Metropolitan Life Ins. Co. v. Potter

Decision Date16 September 1988
PartiesMETROPOLITAN LIFE INSURANCE COMPANY v. Betty Marie POTTER and Dwight Douglas Potter. Gene Arnold POTTER v. Betty Marie POTTER and Dwight Douglas Potter. Elizabeth TOWNSEND v. Betty Marie POTTER and Dwight Douglas Potter. 87-449, 87-477 and 87-478.
CourtAlabama Supreme Court

William J. Toppeta and Allan M. Marcus, New York City, for appellant Metropolitan Life Ins. Co.

David H. Meginniss of Hornsby, Blankenship, Robinson & Meginniss, Huntsville, for appellant Gene Arnold Potter.

S. Dagnal Rowe of Cleary, Lee, Morris, Smith, Evans & Rowe, Huntsville, for appellant Elizabeth Townsend.

George W. Royer, Jr., of Butler & Royer, Huntsville, for appellees.

MADDOX, Justice.

The question presented on these appeals is whether the doctrine of federal preemption applies, specifically, whether federal law allowed a former husband to change the beneficiary on a Federal Employees' Group Life Insurance (FEGLI) policy, even though a state circuit court, in a divorce proceeding, had ordered him to maintain his former wife as the sole beneficiary.

The learned trial judge, in a lengthy judgment, determined that "the effect of a provision in a decree of divorce requiring a party to maintain a designated person as a beneficiary of life insurance create[d] a vested equitable interest in the proceeds of [the FEGLI policy] which [could not] be defeated by a later attempt to change the beneficiary." He also concluded that the insured had committed a fraud on his former wife by failing to advise her that he was going to change the beneficiary designation on the policy, and that as a result, a constructive trust should be imposed in her favor. He issued a summary judgment, finding that: "Under Alabama law it is clear that Betty Marie Potter is entitled to the proceeds of Jackie H. Potter's life insurance despite the attempt by him to change the designation of beneficiary." Metropolitan Life Insurance Company, the insurer, and Elizabeth Townsend and Gene A. Potter, two of the new beneficiaries the insured had named, appeal. Their sole claim is that federal statutes and regulations specifically applicable to the FEGLI policy preempt the state divorce decree and require the payment of the FEGLI proceeds to the designated beneficiaries. We agree with the appellants, and we reverse the judgment and remand the cause.

FACTS

The facts are not in material dispute. Jackie Potts, the insured, was a retiree from the National Aeronautics and Space Administration (NASA) at the Marshall Space Flight Center in Huntsville. He was covered under a FEGLI policy issued by Metropolitan to the United States Office of Personnel Management. The FEGLI program was established by Congress to provide life insurance coverage to federal civilian employees, and it is governed by the provisions of the Federal Employees' Group Life Insurance Act of 1954 ("FEGLI Act"), 5 U.S.C. §§ 8701-8716 (1982 & Supp.1986), and by regulations of the Office of Personnel Management, 5 C.F.R. § 870.101 et seq. (1987).

The FEGLI Act provides, in relevant part:

"The amount of group life insurance ... in force on an employee at the date of his death shall be paid, on the establishment of a valid claim, to the person or persons surviving at the date of his death, in the following order of precedence:

"First, to the beneficiary or beneficiaries designated by the employee in a signed and witnessed writing received before death in the employing office or [in the case of a retiree] in the Office of Personnel Management...."

5 U.S.C. § 8705(a).

The regulations provide, in relevant part:

"A change of beneficiary may be made at any time and without the knowledge or consent of the previous beneficiary. This right cannot be waived or restricted."

5 C.F.R. § 870.901(e). 1

The FEGLI Act further provides:

"The provisions of any contract under this chapter which relate to the nature or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any law of any State or political subdivision thereof, or any regulation issued thereunder, which relates to group life insurance to the extent that the law or regulation is inconsistent with the contractual provisions."

5 U.S.C. § 8709(d)(1). (Emphasis added).

The FEGLI policy provides for payment of proceeds according to the order of precedence mandated by 5 U.S.C. § 8705(a) and prescribes the procedures that must be followed in designating a beneficiary.

On April 25, 1984, Jackie Potter and Betty Marie Potter were divorced by a judgment of the Circuit Court of Madison County, Alabama. That judgment provided, inter alia:

"It is further ORDERED, ADJUDGED AND DECREED that so long as the husband maintains the life policies presently in effect, he is hereby ordered to maintain the wife as sole beneficiary and shall not be allowed to change such beneficiary unless the wife shall die, remarry, or live openly or cohabit with a member of the opposite sex...."

At the time of the divorce, the designated beneficiary of 100% of Jackie Potter's FEGLI insurance was Betty Marie Potter. In a duly executed designation of beneficiary form dated July 13, 1986, and received by the Office of Personnel Management on July 22, 1986, Jackie Potter revoked the designation of Betty Marie Potter as beneficiary of his FEGLI proceeds and named instead his son, Dwight Douglas Potter, his brother Gene Arnold Potter, and a friend, Elizabeth C. Townsend, as beneficiaries of 60%, 20%, and 20% shares, respectively. Jackie Potter did not tell his ex-wife Betty Marie Potter of the beneficiary change.

Jackie Potter died on February 16, 1987. Shortly thereafter, Metropolitan received claims for death benefits from the newly designated beneficiaries and from Betty Marie Potter. Metropolitan also received an assignment of benefits dated March 13, 1987, by Dwight Douglas Potter in favor of Betty Marie Potter, his mother.

