarded it to his employer.  

>Faced with competing claims to the proceeds, the insurance company filed an interpleader action, and the lower court ruled in favor of the employee’s sister.

>Following an appeal by the wife, the Sixth Circuit upheld the lower court’s decision.   The appellate court noted that the policy provided that “The Insured may change the beneficiary at any time by giving written notice to the Employer or the Insurance Company”, but that “. . . No change in beneficiary will take effect until the request is received by the Employer or the Insurance Company.”

>The court found that these requirements had not been satisfied since the employee never gave the form to the appropriate entity, and also rejected an argument that a federal common-law standard of “substantial compliance” might call for a different result.  

>The court said that, “While delivery might also have been effectuated by an agent, acting at the insured’s direction, in this case the insured had regained possession of the change-of-beneficiary form from his wife, and his failure to take any further action to effect delivery simply cannot be taken to constitute substantial compliance.” In other words, the employee did not do “all that he reasonably could do to meet the conditions of the policy,” a condition that would have been necessary to successfully argue substantial compliance.

>The case is Life Ins. Co. of North v. Leeson, 2003 App. LEXIS 23007 (6th Cir. 2003).