Liberty Life Assurance Co. v. Barbara Kennedy

Citations: 358 F.3d 1295; 32 Employee Benefits Cas. (BNA) 1034; 2004 U.S. App. LEXIS 1675; 2004 WL 205843Docket: 02-14044

Court: Court of Appeals for the Eleventh Circuit; February 4, 2004; Federal Appellate Court

Original Court Document: View Document

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Liberty Life Assurance Company initiated an interpleader action in the Northern District of Georgia to resolve competing claims for life insurance benefits following the death of Clint Kennedy. The claims were made by his second wife, Barbara Kennedy, and his third wife, Mary Beth Kennedy. Barbara, married to Clint from 1983 to 1991, claimed benefits for herself and their minor children, Katherine and William. Mary Beth, married from 1991 until his death, claimed benefits for herself and Clint's adult children from his first marriage, Bridget and Presley, as well as Katherine and William.

The district court ruled in favor of Mary Beth Kennedy, granting her 25% of the benefits and distributing the remaining 75% equally among Clint's four children, awarding each 18.75%. Clint had a life insurance policy through Georgia-Pacific Corporation, which provided $1,000,000 in life insurance and $300,000 in accident insurance. He designated Barbara as the sole beneficiary in 1988, but after their divorce, a settlement agreement allowed him to change the distribution of benefits if he remarried. Although he did not formally amend the beneficiary designation, the settlement agreement permitted him to reduce the children's shares upon remarriage. In 1993, Clint executed a will that included provisions for the life insurance proceeds, but the details of this provision were not fully outlined in the summary. The court's decision was affirmed.

Mary Beth Kennedy is bequeathed 25% of the estate outright. Each child from Mr. Kennedy's first marriage, Bridget and Presley, is allocated 18.75% per stirpes, as are the two children from his second marriage, Katherine and William. However, if either child from the second marriage is under 30 at Mr. Kennedy's death, their share will go to their mother, Barbara Nowell Day Kennedy, to be held in separate trusts for the children. If Mr. Kennedy’s estate is not the beneficiary of his life insurance policies, the proceeds will be distributed according to the will's terms, provided they align with existing beneficiary designations. 

At the time of his death, Mr. Kennedy's estate was not the beneficiary of his Georgia-Pacific life insurance due to his failure to amend the 1988 beneficiary designation. The district court found that he did not take steps to update this designation despite several opportunities. Georgia-Pacific provided a Summary Plan Description explaining the beneficiary designation process, stating beneficiaries could be changed without consent unless irrevocably assigned. There is no evidence that Mr. Kennedy received or retained a copy of this document. The insurance policy required written notice for beneficiary changes, which must be filed with Georgia-Pacific, and changes would take effect upon signing. Mr. Kennedy died on October 7, 2000, and proof-of-death forms prepared shortly after continued to list Barbara Kennedy as the beneficiary, reflecting his last written designation from 1988.

Mary Beth Kennedy's counsel contacted Georgia-Pacific to claim benefits, leading Georgia-Pacific to refer the matter to Wausau. Discussions resulted in an agreement designating Barbara Kennedy as trustee for 37.5% of the insurance proceeds for Katherine and William Kennedy, mirroring the distribution per Mr. Kennedy's will. Wausau opted not to resolve the conflicting claims, prompting Liberty Life to file an interpleader action. Liberty Life subsequently deposited $1,376,858.29 into the court registry, covered $10,000 in attorneys’ fees, and was dismissed from the case. The district court issued a consent order aligning with the parties' agreement, distributing 37.5% of the proceeds equally to the Katherine and William Kennedy Management Trust and treating personal accident policy benefits similarly.

The court, upon ruling on cross-motions for summary judgment, granted Mary Beth Kennedy's motion and denied Barbara Kennedy's, determining that the policy, not the Summary Plan Description, governed beneficiary designation. The court recognized Mr. Kennedy's will as valid for designating beneficiaries—Mary Beth Kennedy (25%), Bridget Kennedy Richards (18.75%), and Presley Kennedy Wilson (18.75%). Barbara Kennedy appealed, seeking to amend the distribution to grant Katherine and William an additional 6.25% each and claim the remaining 50%.

The district court needed to resolve the distribution of Mr. Kennedy's life insurance benefits after Wausau declined to assert authority over the claims. The review of the district court’s interpretation of ERISA and its application to plan provisions was conducted de novo. Barbara Kennedy contended that the district court incorrectly allowed the will as a beneficiary designation, arguing it invoked state testamentary law, which she claimed was preempted by ERISA, citing Egelhoff v. Egelhoff, where a state statute affecting beneficiary designations was invalidated due to its connection with ERISA plans. The court noted that this case differs from Egelhoff.

The district court concluded that Mr. Kennedy's will could serve as a valid beneficiary designation under the Plan, without reference to state law. The Plan's 'Change of Beneficiary' subsection allows for written notice to Georgia-Pacific without a specific form, and it implies that a will is an acceptable form of notice, as it notes that the participant does not need to be living at the time of filing. Barbara Kennedy contends that recognizing the will as a beneficiary designation raises ERISA preemption concerns regarding uniformity and administrative efficiency. However, the court determined that such concerns do not apply, as ERISA permits insurers to allow multiple methods for changing beneficiaries, provided policyholders are informed and fiduciary obligations are met.

Additionally, Barbara Kennedy argues that the Summary Plan Description conflicts with the Plan regarding beneficiary changes and that Mr. Kennedy relied on the Summary Plan Description, which mandated a specific form. The court found no irreconcilable conflict between the two documents, noting that while the Summary Plan Description instructs participants to seek the correct form from the Employee Benefits Department, the Plan allows for various written methods to effectuate beneficiary changes. The court concluded that the Plan's language validates Mr. Kennedy's will as a beneficiary designation and that the Summary Plan Description does not exclude alternate forms.

Barbara Kennedy's claim that Georgia-Pacific required Mr. Kennedy to use a specific form exclusively to change beneficiaries is unsupported by the record. In 1991, Georgia-Pacific provided Mr. Kennedy with four different beneficiary designation forms applicable to various benefit plans, accompanied by a cover memo indicating they were the 'appropriate change forms.' Following his divorce from Barbara in 1997, Georgia-Pacific confirmed his enrollment in its executive life and personal accident program, listing Barbara as the beneficiary without instructions for changing this designation. In 2000, an HR executive inquired about his beneficiary designations but provided no specific guidance on changes. 

In 1993, Mr. Kennedy consulted an attorney regarding his divorce agreement and the implications of changing his beneficiaries without Barbara's consent. The attorney advised that consent was necessary and drafted a letter for Mr. Kennedy, which he ultimately did not send. While the attorney suggested preparing new beneficiary forms, he believed the will's language might suffice. The record does not support Barbara Kennedy’s claim that Mr. Kennedy's attorney mandated a designated form for changing beneficiaries. The court determined that the life insurance benefits would be distributed according to a beneficiary designation acceptable under the plan document. Reliance on the Summary Plan Description was deemed irrelevant since there was no conflict with the plan document, which governs the interpretation of beneficiaries in this case.

The district court correctly ruled that Mr. Kennedy's will serves as a valid beneficiary designation for the Georgia-Pacific executive life insurance policy. Mr. Kennedy explicitly stated his intended beneficiaries in his signed will, which was subsequently filed with Georgia-Pacific, allowing it to qualify as a permissible change notice. The court enforced the Plan by recognizing the will as the controlling designation, effective from the date of signing and as the most recent designation prior to Mr. Kennedy's death. Under ERISA guidelines, benefits distribution must conform to the plan's language, which must be clearly documented.

Barbara Kennedy contended that the court improperly inferred Mr. Kennedy’s intent, arguing that intent is a factual matter unsuitable for summary judgment; however, the record does not support this claim. The court's legal determinations focused solely on whether the Plan permitted the will as a beneficiary designation and whether it was the most recent such designation, without inferring Mr. Kennedy’s intent. The will reflects Mr. Kennedy's consistent intention to allocate his insurance benefits to his wife and children. The district court did not misinterpret disputed facts in its legal conclusions.

Mary Beth Kennedy presented alternative arguments for affirming the judgment, such as questioning the validity of the Summary Plan Description and advocating for the application of substantial compliance. However, the decision rendered makes it unnecessary to address these points. The judgment is AFFIRMED.