Matschiner v. Hartford Life

• Decision Date: 19 November 2010
• Docket Number: No. 09-3576.,09-3576.
• Citation: 622 F.3d 885
• Parties: Katherine MATSCHINER; Kristina Matschiner, Plaintiffs-Appellees, v. HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY, Defendant-Appellant. Hilda Solis, Secretary of Labor, Amicus on Behalf of Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

622 F.3d 885

Katherine MATSCHINER; Kristina Matschiner, Plaintiffs-Appellees,

v.HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY, Defendant-Appellant.

Hilda Solis, Secretary of Labor, Amicus on Behalf of Appellant.

No. 09-3576.

United States Court of Appeals,Eighth Circuit.

Submitted: June 15, 2010.

Filed: Oct. 7, 2010.

Rehearing and Rehearing En Banc Denied Nov. 19, 2010.

Eric C. Tostrud, argued, David D. Leishman, on the brief, Minneapolis, MN, for appellant.

Jamila Minnicks, argued, Nathaniel Spiller, on the brief, U.S. Department of Labor, Washington, DC, for the Amicus on behalf of the appellant, the Secretary of Labor.

Clifford Lee, argued, Wayne S. Rasmussen, on the brief, Omaha, NE, for appellees.

Before LOKEN, ARNOLD, and GRUENDER, Circuit Judges.

LOKEN, Circuit Judge.

In 1991, RoJane Lewis obtained life insurance under a group policy issued by Hartford Life and Accident Insurance Company to her employer, Inacom Corporation. She submitted a beneficiary designation form granting sixty percent of the death benefit to her husband, Alan Lewis, and twenty percent to each of her daughters, Katherine and Kristina Matschiner. RoJane died in April 2005. When Hartford located the designated beneficiaries in June 2007, Katherine Matschiner advised that Kristina had a more recent beneficiary designation and that Alan Lewis intended to disclaim his share of the $122,000 death benefit. Hartford contacted Alan, who stated that he wished to collect his share of the death benefit and submitted a signed claim form. The daughters also submitted claim forms, and Kristina faxed Hartford a copy of a November 2000 divorce decree in which a Nebraska state court awarded Alan and RoJane, individually, the “cash values of any life insurance policies currently owned by him or her or the cash proceeds ... to be received therefrom.” When neither daughter submitted a more recent beneficiary designation, Hartford paid the policy benefits in accordance with the 1991 designation in its files.

The Matschiners sued Hartford and Alan Lewis in state court to recover the benefit paid to Alan. Hartford removed the action because the policy was an employee welfare benefit plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq. The district court granted summary judgment to the Matschiners, concluding that Hartford abused its discretion by paying the death benefit in accordance with the 1991 designation. Hartford moved for reconsideration after the Supreme Court decided Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, --- U.S. ----, 129 S.Ct. 865, 172 L.Ed.2d 662 (2009). The district court denied the motion, distinguishing Kennedy, ordered Hartford to pay the contested benefit directly to the Matschiners, and awarded them attorneys' fees. Hartford appealed after the court directed entry of final judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. ¹ The Secretary of Labor, appearing as amicus curiae, argues that Hartford paid the death benefit in accordance with the plan documents and therefore complied with ERISA as construed in Kennedy. We agree and accordingly reverse.

I.

When RoJane became permanently disabled in 1994, Hartford continued her group life insurance, with premiums waived, even after Inacom, the group life policyholder, went out of business some years later. Hartford learned of RoJane's death in 2005 and began an extensive search for the designated beneficiaries. When Katherine responded in June 2007 and advised that her sister had a later beneficiary designation, Hartford asked that it be submitted. Instead, Kristina faxed a copy of the divorce decree. Hartford's attempt to obtain more information from defunct Inacom went unanswered. After Alan submitted a claim for his share of the death benefit, he complained to the Nebraska Department of Insurance when Hartford did not promptly pay the claim. The Department demanded that Hartford explain the delay. Hartford then paid the death benefit in accordance with the 1991 beneficiary designation form, the only designation in its files. After these payments, the Matschiners' attorney sent Hartford a beneficiary designation signed by RoJane in December 1997 granting forty percent of the life insurance benefit to Alan and thirty percent to each daughter. This document was found in RoJane's “personal files.”

