Telephone Call Not Enough to Alter Insurance Beneficiary

October 15, 2004 ( - A US District Court of Massachusetts judge has ruled that a telephone call to an insurer is not enough to change beneficiary status for a life insurance plan.

>In the case of Prudential Ins. Co. of America v. Schmid, the court ruled that a man who called his life insurance provider to change the beneficiary from his daughter to his new wife did not “substantially comply” with the plan’s provisions. Although the man had called Prudential to change the beneficiary and requested a form to officially do so, the form sent incorrectly labeled the beneficiary as the man’s new wife. Because he failed to remedy this error, the court ruled that the daughter was still the beneficiary. The man died about a year after making the telephone call.

>The court noted that the state’s common law of substantial compliance was preempted by the federal Employee Retirement Income Security Act (ERISA). Because ERISA requires that a beneficiary change requires both evidence of intent to change as well as an attempt to effectuate the change by taking “positive action” similar to the action required by the plan’s change of beneficiary provisions, the man did not legally change the beneficiary status.

>The court said that the man had met the first requirement – intent to alter the beneficiary status – but had failed to meet the second. Thus, it ruled that the daughter was the beneficiary.