Estate of Egelhoff, Matter of

• Decision Date: 23 December 1998
• Docket Number: Nos. 22293-1-I,22562-0-II,s. 22293-1-I
• Citation: 968 P.2d 924,93 Wn.App. 314
• Court: Washington Court of Appeals
• Parties: , Pens. Plan Guide (CCH) P 23954R In the Matter of the ESTATE OF David A. EGELHOFF, Deceased. Samantha EGELHOFF, a minor By and Through her natural parent Kate BREINER; and David Egelhoff, a single person, Appellants, v. Donna Rae EGELHOFF and "John Doe" Egelhoff, wife and husband, Respondents.

Page 314

93 Wn.App. 314

968 P.2d 924, Pens. Plan Guide (CCH) P 23954R

In the Matter of the ESTATE OF David A. EGELHOFF, Deceased.

Samantha EGELHOFF, a minor By and Through her natural parent

Kate BREINER; and David Egelhoff, a single

person, Appellants, v. Donna Rae EGELHOFF and "John Doe" Egelhoff, wife and husband, Respondents.

Nos. 22293-1-II, 22562-0-II.

Court of Appeals of Washington,

Division 2.

Dec. 23, 1998.

Michael W. Jordan, Jordan, Imler & McGovern, Tacoma, for Appellants

Ryan D. Rein, Seattle, Henry Haas, McGavick, Graves, Beale & McNerthney, Tacoma, for Respondents.

HUNT, J.

Decedent David Egelhoff's children from his first marriage appeal the grant of summary judgment to his second wife, Donna Egelhoff. ¹ The trial court awarded to Donna, the named beneficiary, the proceeds of David's employer-provided life insurance and his pension plan benefits, even though she and David had dissolved their marriage more than two months before his death. The trial court reasoned that ERISA ² preempted state law, which otherwise could operate automatically to redesignate beneficiaries upon dissolution of a marriage. Holding that ERISA does not preempt the state law in question and that Donna was not entitled to the insurance proceeds or pension funds, we reverse.

FACTS

David and Donna Egelhoff married on November 4, 1988; they separated on October 1, 1993. During their marriage, David had named Donna as the beneficiary of his life insurance policy and his pension plan, both provided by his employer, the Boeing Company. The decree of dissolution was entered on April 22, 1994. As part of the property settlement distribution, David was awarded "100% of his Boeing retirement 401K ³ and IRA ⁴."

On June 23, 1994, David was involved in a serious car accident. On July 8, 1994, he died from his injuries. Donna was still listed as the beneficiary of both David's insurance policy and his pension plan. David died intestate.

David's statutory heirs, ⁵ his children from his first marriage, filed suit, alleging that under the dissolution decree's property distribution settlement, Donna had waived her rights to the pension plan. After Donna received the insurance proceeds, the children filed a conversion action, alleging that Washington law, specifically RCW 11.07.010, had operated to remove her as the beneficiary of the insurance policy.

The trial court entered summary judgment for Donna as to both benefits. The trial court ordered that the insurance policy be "administered in accordance with the Employee Retirement Income Security Act and the designated beneficiary, Donna Rae Egelhoff shall have all legal rights to the proceeds which have been paid thereto." ⁶ The trial court similarly ordered that the pension plan should be "administered in accordance with the Employ[ee] Retirement Income Security Act of 1974 ("ERISA") and that the designated beneficiary, Donna Rae Egelhoff shall have all legal rights thereto[.]" The trial court stayed the order for summary judgment with regard to the pension plan proceeds, directing that they not be distributed to any party pending the outcome of this appeal. As noted above, the insurance The children timely appealed and we consolidated the appeals. ⁷

proceeds had already been distributed to Donna before the litigation commenced.

ANALYSIS

I. STANDARD OF REVIEW

When reviewing a trial court's order of summary judgment, we engage in the same inquiry as the trial court. Wilson v. Steinbach, 98 Wash.2d 434, 437, 656 P.2d 1030 (1982). Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See CR 56(c), Mutual of Enumclaw Ins. Co. v. Jerome, 122 Wash.2d 157, 160, 856 P.2d 1095 (1993). Summary judgment should be granted only if reasonable persons could reach but one conclusion, after considering the evidence in the light most favorable to the non-moving party. Reynolds v. Hicks, 134 Wash.2d 491, 495, 951 P.2d 761 (1998).

II. FEDERAL LAW

The pension plan and insurance policy at issue in this case fall under ERISA because they were provided by David's employer, the Boeing Company. ERISA regulates all employee benefits plans sponsored by an employer or an employee organization. Cutler v. Phillips Petroleum Co., 124 Wash.2d 749, 756, 881 P.2d 216 (1994).

