# Amicus Curiae Brief — Egelhoff v. Egelhoff

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0359%3A06

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2001
- **Citation:** 532 U.S. 141

## Text

I No. 99-1529

; IN THE
Supreme Court of the United States

DONNA RAE EGELHOFF,
Petitioner,
v.

SAMANTHA JGELHOFF, A MINOR, BY AND THROUGH
HER NATURAL PARENT KATE BREINER
and DAVID EGELHOFF,
Respondents.

On PETITION FoR A Writ oF CERTIORARI
TO THE SUPREME CouRT OF WASHINGTON

—————————————————————————— SX
MOTION OF THE AMERICAN COUNCIL OF
LIFE INSURERS FOR LEAVE TO FILE BRIEF
AMICUS CURIAE AND BRIEF AMICUS CURIAE

IN SUPPORT OF CERTIORARI
Victoria E. FIMEA STEPHANIE W. KANWIT
Senior Counsel, Litigation Counsel of Record

AMERICAN COUNCIL OF LIFE INSURERS STEPHEN N. LamMB
1001 Pennsylvania Avenue, N.W. EpsTEIN BECKER & Green, P.C.

Washington, D.C. 20004 1227 25" Street, N.W.
(202) 624-2183 Suite 700
Washington, D.C. 20037-1156
(202) 861-0900
Attorneys for Amicus Curiae

159761 @ Counsel Press LLC
(800) 274-3321 + (800) 359-6859

z21epP

OF Ee py Oe eg ee ee

Pursuant to this Court’s Rule 37.2(b), the American
Council of Life Insurers (“ACLI”) respectfully moves for
leave to file the attached brief amicus curiae in this case.
The consent of the attorney for petitioner, William Kilberg,
Esq., has been obtained. The consent of the attorney for
respondents, Michael W. Jordan, Esq., was requested but
refused.

Amicus ACLI is based in Washington, D.C., and is an
association representing 435 legal reserve life insurance
companies, accounting for over 73% of life insurance and
over 82% of pension business with such companies in the
United States.

The insurance industry represented by Amicus ACLI is
extremely concerned with the implications of this case
for the future of employer-sponsored life insurance
coverage. The Washington State Supreme Court held in the
decision below that a state probate statute, Wash. Rev. Code
§ 11.07.010, is not preempted by the Employee Retirement
Income Security Act, 29 U.S.C. § 1144(a) (1999) (ERISA),
even with respect to the pension plan. Thus, the Court allowed
a State statute to override and nullify the deceased’s
beneficiary designations under both his life insurance plan
and a pension plan. Egelhoff v. Egelhoff, 139 Wash. 2d 557,

989 P.2d 80 (1999).

ACLI has a unique perspective on the impact that this
decision will have on its members’ ability to offer and
administer life insurance and death benefits through
employer-sponsored plans. In filing this brief, ACLI seeks
to bring to the Court’s attention matters that have not been
fully addressed by the parties regarding the negative effects
of the decision below on the provision of life insurance
benefits.

Respectfully submitted,

STEPHANIE W. KANwIT
Counsel of Record

STEPHEN N. LAMB

EPSTEIN BECKER & GREEN, P.C.
1227 25" Street, N.W.

Suite 700

Washington, D.C. 20037-1156
(202) 861-0900

VICTORIA E. FIMEA

Senior Counsel, Litigation
AMERICAN COUNCIL OF LIFE INSURERS
1001 Pennsylvania Avenue, N.W.

Washington, D.C. 20004
(202) 624-2183

Attorneys for Amicus Curiae

TABLE OF CONTENTS

Table of Cited Authorities ....................

Statement of Interest ................... ee

Summary of Argument in Support of Petition for a
nr des de ceGdvctedecccececs

A.

D.

The Washington Statute Violates Congress’
Intent to Subject Plan Administrators to a
Uniform Body of Benefits Law ..........

State Law Cannot Be Allowed to Defeat the
Expectations of ERISA Plan Members and
TE

The Decision Below Discourages Employers
from Sponsoring, and Life Insurers From
Providing, Reasonably-Priced Life Insurance
Se

State “Domestic Relations Laws” Cannot Be
Allowed to Override ERISA .............

EEE

16

19

TABLE OF CITED AUTHORITIES

Page
Cases:
Ankenbrandt v. Richards, 504 U.S. 689 (1992) ... 16
Barber v. Barber, 621 U.S. (21 How.) 582 (1858)
ececcecéedeeesesesbbanseadeneeenseeeest 16
Boggs v. Boggs, 520 U.S. 833 (1997) .......... passim
Brandon v. Travelers Ins. Co. & Abbott Labs.,
18 F.3d 1321 (5® Cir. 1994) ............0055. 9
Emard v. Hughes Aircraft Co., 153 F.3d 949
(9th Cir. 1998), cert. denied, 525 U.S. 1122 (1999)
ecbcscecébbsec deeb 660Neeebbseusensetee 9,10
Fort Halifax Packing v. Coyne, 482 U.S. 1 (1987)
sectbedacuceeesdeaedseabeueeaensennasee: 5
Guidry v. Sheet Metal Workers Nat'l Pension Fund,
GBB UB. SEB CIGGED oc ccccccscccecccscssece 10

Hisquierdo v. Hisquierdo, 439 U.S. 572 (1979) ... 18

Ingersoll-Rand Co. v. McClendon, 498 US. 133
|. PPPPTTTTrririttr ei 7

John Hancock Mut. Life Ins. Co. v. Timbo,
67 F. Supp. 2d 413 (D.N.J. 1999) ............ 11

Cited Authorities
Page
Krishna v. Colgate Palmolive Co., 7 F.3411 ~
DP MEE see ddocudaetabddcedddsnekies 12
Mansell v. Mansell, 490 U.S. 581 (1989) ........ 18
Mendez-Bellido v. Board of Trustees of Div. 1181,
A.T.U. N.Y. Employees Pension Fund & Plan,
709 F. Supp. 329 (E.D.N.Y. 1989) ........... 18
Metropolitan Life Ins. Co. v. Massachusetts,
Ss MD Sdcndvétadaneedvnkstcés 6
Metropolitan Life Ins. Co. v. Pettit, 164 F.3d 857
Se a EE cnsenendneoscheodbedtbesdact 12
New York State Conference of Blue Cross & Blue
Shield Plans v. Travelers Ins. Co., 514 U.S. 645
EE Se RS ci ahaaeeee 5,7, 14,16
Ridgway v. Ridgway, 454 U.S. 46 (1981) ........ 17, 18
Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983)
venesonensnncees tedusdedidetverebsuabank 5
Statutes
Pie OF OG oh cc ccccccece Siugusehussetay 18
29 U.S.C. § 1001(a)........... Ait ndhedeteodus 3

SPP EEE Sc'cuddckks Mi aboekneontcns 5

iv

Cited Authorities

Page
BP UB. § GGREED "0 cv ccbcdvcdvcctvesesvccsees 4
SP UBL. © TD ccocecvcecesccsuedéoseds 4,17
29 U.S.C. § 1OS6(d)(3MA) .. 0.6... ce eee eee 17
29 U.S.C. § 1104(ay(1(D) ...... 20... cee eee 5, 8, 17
29 U.S.C. § 1132(a(1M(B) ............6 2c eee 4
BP UE. © CBS 00 cb dc cvvccivddkvedeewesss 1,4
29 U.S.C. § 1144(BM( 2M A) .. 2.2... ce eee eee eee 6
aD ULB. § ERGHEOD cccccccnsecccceetscccts 17
FO Ue © Fee GREER... oo ccopecedans cveuneove 18
Cal. Health & Safety Code § 7185.5(d) .......... 12
Fla. Stat. Ann. § 765.102(1) ............00000ee 12
OO ie 5
N.Y. Pub. Health Law § 2964(2)(a) TTTTT TTT ey 12

Retirement Equity Act of 1984, Pub. L. No. 98-397,
FE DEED evr cccccscccecencoscsveusepen 17
Wash. Rev. Code § 11.07.010 ................ 1,4, 14
Wash. Rev. Code § 11.07.010(2)(a) ............. 4,9

Wash. Rev. Code § 70.122.030 ................ 12

Vv
Cited Authorities
“— Page
Other Authorities:

Buist M. Anderson, Anderson on Life Insurance
SP OMPOR EOE sb caviunceevictessicsssice 2,13

Ann C. Foster, Brief: Life Insurance, Compensation
and Working Conditions, Winter 1997 ........ 1,2

Jeffrey W. Stempel, Law of Insurance, § 18.02{c]
DEE SER eb Sekei éhoveecdvere caceebesede se 5

Employee Benefits in State and Local Governments,

Bulletin 2477, Bureau of Labor Statistics (1994)
PERU CEES CUS THESE baGS Sd DADE SERCO CRE Ces e ss 2

]

STATEMENT OF INTEREST

The American Council of Life Insurance (“ACLI”), based
in Washington, D.C., is an association representing 435 legal
reserve life insurance companies, accounting for over 73%
of life insurance and over 82% of pension business with such
companies in the United States.'

The insurance industry represented by Amicus ACLI is
extremely concerned with the implications of the holding
below for the future of employer-sponsored life insurance
coverage. Relying on an inappropriately narrow reading of
the preemption clause in the Employee Retirement Income
Security Act, 29 U.S.C. § 1144(a) (1999) (“ERISA”), the
Washington State Supreme Court has held that a state probate
statute, Wash. Rev. Code § 11.07.010 (the “Statute”), can
nullify the disposition of plan benefits made in accordance
with the terms of ERISA. As a result, in this case the
decedent’s express designation of petitioner, his former wife,
as beneficiary under both his life insurance and pension plans
was nullified by the Statute’s mandatory presumption that
his former wife as a matter of law “died at the time of entry
of the decree of dissolution.”

The ruling of the Washington Supreme Court has
jeopardized the future of employer-sponsored life insurance
benefit plans covering millions of Americans. According to
the Federal Bureau of Labor Statistics, 74% of all Americans
employed on a full-time basis are covered by employer-
sponsored life insurance.’ The percentage is even higher for

1. Counsel for Amicus were the sole authors of this brief. No
person or entity other than Amicus made a financial contribution to
this brief.

2. Egelhoff v. Egelhoff, 139 Wash. 2d 557, 575, 989 P.2d 80,
90 (1999).

3. Ann C. Foster, Brief: Life Insurance, Compensation and
Working Conditions, Winter 1997, at 53.

2

public sector employees — 87%.‘ Life insurance is considered
so valuable a benefit in attracting and retaining qualified workers
that fully 85% of both private and public employers pay for the
full cost of such insurance.°

If the opinion of the Washington Court is allowed to stand,
life insurance inevitably will become more expensive, more
difficuli to administer, and less accessible for Americans.
Statutes like Washington’s will succeed in eroding or eliminating
the bases for the utility of life insurance as a financial
management and estate planning tool: its certainty and its
liquidity in the wake of the insured’s death. Life insurance
proceeds are designed to be readily accessible to beneficiaries.
Once the insurer receives proof of an insured’s death, payment
of the death benefit to the designated beneficiary is normally
an expeditious procedure.

The named beneficiaries of the millions of life insurance
policies in effect in this country are entitled to rely on an
expectation that they will receive the proceeds of these policies
when making critical future financial decisions for themselves,
their families, and their businesses. Life insurance serves
numerous socially beneficial functions; the proceeds from a
policy can provide funds to keep a business functioning after
the death of its principal, to pay for a child’s education, to pay
off a mortgage, to provide for additional retirement income,
and to encourage gifts to charity.

The Statute will defeat the legitimate expectations of named
plan beneficiaries, as well as those of plan participants, who
will no longer have an absolute right to decide for themselves
who their beneficiaries should be. So too, the plan sponsors,

4. Id. at 54 (citing Employee Benefits in State and Local
Governments, Bulletin 2477, Bureau of Labor Statistics (1994)).
See also Buist M. Anderson, Anderson on Life Insurance § 1.6 at 22
(1991) (“Every large employer, including the federal government,
provides group life insurance for its employees.”).

5. Foster, supra note 3, at 55.

3

fiduciaries, and administrators of ERISA plans need to be able
to decide what types of benefits to offer to plan participants,
and to ascertain their rights and liabilities in regard to those
benefits with certainty. Yet the ruling at issue imposes an
impossible burden on them, allowing each state to dictate how
the beneficiary of a life insurance policy will be determined,
and frustrating ERISA’s goal of achieving uniformity and
consistency in benefits administration by preventing them from
offering uniform life insurance and death benefits.

Such a result runs counter to strong federal policy in this
area aimed at encouraging employers to establish the retirement
and welfare plans that most Americans and their families depend
upon for their post-retirement income, health care benefits, and
life insurance benefits.® As for insurers, the rationale of the
decision makes it infeasible for them to issue life insurance
coverage to a multi-state employer group that is both predictable
with respect to the observance of beneficiary designations, and
affordable, i.e., that constrains premium rates and plan costs
both by achieving economies through uniform administration
of policy benefits, and by avoiding expensive and time-
consuming challenges resulting from inconsistent state
directives and conflicting beneficiary claims.

SUMMARY OF ARGUMENT IN SUPPORT OF
PETITION FOR A WRIT OF CERTIORARI

This case concerns a dispute regarding employer-provided
benefits between a decedent’s children from a prior marriage
and a subsequent spouse, similar to the circumstance presented
in this Court’s prior decision in Boggs v. Boggs, 520 U.S. 833
(1997). In Boggs, this Court held that ERISA preempted a state

6. Congress insisted on the certainty of rights and obligations under
ERISA, noting in Title I that “employees with long years of employment
are losing anticipated retirement benefits owing to the lack of vesting
provisions in such plans,” and that “employees and their beneficiaries
have been deprived of anticipated benefits.” ERISA § 2(a), 29 U.S.C.
§ 1001(a).

4

statute that would allow a non-participant spouse to transfer an
interest in her husband’s pension funds to her sons. Although
the Court acknowledged that descent, distribution, and marital
issues are quintessential examples of traditional areas of state
concern,’ it found that ERISA’s strong anti-alienation provisions
preempted the state statute.®

Here in Egelhoff, a deceased participant’s children have
asserted state law-based claims to the proceeds of ERISA
pension and welfare benefit plans (the latter encompassing life
insurance benefits), although they are neither participants nor
beneficiaries in these plans.? The Washington Supreme Court
has now ruled, contrary to the holding of Boggs, that the Statute
at issue here, Wash. Rev. Code § 11.07.010(2)(a), which
automatically revokes the designated beneficiary status of a
spouse upon divorce, does not run afoul of ERISA.'° Whether
there is found here to be a “direct clash” with ERISA’s
objectives, in the words of the Boggs Court,'' or whether
ERISA’s preemption clause is applied,'? the result should be
the same: this Court should grant certiorari and conclude that
the Washington “state law cannot stand.”"”

