Terms Of Will Not Sufficient To Effectuate Beneficiary Change, Eighth Circuit Rules

The wife of an insured under an employer-sponsored group benefit plan was not entitled to the death benefit because the will executed by the insured just before his death did not comply with the terms of the plan for beneficiary changes, the Eighth Circuit U.S. Court of Appeals has ruled, affirming the lower court. The Eighth Circuit also held that the substantial-compliance doctrine did not apply to preclude the plan administrator from strict enforcement of the plan requirements. The case is Hall v. Metropolitan Life Insurance Company (No. 13-1332).

Background. Dennis Hall obtained life insurance from Metropolitan Life Insurance Company through an employer-sponsored group benefits plan in 1988. He named his son as the beneficiary. In 2001, Dennis married Jane and in 2010, after he had been diagnosed with cancer, completed a beneficiary change form naming her as the beneficiary but did not submit the form.

After learning that he only had a short time to live in 2011, Dennis executed a will, stating: “the following specific bequests be made from my estate. . . . Any and all life insurance and benefits shall be distributed to Jane Marie Hall. If this beneficiary does not survive me, this bequest shall be distributed with my residuary estate.” Dennis passed away later that day. His employer notified the insurance company, sending the beneficiary form Dennis executed in 1991 and mentioning that Jane claimed that she has a will. Jane contacted the insurance company and explained that Dennis did not have adequate time to obtain an approved form from the plan administrator and that he intended the will to designate Jane as his beneficiary.

The plan administrator denied Jane’s claim to the proceeds on the ground that a will has no bearing on the death benefit and that Dennis’ son was the beneficiary of record. Jane appealed and informed the plan administrator that Dennis had completed a beneficiary change form but did not send it in. The plan administrator upheld its denial and distributed the death benefit to Dennis’ son. Jane filed a lawsuit against the plan administrator, but the federal district court found that the plan administrator’s determination was reasonable and that Jane could not rely on the substantial-compliance doctrine. Specifically, the lower court held that the will did not make an effective beneficiary change to the plan, in part because a will cannot dispose of a non-probate asset and the will bequeathed the benefit “from [the] estate” when the estate was not a beneficiary under the plan.

Policy language. According to the plan, an insured may: “…designate a Beneficiary in Your application or enrollment form. You may change Your Beneficiary at any time. To do so, You must send a Signed and dated, Written request to the Policyholder using a form satisfactory to [MetLife]. Your Written request to change the Beneficiary must be sent to the Policyholder within 30 days of the date You Sign such request.”

Sufficient written request. On appeal, Jane asserted that the will effected a beneficiary change and that the unsent beneficiary change form was a sufficient written request under the terms of the plan. The Eighth Circuit disagreed. The appellate court first concluded that the will could not serve as a written request “satisfactory to [the plan administrator]” because the estate was not a policy beneficiary and the will did not expressly address the distribution of assets that were not part of the estate. Because the direction in the will to distribute the life insurance benefit to Jane followed the direction “that the following specific bequests be made from my estate,” the plan administrator was reasonable when it construed the will to address only life insurance proceeds that were part of the estate.

Second, the beneficiary change form did not satisfy the plan requirements because the plan mandated that the request be submitted “within 30 days of the date You Sign the request,” which had passed. Jane argued that the summary plan description did not contain a time limitation and, thus, should control over the plan language. However, case law held that a summary plan description controls when it is in conflict with a plan provision, not when the summary plan description is silent on a particular matter. Accordingly, the plan administrator did not abuse its discretion when it refused to honor the beneficiary change form.

Substantial-compliance doctrine. The Eighth Circuit also ruled that the lower court did not err when it refused to apply the substantial compliance doctrine. It was unsettled in the Eighth Circuit whether the doctrine was recognizable, but the appellate court explained that, even assuming the doctrine was available to Jane, it still would not rescue her argument because the doctrine would not deprive the plan administrator of the power to require strict compliance with the terms of the plan in light of the plan administrator’s discretion to determine benefits. The case law Jane presented was distinguishable because a court may excuse a technical non-compliance with an employee-sponsored plan, i.e., permit a beneficiary change for a form that was submitted but not signed or dated, but that does not preclude a plan administrator from enforcing compliance with the plan requirements. The Eighth Circuit stated: “[w]hatever the soundness of the substantial-compliance doctrine is another context, however, the doctrine does not operate to interfere with discretion granted to a plan administrator by an ERISA plan.” This reasoning was supported by case law in sister circuits. Therefore, the district court’s ruling was affirmed.

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