In a case of federal pre-emption, the United States Supreme Court recently held a federal employee’s life insurance policy was payable to the decedent’s former wife and named beneficiary under federal law, not to the decedent’s current wife under state law.

In Hillman v. Maretta, 133 S. Ct. 1943 (June 3, 2013), a federal employee had named his former wife as the beneficiary of his Federal Employees’ Group Life Insurance policy.  He had since divorced her and remarried, but never changed the beneficiary on the policy.   The Federal Employees’ Group Life Insurance Act gives precedence to the named beneficiary, while Virginia state law revokes all named beneficiaries in the event of a change in marital status.  The Virginia statute also contains a pre-emption escape clause that creates a cause of action in favor of any person who would have been entitled to the proceeds but for pre-emption by federal law.

After Decedent’s death, Former Wife claimed and collected the proceeds as the named beneficiary, in accordance with the federal law.  Current Wife, who would have been entitled to the proceeds under Virginia state law, sued to recover them under the Virginia escape clause.

Examining federal interests, Justice Sotomayor observed that federal statutes governing group life insurance programs for federal employees and armed service members consistently give policyholders the freedom to designate beneficiaries, and establish a clear and predictable order of precedence for awarding the proceeds. And, Virginia’s state law interfered with that predictability. Therefore, the U.S. Supreme Court affirmed the Virginia Supreme Court, holding that the federal law pre-empted not only the Virginia law revoking the beneficiary, but also the escape clause, and held that the proceeds belonged to the named beneficiary - the Former Wife.

Although this case involved Virginia law, similar federal pre-emption issues could potentially affect Texas community property law.

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