Supreme Court Sides with Ex-Spouse in FEGLI Benefits Case

By on June 3, 2013 in Court Cases with 27 Comments

Apparently finding a legal issue they could almost completely agree on, the Supreme Court has ruled in the case of a current and former spouse warring over the proceeds of a deceased fed’s FEGLIA (Federal Employees’ Group Life Insurance Act of 1954).

The case is Hillman v. Maretta (US Supreme Court No. 11-1221, June 3, 2013). The issue was whether a Virginia law or FEGLIA should have precedence where they would result in different outcomes.

Warren Hillman named his then-spouse Judy (now ex-spouse Judy Maretta) as the beneficiary of his federal life insurance policy. They divorced and Warren later married again. But Warren never took the time to change his FEGLI beneficiary to his new wife, Jacqueline. When Warren died, ex-wife Judy claimed and was paid his FEGLI policy benefits.

This is where the Virginia law came into play. Under that law if a contract gives the death benefit to a former spouse rather than the current spouse, it is required to be paid to the current spouse instead. (Section A). But, if that requirement is preempted by federal law, then Section D of the Virginia law makes the former spouse liable to the current spouse for the amount of the policy proceeds paid to the former wife by the policy.

In other words, Virginia was cleverly trying to get around federal preemption in a case such as this one. If Warren forgot to change his beneficiary to his new wife, no problem if federal law took precedence and the former spouse got payment of the proceeds. Virginia law tries to take care of the current spouse by letting her sue the former spouse for the full amount that she got paid under the policy, using the cause of action that Virginia so thoughtfully set out in Section D.

Citing Section D, Jacqueline Hillman sued Judy Maretta in state court, demanding Judy pay her an amount equal to Warren’s FEGLI benefit. Not surprisingly, Maretta argued that federal law preempted Section D. The lower Virginia court found no preemption for Section D and ordered Judy Maretta to pay up to Jacqueline. However, the Virginia Supreme Court reversed, holding that because Section D “conflicts with the purposes and objectives of Congress…” then it is preempted by FEGLIA.

At this point the case went to the U.S. Supreme Court, which was forced into deciding a marital dispute situation.

The Supreme Court has now ruled that Section D of the Virginia law is indeed preempted by FEGLIA. Former wife Judy Maretta gets to keep the FEGLI payout.

It is always critical in a divorce/remarriage situation for a federal employee or retiree to take a look at beneficiaries and any necessary changes. Warren may have well wanted the new wife to get his life insurance proceeds, but because he did not take the time to get his paperwork in order, the former wife keeps those benefits.

© 2016 Susan McGuire Smith. All rights reserved. This article may not be reproduced without express written consent from Susan McGuire Smith.


About the Author

Susan McGuire Smith spent most of her federal legal career with NASA, serving as Chief Counsel at Marshall Space Flight Center for 14 years. Her expertise is in government contracts, ethics, and personnel law.