Most likely, the Washington legislature enacted Wash. Rev.
Code § 11.07.010 to solve what it perceived to be an endemic
social problem — insureds “forgetting” to change their

7. Boggs, 520 U.S. at 839-40.

8. ERISA § 206(d), 29 U.S.C. § 1056(d), cited in Boggs, 520 U.S.
at 851.

9. In order to have standing to file a suit for benefits under ERISA,
an individual must either be a participant or beneficiary of the plan.
ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1(B).

10. Egelhoff, 989 P.2d at 92 (citing ERISA § 206(d)(1), 29 U.S.C.
§ 1056(d)(1)).

11. Boggs, 520 U.S. at 844.
12. ERISA § 514(a), 29 U.S.C. § 1144(a).
13. Boggs, 520 U.S. at 844.

5

beneficiaries after a divorce. This paternalistic measure,
ostensibly taken “to save policyholders from themselves
(and presumably greedy former spouses),”'* directly interferes
with the federal statutory scheme created by Congress in ERISA
that seeks to insure that both pension and welfare plans are
administered consistently and in accordance with the
“documents and instruments governing the plan.”

Congress enacted ERISA in 1974 to: (1) protect plan
participants and beneficiaries,'® (2) assure uniformity and
efficiency in plan administration,"’ and (3) create incentives for
the creation and maintenance of employee benefit plans.'* Every
one of those Congressional goals would be frustrated by
allowing state law, at the option of each state, to trump the
beneficiary designation of an ERISA plan.

14. Jeffrey W. Stempel, Law of Insurance § 18.02{c], at 18-12
(1994).

15. ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D).

16. Boggs, 520 U.S. at 845 (“The principal object of the statute is
to protect plan participants and beneficiaries.”) (citing Shaw v. Delta
Air Lines, Inc., 463 U.S. 85, 90 (1983)). The statute itself notes that the
express purpose is “to protect interstate commerce and the interests
of participants in employee benefit plans and their beneficiaries.”
29 U.S.C. § 1001(b).

17. New York State Conference of Blue Cross & Blue Shield Plans
v. Travelers Ins. Co., 514 U.S. 645, 656 (1995).

18. Fort Halifax Packing v. Coyne, 482 U.S..1, 11 (1987)
(“A patchwork scheme of regulation would introduce considerable
inefficiencies in the benefit program operation, which might lead those
employers with existing plans to reduce benefits, and those without
such plans to refrain from adopting them.”). The U.S. Tax Code, in
addition, provides incentives both for employers to establish qualified
benefit plans as well as for employees to participate in them, since a
contribution to a qualified plan is immediately deductible by the
employer and only becomes taxable to the employee on subsequent
distribution. I.R.C. § 404.

6

The Egelhoff decision, rather than protecting plan
participants and their beneficiaries, instead undermines the very
reasons they value life insurance — its certainty and its liquidity.
The Statute defeats the legitimate expectations of both
participants and designated beneficiaries on the basis of an
unsubstantiated assumption that insureds inevitably will act
incompetently with respect to a highly personal decision. From
an insured participant’s perspective, the payment of insurance
proceeds to someone other than the person intended to be the
recipient is the substantive equivalent of a failure to provide the
promised benefit.

The decision also creates substantial administrative
uncertainties under ERISA for plan sponsors, plan fiduciaries,
and life insurance companies. If it is upheld, neither plan
sponsors nor fiduciaries could provide an insured death benefit
which allows the covered plan participant to select the ultimate
beneficiary.

The threat of regulation by inconsistent state laws would
drive employers to self-fund life insurance and death benefits,
i.e., fund those benefits from their own assets or through a trust.'*
That alternative is economically infeasible for all but the very
largest of employers, and likely would be an imprudent use of
sponsor and plan assets. Instead of incentives to create benefit
plans, the decision below will discourage employers from
offering and life insurers from providing reasonably-priced life
insurance, by increasing costs related to the determination of
the proper beneficiary, and requiring plan administrators and
insurers to inquire into their employees’ personal matters. It

19. As this Court summarized it in Metropolitan Life Ins. Co. v.
Massachusetts, 471 U.S. 724, 732 (1985), employee welfare plans “may
self-insure or they may purchase insurance for their participants. Plans
that purchase insurance — so-called ‘insured plans’ — are directly
affected by state laws that regulate the insurance industry,” pursuant to
ERISA’s “insurance saving clause,” § 514(b)(2)(A), 29 U.S.C.
§ 1144(b)(2)(A), which exempts from preemption “any law of any State
which regulates insurance, banking, or securities.”

7

would also inspire corrosive intra-family litigation and costly
interpleader actions, and would likely force life insurers to make
duplicate payments to settle claims.

