Supreme Court Decides Hillman v. Maretta

On June 3, 2013, the Supreme Court decided Hillman v. Maretta, No. 11-1221, holding that, because a Virginia statute interferes with Congress' objective that insurance proceeds belong to the named beneficiary, the Federal Employees' Group Life Insurance Act of 1954 (FEGLIA) preempts a Virginia statute that makes one who receives life insurance proceeds from the death of a former spouse liable for those proceeds to whoever would have received them under applicable law but for a beneficiary designation.

Congress enacted FEGLIA to provide low-cost group life insurance to federal employees. FEGLIA provides that, upon an employee's death, life insurance benefits are paid under a specified order of preference, with benefits first accruing to the beneficiary the employee designated in a signed and witnessed writing before death. Various regulations govern beneficiary designation rights, including a regulation providing that the right to change a beneficiary cannot be waived or restricted. FEGLIA contains a limited exception to the employee's designation rights in the event FEGLIA's administering agency receives before the employee's death a court decree, order, or agreement expressly naming another designee.

A Virginia statute, Section 20-111.1(A) (Section A), provides that a divorce or annulment revokes a beneficiary designation in a then-existing written contract owned by one party that provides for the payment of life insurance proceeds to the other party. If federal law pre-empts Section A, Section 20-111.1(D) (Section D) applies and provides that "a former spouse who, not for value, receives the payment of any death benefit that the spouse is not entitled to under [§20-111.1] is personally liable for the amount of the payment to the person who would have been entitled to it were [§20-111.1] not preempted." Thus, where Section A is pre-empted, Section D creates a cause of action rendering the former spouse liable for the principal amount of the insurance proceeds to the person who would have received them if Section A had effect.

Warren Hillman (Warren) and Judy Maretta were married. In 1996, Warren named Maretta his FEGLIA beneficiary. Warren and Maretta divorced in 1998 and Warren married Jacqueline Hillman (Hillman). Warren died in 2008 without having changed his FEGLIA beneficiary. Maretta collected the proceeds. Hillman filed suit in Virginia Circuit Court, arguing that Maretta was liable to her under Section D of the Virginia Code. Maretta argued that federal law pre-empts Section D. The Circuit Court granted summary judgment for Hillman, finding Maretta liable under Section D. The Virginia Supreme Court reversed and entered judgment for Maretta, holding that federal law pre-empts Section D.

The Supreme Court granted certiorari to resolve a conflict among the state and federal courts. Employing conflict pre-emption principles, the Supreme Court considered previous case law addressing similar federal insurance statutes and determined that Congress "spok[e] with force and clarity in directing that the proceeds belong to the named beneficiary and no other" (internal quotation omitted). Section D interferes with Congress' scheme by "displac[ing] the beneficiary selected by the insured in accordance with FEGLIA and plac[ing] someone else in her stead." The Court also determined that a state's ability to "make alternative distributions outside the clear procedure Congress established," would transform the narrow exception contained in FEGLIA into a "general license for state law to override FEGLIA."

Justice Sotomayor delivered the opinion for the Court, in which Chief Justice Roberts and Justices Kennedy, Ginsburg, Breyer, and Kagan joined, and in which Justice Scalia joined except as to footnote 4. Justices Thomas and Alito filed opinions concurring in the judgment.

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