Life Insurance lawyers often see disputes over who is entitled to life insurance proceeds.
A 2021, opinion from the Southern District of Texas, Houston Division, is a dispute over who is entitled to life insurance proceeds. Also, the life insurance policy at issue in this case is governed by the Employee Retirement Income Security Act of 1974, (ERISA). The opinion is styled, Christine and Denise Morgan v. Prudential Life Insurance – Prudential Life Insurance v. Linda Arriazola and Elvia Barrera.
This case was decided on competing motions for summary judgment.
In September, 2009, Janie Barrera, now deceased, purchased a life insurance policy through her employer, Walgreens. She soon named her two sisters as beneficiaries, Linda and Elvia. In August 2018, Janie suffered a stroke. A month later, she signed documents giving power of attorney to her friend Christine Morgan. Over the following weeks, Ms. Barrera took steps to change records that would show she no longer desired that her property and life insurance proceeds go to her sisters.
After the stroke, her Pastor and the Pastor’s wife visited Ms. Barrera several times in the hospital. According to the Pastor, Ms. Barrera told him and his wife that she wanted the Morgans to receive her estate and to leave nothing for the Sisters. Ms. Barrera also discussed this with the Morgans. To ensure her wishes were carried out, she asked Christine to assist in making the necessary changes.
On or about September 12, 2018, Ms. Barrera requested Christine to draft “Janie Barrera’s Wishes.” That document states that Ms. Barrera wanted Christine Morgan to have ultimate control over her property and assets. On or about October 23, 2018, Ms. Barrera asked the Morgans to draft a document called “Janie Barrera.” The handwritten contents of that document addressed certain assets including her life insurance proceeds, 401k, house, car, and personal belongings. Each item was initialed by Ms. Barrera in the presence of the Morgans. In addition, the three, along with two nurses, signed and dated the document.
On or about October 31, 2018, Christine called Walgreens concerning Ms. Barrera’s benefits. In the first call, Christine attempted to change the beneficiaries on Ms. Barrera’s life insurance policy utilizing her power of attorney. However, the Walgreens representative denied Christine access to its platform to make the changes because Ms. Barrera was not listed as having a power of attorney, pursuant to Walgreen’s internal policies. Christine made a second call to the employee benefits office. On this occasion, and unbeknownst to the Walgreens employee on the phone, Christine represented herself to be Ms. Barrera. Posing as Ms. Barrera, she obtained access to Ms. Barrera’s account and added herself and Denise, her sister,as beneficiaries on the policy. Later that day, Christine called the Walgreens Benefits Department again. On that call,she informed the representative that she was on the phone with Ms. Barrera and at that time, she was in Ms. Barrera’s hospital room. After Ms. Barrera gave verbal permission for the benefits department to speak with Christine, Ms. Barrera stated that she wanted the Morgans to be listed as beneficiaries for the policy’s proceeds. The representative then confirmed that the Morgans were the beneficiaries on the policy.
Ms. Barrera died on November 4, 2018.
The Morgan’s claim that pursuant to federal common law,the evidence establishes that Ms. Barrera designated them as beneficiaries to the proceeds of the policy. In fact, she expressed and confirmed her wishes on several occasions, including making the designation during a phone call to the Walgreens Benefits Department.
The Sisters claim that they are the proper beneficiaries of the life insurance proceeds by default. They assert that the life insurance policy explicitly required Ms. Barrera to re–designate her beneficiary(s) after January 1, 2016. Because she failed to do so in writing after January 1, 2016, they are entitled to the proceeds as Ms. Barrera’s surviving heirs.
It is undisputed that in October 2018, the Morgans, whether procedurally correctly or not, were designated as the beneficiaries on Ms. Barrera’s life insurance policy. Moreover, the designation was confirmed telephonically by Walgreens. Based on Walgreen’s records, Prudential sent a letter to the Morgans recognizing them as beneficiaries and requested that they decide their preferred form of payment.
While Ms. Barrera’s policy is statutorily governed by ERISA, the Statute is silent concerning the determination of a beneficiary when two parties dispute a designation. Any state law on the subject is preempted by ERISA. Even though ERISA does not address disputing claims regarding a change of beneficiary, the Supreme Court has filled this void by authorizing the use of federal common law to resolve any designations.
Recently, the Fifth Circuit followed the Supreme Court’s direction concerning the substantial compliance doctrine. The doctrine applies when an employee/participant intended to change a beneficiary,and she took action in furtherance of that intent.
The evidence is undisputed that Ms. Barrera attempted to change her designation of beneficiaries. During the last few weeks of her life, she told several people, other than the Morgans, that she did not want her Sisters to have the proceeds and that, instead, she wanted the Morgans to have them. In furtherance of her statements, she signed testamentary–styled–documents that expressed her intent to designate the Morgans.
The Sisters contend—without evidence—that Ms. Barrera’s attempts to designate the Morgans as beneficiaries were a result of coercion, duress, and a lack of mental capacity. However, the Court is unpersuaded. The evidence establishes that Ms. Barrera attempted to change her beneficiary designation while in the hospital during the last few weeks of her life. Moreover, there is no evidence that Ms. Barrera’s physical limitations affected her mental capacity. Therefore, the Court holds that Ms. Barrera’s attempt to change her beneficiary designations was effectual.