ARGUMENT

A. The Washington Statute Violates Congress’ Intent to
Subject Plan Administrators to a Uniform Body of
Benefits Law

In New York State Conference of Blue Cross and Blue Shield
Plans v. Travelers Ins. Co., 514 U.S. 645, 646 (1995), this Court
specifically noted that one of ERISA’s objectives was to promote
the “nationally uniform administration of employee benefit plans.”
The Court recognized that in enacting ERISA, Congress intended:

to ensure that plans and plan sponsors would be
subject to a uniform body of benefits law; the goal
was to minimize the administrative and financial
burden of complying with conflicting directives
among States or between States and the Federal
Government . . . , [and to prevent] the potential for
conflict in substantive law . . . requiring the tailoring
of plans and employer conduct to the peculiarities
of the law of each jurisdiction.” (emphasis added).

Allowing multiple state statutes to affect the interpretation
and administration of employee benefit plans (including the
disposition of pension plan assets, which may include insurance
policies) will have a dramatic effect on plan sponsors and
administrators. They will be forced to administer these plans
differently in different states, contrary to Congressional intent
that plans not be subject to piecemeal regulation. Moreover,
administering the plans in accordance with varying state laws
will subject plan fiduciaries to potentially devastating claims
for breach of fiduciary duty because Congress has made the

20. Travelers, 514 U.S. at 656-57 (quoting Ingersoll-Rand Co. v.
McClendon, 498 U.S. 133, 142 (1995)).

8

prior determination in ERISA that a plan fiduciary must
“discharge his duties with respect to a plan . . . in accordance
with the documents and instruments governing the plan,””' not
in accordance with those state laws.

The State Supreme Court clearly erred in holding that the
Statute is not preempted under ERISA because it “does not alter
the nature of the plan itself, the administrator’s fiduciary duties,
or the requirements for plan administration.”” The Statute
unquestionably impacts upon all three elements: (1) it alters
the plan of benefits substantially by mandating that written
directives as to designation of a beneficiary be superseded if
inconsistent with state law; (2) it substitutes state probate law
principles, and obligates plan administrators to follow those
principles, by requiring plans to pay benefits in a manner that
is in direct conflict with both the plan requirements and the
written instructions of the decedent, thus violating the fiduciary
duty to follow the terms of the plan documents; and (3) it
interferes with plan administration and alters the administrators’
duties by requiring them to keep track of changes in plan
participants’ marital status, and to ascertain the effect of
Washington’s probate law on each participant’s circumstances.

The Washington Supreme Court attempts to minimize the
negative impact of its decision on uniform plan administration
by insisting that while the Statute “may operate upon the
beneficiary designation in an ERISA plan,” it does not “direct
payment of proceeds,” nor disturb the beneficiary designation
since benefits “remain to be distributed in accord with the plan
documents under ERISA.” That conclusion is not accurate,
because the Statute has created competing ownership interests
that conflict with those prescribed by the ERISA plan
documents. This is a complete and plain usurpation by the State

21. 29 U.S.C. § 1104(a)(1)(D).
22. Egelhoff, 989 P.2d at 90.
23. Egelhoff, 989 P.2d at 90, 91.

-

9

of an ERISA plan’s benefit structure that empowers the plan
participant, and the participant alone, to decide the identity of
his or her beneficiary.

Far from an issue that merely “brushes against the periphery
of an ERISA plan,” as the Washington Supreme Court believes,”
its holding here stands for the proposition that each of the states
can control the rights of ERISA plan participants and specify
the recipients of ERISA plan benefits. It may be that in some
cases (such as Washington state’s), the beneficiary is altered
only in specific circumstances, such as when “a marriage is
dissolved or invalidated . . .”* Other jurisdictions have attempted
to enact laws whereby such beneficiary designations are altered
by state law only if the beneficiary fails to re-designate his or
her ex-spouse.”* Plan sponsors such as multi-state employers
will justifiably consider it a nightmare to have to coordinate, in
each state, the distribution of benefits in compliance. The Statute
thus must be struck down as directly contrary to the strong
federal policy in favor of a “uniform body of benefits law,” as it
imposes on benefit plans (both health and welfare and pension
plans) those very “conflicting directives” that ERISA forbids.

B. State Law Cannot Be Allowed to Defeat the
Expectations of ERISA Plan Members and
Beneficiaries.

As this Court emphasized in Boggs, ERISA was enacted
to ensure that plan participants and their beneficiaries would
receive their expected ben) its. For example, a primary purpose

24. Egelhoff, 989 P.2d at 88 (quoting Emard v. Hughes Aircraft
Co., 153 F.3d 949, 961 (9th Cir. 1998), cert. denied, 525 U.S. 1122
(1999)).

25. Wash. Rev. Code § 11.07.010(2)(a).

26. See, e.g., Brandon v. Travelers Ins. Co. & Abbott Labs.,
18 F.3d 1321 (Sth Cir. 1994) (holding preempted by ERISA such an
attempt by the Texas legislature to require a re-designation of an cx-
spouse after a divorce in order to maintain him or her as the designated
beneficiary on a life insurance policy).