On or about March 16, 1987, Betty Marie Potter and Dwight Douglas Potter commenced this action in the Circuit Court for Madison County, Alabama, seeking payment to Betty Marie Potter of the FEGLI proceeds payable upon Jackie Potter's death. No FEGLI proceeds have as yet been paid to any claimant, pending resolution of this action.

I.

The authority of the United States is supreme on all subjects that the Constitution has committed to it, and since this case deals with an insurance policy issued pursuant to the FEGLI Act contained in 5 U.S.C. § 8701 et seq. and governed by administrative regulations issued pursuant to authority granted in that Act, federal power must prevail. Cf. Radio Broadcast Technicians Local No. 1264 v. Jemcon Broadcasting Co., 281 Ala. 515, 205 So.2d 595 (1967).

According to the preemption doctrine, any time the law of Alabama is in conflict with federal law, or with the administration of a federal program, the federal law must take precedence. Fillinger v. Foster, 448 So.2d 321 (Ala.1984). Preemption may occur from explicit preemptive language in a statute, from implied congressional intent, or where state law stands as an obstacle to the accomplishment of the full purposes and objectives of Congress. Tectonics, Inc., of Florida v. Castle Construction Co., 753 F.2d 957 (11th Cir.1985). Congressional intent to supersede state law may be inferred either because: (1) federal law is so pervasive that Congress left no room for the states to supplement it; (2) the field the federal law touches is one where the federal interests are dominant; or (3) the object the federal law seeks to obtain and the character of the obligations imposed by it reveal a strong federal purpose. Id. at 961.

In Howard v. Uniroyal, Inc., 719 F.2d 1552 (11th Cir.1983), a federal case arising from Alabama, the court recognized that "federal regulations have no less pre-emptive effect than federal statutes." Id. at 1556, quoting Fidelity Federal Savings &amp Loan Ass'n v. De La Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982). The Court also recognized that "Congress' authority to supplant state law is no less because the state's power is exercised by the state judiciary through the common law rather than by the state legislature." Id. at 1557.

The general principles of the doctrine of preemption of state law by federal law have been stated by the United States Supreme Court in Fidelity Federal Savings & Loan Ass'n v. De La Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982), as follows:

"The pre-emption doctrine, which has its roots in the Supremacy Clause, U.S. Const., Art. VI, cl. 2 requires us to examine congressional intent. Pre-emption may be either express or implied, and 'is compelled whether Congress' command is explicitly stated in the statute's language or implicitly contained in its structure and purpose.' Jones v. Rath Packing Co., 430 U.S. 519, 525 [97 S.Ct. 1305, 1309, 51 L.Ed.2d 604] (1977). Absent explicit pre-emptive language, Congress' intent to supersede state law altogether may be inferred because '[t]he scheme of federal regulation may be so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it,' because 'the Act of Congress may touch a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject,' or because 'the object sought to be obtained by the federal law and the character of obligations imposed by it may reveal the same purpose.' Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 [67 S.Ct. 1146, 1152, 91 L.Ed. 1447] (1947).

"Even where Congress has not completely displaced state regulation in a specific area, state law is nullified to the extent that it actually conflicts with federal law. Such a conflict arises when 'compliance with both federal and state regulations is a physical impossiblity,' Florida Lime and Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-143 [83 S.Ct. 1210, 1217-18, 10 L.Ed.2d 248...

To continue reading

Request your trial
12 cases
  • State v. Volkswagen AG
    • United States
    • Supreme Court of Alabama
    • December 14, 2018
    ...See also, Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984)." Metropolitan Life Ins. Co. v. Potter, 533 So.2d 589, 591-92 (Ala. 1988).To determine whether field preemption applies, this Court must determine whether the federal law in the area of motor-vehicle ......
  • Maretta v. Hillman
    • United States
    • Supreme Court of Virginia
    • January 13, 2012
    ...”) (quoting Hisquierdo v. Hisquierdo, 439 U.S. 572, 583, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979)); Metropolitan Life Ins. Co. v. Potter, 533 So.2d 589, 591 (Ala.1988) (“Preemption may occur from explicit preemptive language in a statute, from implied congressional intent, [283 Va. 41] or where st......
  • Smith v. South Carolina Retirement System
    • United States
    • Court of Appeals of South Carolina
    • July 6, 1999
    ...United States, 391 F.2d 195 (9th Cir.1968); Metropolitan Life Ins. Co. v. McShan, 577 F.Supp. 165 (N.D.Cal.1983); Metropolitan Life Ins. Co. v. Potter, 533 So.2d 589 (Ala.1988). As the Court stated regarding the change of [T]o say that this type of conduct constitutes constructive fraud wou......
  • McCord v. Spradling, 97-CT-01276-SCT.
    • United States
    • United States State Supreme Court of Mississippi
    • November 21, 2002
    ......Spradling's Federal Employee Group Life Insurance Act (FEGLIA), 5 U.S.C. §§ 8701-8716, policy to the widow; . ...He had a group life insurance policy with Metropolitan Life Insurance Company through the Federal Employees Group Life Insurance ... of this position, the widow cites federal cases: Metropolitan Life Ins. Co. v. Sullivan, 96 F.3d 18 (2d Cir.1996) ; Metropolitan Life Ins. Co. ...v. Potter", 533 So.2d 589 (Ala.1988), in support of her position. .        \xC2"......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT