Another case has been decided by the Michigan court of appeals dealing with a challenge to a life insurance policy payout to the divorced spouse because the former spouse forgot to change his beneficiary after the divorce. In Brown v Wright, the judgment of divorce had the standard statutory provision: "Any of the rights of either party in any policy or contract of life, endowment or any insurance of the other as beneficiary or otherwise, is hereby extinguished unless specifically preserved by this Judgment."
After the death of her former husband, the defendant was paid the proceeds of the life insurance policy. The estate's personal representative sued to recover this money and the trial court concluding that the case did not involve ERISA preemption and granted the PR's motion for summary judgment, ordering the defendant to turn over the life insurance proceeds to plaintiff.
Defendant married Edwin Sanger in September 1990. One month later, Sanger named defendant as beneficiary under an employer-provided life insurance policy with Met Life. The two divorced in 1992, and the judgment of divorce contained the above provision.
Sanger failed to change the beneficiary designation in the policy. After he died in November 2006, Met Life paid the benefits to defendant in accordance with the beneficiary designation, and the PR of Sanger's estate sued defendant to recover the money (about $27,000). The PR claimed that defendant had no right to retain the insurance proceeds and defendant's retention of the proceeds was a breach of the divorce judgment. Defendant claimed that ERISA preempted state law, but the trial court granted the PR's motion for declaratory judgment.
The court of appeals agreed, holding that this case is controlled by Sweebe v Sweebe, 474 Mich 151 (2006) the case did not involve ERISA preemption because defendant and Sanger's divorce judgment explicitly extinguished defendant's right to retain the proceeds as the designated beneficiary.
Practice pointer: Make it a habit to send a closing letter to divorce clients with their copy of the judgment of divorce. Several points can be made in that letter: (a) Point out the need to update estate planning. (b) Remind clients to change beneficiaries of life insurance policies. (c) For those who've requested a name change in the judgment, include a copy of this document Legal Name Change [PDF file]
Download Brown_v_Sanger here [PDF]