10

of ERISA’s qualified survivor annuity provisions is to “ensure
an income stream” to spouses,”’ while ERISA’s anti-alienation
provision is intended to provide the same income stream to
participants and beneficiaries.”

Those provisions in ERISA cannot co-exist with the
decision of the Washington Supreme Court ho «ti; that the State
probate statute at issue here is saved from preemption under
ERISA Section 514 because it allegedly does not “affect the
administration of ERISA plans but ‘merely the ultimate
ownership of distributed benefits.’ That description of the
effect of the Statute is inaccurate. The “ultimate ownership”
determination alters the manner in which ERISA plans
determine to whom distribution must be made. Currently,
administrators need only look up and apply the participant’s
current written beneficiary designation. Under the Statute, where
the beneficiary is a spouse, the plan administrator first must
determine whether that relationship to the participant has
changed, and if so, must ascertain the nature of the changed
circumstances and form a legal conclusion as to the effect of
the State’s probate law on the plan’s distributive obligation. That
process, the Washington Supreme Court’s opinion
notwithstanding, has a direct and material impact on plan

From the beneficiary’s point of view, “ultimate ownership”
is not an afterthought, but rather precisely the substantive
purpose of his or her designation as a beneficiary. Whether those
benefits have been distributed, or are awaiting future distribution,
is immaterial. The Statute presently determines the criteria
pursuant to which the distribution must take place, substituting
its provisions for the plan’s criteria defining the participant’s
benefit entitlement.

27. Boggs, 520 U.S. at 843.

28. Id. at 852. See also Guidry v. Sheet Metal Workers Nat'l
Pension Fund, 493 U.S. 365, 376 (1990).

29. 989 P.2d at 90 (quoting Emard, 153 F.3d at 959).

11

As this Court held in Boggs, ERISA’s anti-alienation rules
protect plan benefits regardless of whether they “have been
distributed” or they are as yet “undistributed.” Any other rule
would conflict with strong Congressional policy embodied in
ERISA to preserve benefits for pension plan participants and
beneficiaries. The Statute here, however, operates as an
alienation of plan benefits by the State for the purpose of
effectuating an involuntary reallocation.

Consider the scenario where a decedent deliberately left
an €x-spouse as a named beneficiary in a life insurance policy,
perhaps as part and parcel of an informal agreement between
the people involved, or to protect children who are still minors,
and now finds his or her choice — after death, and hence
irrevocably — overruled by state law.*' Plan sponsors and
administrators are entitled to, and under the plan must, assume
that the vast majority of participants who fill out a beneficiary
designation form have done so deliberately and with the
expectation that their choices will be complied with, and should
not be made to accept the paternalistic assumption inherent in
the Washington State Statute that the participants’ choices must
be negated.
afoul of other State policy allowing and even encouraging adult
citizens to prescribe advanced directives not only for disposition
of their worldly assets (as in a will or trust), but to execute
documents such as living wills to declare their intentions as to
other very personal decisions — for example, the extent of
medical treatment they desire should they be unable to make

30. Boggs, 520 U.S. at 854.

31. See John Hancock Mut. Life Ins. Co. v. Timbo, 67 F. Supp. 2d
413, 422 (D.N.J. 1999) (finding that former wife did not waive interest
in proceeds of insurance policy bolstered by fact that “throughout the
post-divorce period decedent continued to assure her that she would
“be taken care of” at his death.”).

12

such a determination in the future.*? Instead, the State here has
made that decision for presumably competent adults merely by
the fact of a divorce, no matter that they have left written
instructions with their plan administrators that the death benefit
be paid to a former spouse.

The application of statutes such as that sustained by the
Washington Supreme Court also defeat beneficiary expectations
by inevitably creating delay and increased costs, in part negating
the protective purpose of life insurance. Delay occurs as
insurance companies and plan administrators are required to
parse state laws in each case to determine whether, when, and
how a beneficiary designation is to be overridden. Plan sponsors
and insurers may be forced to join the competing beneficiaries
as defendants in interpleader actions to prevent double or
multiple liability. This administrative nightmare inevitably will
cause delay and sharply increased costs.*°

Such litigation not only delays payment of the life insurance
benefit, but may even “eat up” all of the insurance proceeds,
leaving the winner with a Pyrrhic victory and possibly creating
even more discord among competing family members. A noted
authority on life insurance points out that the “increase in the

32. See, e.g., Wash. Rev. Code § 70.122.030 (“Directive to
withhold or withdraw life-sustaining treatment”); see also Cal. Health
& Safety Code § 7185.5(d); Fla. Stat. Ann. § 765.102(1); N.Y. Pub.
Health Law § 2964(2)(a).

33. See, e.g., Metropolitan Life Ins. Co. v. Pettit, 164 F.3d 857
(4th Cir. 1998), where a life insurer was forced to file an interpleader
action to allow a court to determine whether the insured’s widow or his
former wife was entitled to insurance proceeds. 164 F.3d at 859. The
court held that the former wife’s claim, which sought to impose a
constructive trust on life insurance proceeds due under the ERISA plan,
was preempted as directly affecting the distribution of plan benefits.
164 F.3d at 865.