III. STATE LAW

The children rely on RCW 11.07.010 to support their claim that they, and not Donna, should receive both the proceeds of the pension plan and the insurance policy.

RCW 11.07.010 provides Nonprobate assets on dissolution or invalidation of marriage

(1) This section applies to all nonprobate assets, wherever situated, held at the time of entry by a superior court of this state of a decree of dissolution of marriage or a declaration of invalidity.

(2)(a) If a marriage is dissolved or invalidated, a provision made prior to that event that relates to the payment or transfer at death of the decedent's interest in a nonprobate asset in favor of or granting an interest or power to the decedent's former spouse is revoked. A provision affected by this section must be interpreted, and the nonprobate asset affected passes, as if the former spouse failed to survive the decedent, having died at the time of entry of the decree of dissolution or declaration of invalidity.

...

(5) As used in this section, "nonprobate asset" means those rights and interests of a person having beneficial ownership of an asset that pass on the person's death under only the following written instruments or arrangements other than the decedent's will:

(a) A payable-on-death provision of a life insurance policy, employee benefit plan, annuity or similar contract, or individual retirement account[.]

(Emphasis added.)

Donna argues that ERISA preempts RCW 11.07.010. If not preempted by ERISA, this statute would operate to revoke Donna's status as beneficiary upon dissolution of her marriage to David. This would leave no beneficiary listed on either the life insurance or pension plan. As a result, under the terms of the pension plan, the children would receive David's pension benefits. ⁸

With regard to the life insurance plan, RCW 48.24.160, which governs beneficiaries under group life insurance plans, seems to indicate that every plan should contain a designation of how benefits will be paid should no beneficiary be listed at the time of decedent's death. ⁹ But the life insurance plan in this case contains no such designation. Because there are no relevant reported cases interpreting RCW 11.07.010, an analogy to the Uniform Simultaneous Death Act (USDA) is helpful: Both the USDA and RCW 11.07.010 operate, under certain circumstances, to treat the holder of life insurance as surviving the beneficiary as a matter of law. Under the USDA, where the beneficiary is treated as having predeceased the policyholder, the proceeds of a life insurance policy belong to the policyholder's estate, RCW 11.05.040, unless the insurance plan designates an alternate procedure for determining a beneficiary. RCW 48.18.390. Where such a policyholder has left no will, his statutory heirs inherit the proceeds. In re Saunders' Estates, 51 Wash.2d 274, 276, 317 P.2d 528 (1957); In re Clise's Estates, 64 Wash.2d 320, 321, 391 P.2d 547 (1964).

Similarly, under RCW 11.07.010, we treat David as having survived Donna for purposes of distributing life insurance proceeds. As a result, the life insurance proceeds should have been paid first to David's estate and then to his children (as his statutory heirs) as part of his estate. Thus, under RCW 11.07.010, the children, and not Donna, were entitled to both the insurance proceeds and the pension benefits.

IV. PREEMPTION

ERISA preempts state laws that "relate to" employee benefits plans. ¹⁰ We construe this phrase in accordance with Congress's intent in enacting ERISA - to provide uniformity in the administration of benefit programs. Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 11, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987). If state law affects ERISA-covered plans in "too tenuous, remote, or peripheral a manner," the state law does not "relate [ ] to" the plan and is therefore not preempted. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n. 21, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983).

The Supreme Court has recently ¹¹ suggested that ERISA preemption should be limited with regard to areas traditionally left to state regulation. See De Buono v. NYSA-ILA Medical and Clinical Svcs. Fund, 520 U.S. 806, 117 S.Ct. 1747, 1751, 138 L.Ed.2d 21 (1997). Courts "must go beyond the unhelpful text and the frustrating difficulty of defining its key term ['relate to'], and look instead to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive." New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995).

Washington courts have also noted this change in the focus of ERISA preemption analysis. Division One has indicated that preemption is appropriate if it advances "ERISA's goal of providing uniform resolution of disputes for which an ERISA remedy [is] available." Behavioral Sciences Institute v. Great-West Life, 84 Wash.App. 863, 871-72, 930 P.2d 933 (1997).

Rather than basing preemption on the mention of an ERISA plan in the complaint, we choose to apply a holistic approach to ERISA preemption emphasizing congressional intent and the purpose of ERISA.

Behavioral Sciences, 84 Wash.App. at 872, 930 P.2d 933. Division One has also ruled, "[W]e presume that ERISA does not supercede the historic police powers of the states unless that was the clear and manifest purpose of Congress." Kahn v. Salerno, 90 Wash.App. 110, 133, 951 P.2d 321 (1998).

Following Division One, we "begin our analysis with the presumption that ERISA does not preempt" the state law in question here--that spouses named as insurance and pension...