In granting summary judgment to the Matschiners, the district court relied on Eighth Circuit cases applying federal common law and concluded that the divorce decree divested Alan of his beneficiary rights to the life insurance proceeds even though RoJane submitted no designated beneficiary form reflecting this change. See Hill v. AT&T Corp., 125 F.3d 646, 648-50 (8th Cir.1997); Mohamed v. Kerr, 53 F.3d 911, 914 (8th Cir.1995). In Kennedy, a unanimous Supreme Court resolved a conflict in the circuits on this issue. Consistent with its prior decision in Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 147-48, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001), the Court held that ERISA's statutory mandates that a plan “specify the basis on which payments are made to and from the plan,” 29 U.S.C. § 1102(b)(4), and that the plan administrator act “in accordance with the documents and instruments” of the plan, § 1104(a)(1)(D), foreclose any federal common law inquiry into whether a properly designated beneficiary's divorce decree waived his or her entitlement to plan benefits. 129 S.Ct. at 875-77. Hartford and the Secretary argue that principle is controlling here.

The savings and investment plan at issue in Kennedy was an “employee pension benefit plan” under ERISA, 129 S.Ct. at 868, whereas the group life insurance plan here at issue was a “welfare benefit plan.” Although the distinction is important in other ERISA contexts, we agree with Hartford and the Secretary that the “plan documents rule” of Kennedy applies to the payment of benefits under both kinds of plans. First, the Court in Kennedy concluded that the rule is mandated by 29 U.S.C. §§ 1102(a)(1) and 1104(a)(1)(D), ERISA provisions that apply to both kinds of plans. Second, the Court's reasons for applying the plan documents rule, rather than federal common law “inquiries into nice expressions of intent,” apply to the administration of both kinds of plans-a “straightforward rule of hewing to the directives of the plan documents” has the virtues of “simple administration, avoiding double liability, and ensuring that beneficiaries get what's coming quickly, without the folderol essential under less-certain rules.” 129 S.Ct. at 875-76 (quotation omitted). Finally, among the prior cases expressly overruled in Kennedy was our decision in Mohamed v. Kerr, which involved a group life insurance plan like the plan here at issue. Id. at 870 n. 5.

The district court did not discuss whether Kennedy applies to welfare benefit plans generally. Rather, the court held that the holding in Kennedy was limited by footnote 13, in which the Court stated, “[w]e do not address a situation in which the plan documents provide no means for a beneficiary to renounce an interest in benefits.” Id. at 877. As the plan in Kennedy included an express provision for the disclaimer of an interest in a savings and investment account, and Hartford's group policy contained no “formal procedures” for the waiver of a designated beneficiary's interest in life insurance proceeds, the district court concluded that the federal common law of trusts as construed in Mohamed, rather than the plan documents rule, applies in this case. We disagree.

The Supreme Court did not explain why it added the cautionary footnote 13, but we are confident the Court did not intend to exempt from the plan documents rule all welfare benefit plans that do not contain an express waiver-of-benefits provision. As Kennedy explained, employee pension plans under ERISA must contain an anti-alienation provision but may permit a beneficiary to submit a disclaimer of benefits if it is “qualified” under the Tax Code. 129 S.Ct. at 868-69. Welfare benefit plans are not subject to ERISA's anti-alienation requirement and have no corresponding need to include an express waiver-of-benefits provision. Before its discussion of the plan documents rule, where footnote 13 appears, the Court noted that “[c]ommon sense and common law both say that the law certainly is not so absurd as to force a man to take an estate against his will.” Id. at 872 (quotation omitted). We suspect that footnote 13 was simply a reminder that “common sense and common law” may apply to prevent the plan documents rule combined with ERISA's anti-alienation provision from precluding a pension benefit plan beneficiary from disclaiming an unwanted interest. Here, by contrast, the plan beneficiary, Alan Lewis, has claimed his interest in the death benefit. As in Kennedy, the plan documents, not the divorce decree, are controlling.

II.

Without examining the plan documents, the district court ruled, alternatively, that Hartford abused its discretion when it paid the death benefit according to the 1991 designation, six weeks after Katherine Matschiner advised that Kristina had a later designation. Though Hartford requested the later designation, and neither daughter furnished...