34. For example, a final judgment in Krishna v. Colgate Palmolive
Co., 7 F.3d 11 (2d Cir. 1993), was nearly four years in coming after the
insured’s death. Jd. at 13.

13

amounts of life insurance, both individual and group, makes it
worthwhile to litigate,” with such litigation unfortunately serving

“to deplete the policy proceeds.”*’ Dissipation of policy proceeds

is likely where, as here in Egelhoff, the life insurance benefits
claimed by both litigants amount to only $46,000 (Appendix to
Petitioner's Petition for a Writ of Certiorari, p. 4a), while the
pension benefits total only $35,000 (Jd. at 6a).

Nor does the Washington law serve the admittedly laudatory
purpose of protecting participant choice. Choosing one’s
beneficiary is normally a simple administrative task: all that is
required is to fill out a beneficiary designation card, which is
then returned to the plan administrator. Both pension and welfare
plan documents uniformly provide that the participant (unless
incapacitated) is responsible to notify the plan administrator, in
writing, of his or her choice of beneficiary or any change in his
beneficiary designation. The Statute at issue here, however,
assumes that a plan member is incapable of performing that
task, or has neglected to do so, when there has been no challenge
to capacity. In situations where a plan member has deliberately
chosen not to change his or her beneficiary designation, despite
a divorce, the State law steps in and automatically “revokes” a
designation that is totally in accord with the participant’s wishes.

In sum, the decision of the Washington court clearly runs
afoul of Congress’s intent in ERISA by allowing state legislation
to amend plan benefit structures and to thus defeat the legitimate
expectations of plan members. This Statute and similar laws
will diminish the value of life insurance and pension benefits
by delaying their distribution and generating costly litigation
over beneficiary designation and entitlement to benefits.

35. Anderson, supra note 4, § 18.10, at 544.

14

C. The Decision Below Discourages Employers from
Sponsoring, and Life Insurers From Providing,
Reasonably-Priced Life Insurance Benefits

Rather than foster the Congressional goal, as expressed in
ERISA, of permitting “the nationally uniform administration
of employee benefit plans”** and creating incentives for plan
sponsors to establish and maintain employee benefit plans, the
Statute imposes on them and upon their insurers an entirely
new set of duties and risks. Sponsors and insurers now must
determine the validity of beneficiary designations under each
jurisdiction in which a plan is offered or maintained, exposing
themselves to the threat of lawsuits challenging whatever
decision they make.

First, the costs that will be incurred in the determination of
the “proper” beneficiary, especially in the inevitable cases of
multiple competing claimants, will necessarily be charged to
the plan and in turn will make the benefits or insurance policy
more expensive for claimants as well as plan administrators.

Second, the prospect of paying more than once for the same
claim (as is possible here) will give pause to both insurers and
employers who are deciding whether to continue to sponsor
and fund these types of benefit plans. This “dual payment”
scenario may become more frequent as administrators find that
that they have paid life insurance benefits to a beneficiary
designated by a decedent in his or her welfare plan, only to be
faced with a state court order (whether as a result of a statute
like Wash. Rev. Code § 11.07.010, a state law divorce decree,
or a state law of constructive trusts) that a different beneficiary
be paid.

No matter how carefully an ERISA plan is constructed, or
how frequently the plan sponsor or administrator requests that
employees update their beneficiary designations, state laws such

as the Statute at issue here will generate significant

36. Travelers, 514 U.S. at 656.

15

administrative difficulties. What if, for example, a participant
is employed by company “A” in Minnesota and is married with
children. Company A provides an ERISA benefit plan which
includes life insurance in an amount equal to one year’s salary.
The participant names his wife as the beneficiary. A year later,
the participant is offered a significant promotion involving a
transfer to the State of Washington. His spouse prefers
Minnesota to the marriage and Washington and they reach an
amicable agreement to divorce. The divorce becomes final while
he is in Washington. A year later the participant remarries, but
does not change the beneficiary designation. His new wife has
a child by a prior marriage whom the participant does not adopt.
Two years later, the participant and his new wife are killed in
an accident, and her child claims that under the Statute and
Washington’s probate laws, he is the proper ultimate recipient
of the husband’s life insurance proceeds. The complexity of
the litigation that is likely to ensue is patent, as is the burden
such litigation could impose upon Company A’s ERISA plan,
its insurance carrier, and the participant’s designated beneficiary.
The Washington State Court’s decision that the Statute is not
preempted by ERISA becomes the sole spark for such extensive
litigation requiring the involvement of the ERISA plan or its
insurance carrier.

This hypothetical scenario illustrates the clear disincentive
that sponsors or administrators of multi-state plans will now
have to create and support such plans. The increased costs and
more complex administration are deterrents, rendering the cost
of providing life insurance benefits prohibitive. Insurers
themselves will be forced to raise premiums to compensate for
the inevitable increase in interpleader actions and rise in
incidence of conflicting judgments demanding payments to
warring beneficiaries.

16

D. State “Domestic Relations Laws” Cannot Be Allowed
to Override ERISA

As part of its unilateral determination that this Court’s
Travelers opinion has substantially altered ERISA preemption,
the Egelhoff decision contends that the Statute at issue is not
preempted because it involves “domestic relations and family
law, [which] is an area of law historically left to state control.”*”
This simplistic and wholly unsound rationale simply glosses
over this Court’s decision in Boggs,** subsequent to Travelers,
which flatly rejected a doctrine that state probate and domestic
relations laws automatically trump beneficiary rules prescribed
by ERISA-qualified welfare and pension plans.

In addition, that conclusion is predicated on a grossly
overbroad definition of the scope of “domestic relations” law
reserved to the states, a definition that goes far beyond existing
precedent and is contrary to ERISA’s specific language. This
Court has held that the federal courts are divested of power
under Article III of the Constitution in very limited
circumstances, namely, “to issue divorce, alimony, and child
custody decrees.”*” Those categories, and those alone, define
the domestic relations law authority reserved to the states. The
Statute upheld in Egelhoff does not involve any state-law based
claims to the proceeds of ERISA pension and welfare benefit
plans. The State’s assertion that it can dictate the disposition of
ERISA plan benefits is not a “domestic relations” issue, but
instead an arrogation of authority in a purely federal preserve.

37. Egelhoff, 989 P.2d at 92.
38. Boggs, 520 U.S. at 841.

39. Ankenbrandt v. Richards, 504 U.S. 689, 703 (1992)
(“The domestic relations exception, as articulated by this Court since
Barber |v. Barber, 62 U.S. (21 How.) 582 (1858)], divests the federal
courts of power to issue divorce, alimony, and child custody decrees.”)

(emphasis supplied).

17

Nor has Congress hesitated to amend ERISA as it impacts
an area at the heart of what the Washington Court deems
“domestic relations and family law.” For example, Congress
enacted ERISA’s anti-alienation provision” to ensure that
pension benefits are not diverted before they are distributed to
the participant or beneficiary for whom they are intended,
normally a spouse or children. Alienation under ERISA can be
accomplished only in one specific way: by employing a qualified
domestic relations order (“QDRO”).*' No suggestion has been
made that a QDRO is involved here.

A state cannot be permitted to end-run ERISA’s requirement
that a plan must abide by “documents and instruments governing
the plan”*? whenever it asserts, in its discretion, that its own
“domestic relations” issues are involved. The upshot would be
nullification of virtually all ERISA plan criteria governing death
benefit and pension beneficiary designations, as well as
nullification of ERISA’s preemption provisions. Such an
untenable position would presumably leave intact only
beneficiary designations of non-family members, such as occurs
in “key man” insurance policies.

Finally, the “domestic relations” exception to preemption
contrived in Egelhoff cannot be reconciled with an unbroken
line of cases in which this Court has consistently protected
beneficiary designations for life and retirement benefits
mandated by federal programs against interference from state
probate and family law requirements. See, e.g., Ridgway v.
Ridgway, 454 U.S. 46 (1981), where this Court held that the

40. See 29 U.S.C. § 1056(d)( 1), enacted pursuant to the Retirement
Equity Act of 1984, Pub. L. No. 98-397, 98 Stat. 1426. See also Boggs,
520 U.S. at 851; 29 U.S.C. §§ 1056(d)(3)(A), 1144(b)(7).

41. ERISA requires a plan to pay pension benefits to an alternate
payee pursuant to a state domestic relations order if the order meets the
specific requirements prescribed in 29 U.S.C. §§ 1056(d)(3)(A),
1144(b)(7).

42. 29 U.S.C. § 1104(a)(1(D).

18

beneficiary designation under the Servicemen’s Group Life
Insurance Act, 38 U.S.C. § 765, et seq., prevailed over a state
constructive trust for the benefit of another. See also Hisquierdo v.
Hisquierdo, 439 U.S. 572 (1979) (benefits payable under the U.S.
Railroad Retirement Act may not be divided under the community
property laws of California); Mansell v. Mansell, 490 U.S. 581
(1989) (Uniformed Services Former Spouses’ Protection Act,
10 U.S.C. § 1408, did not grant state courts the power to treat as
property divisible upon divorce military retirement pay waived by
the retiree in order to receive veterans’ disability benefits. )*’

The Egelhoff decision runs contrary to the plainly expressed
purpose of Congress to forbid states from interfering with the
consistent and uniform provision of benefits provided through plans
subject to federal statutory regulation. The “domestic relations”
rationale for the decision is a contrivance which collapses when
examined in the context of the Statute’s actual effects. The sum
and substance of those effects is that states, through legislation
such as this Statute, can dictate to ERISA plans, their participants
and their designated beneficiaries, who actually will receive plan
benefits, despite written instructions to the contrary and despite
the mandate in ERISA that pension and welfare plans be
administered consistently. ERISA preempts any such conduct by
the states.

43. The only exception to this consistent Federal jurisprudence is the
aberrational situation noted in Ridgway involving so-called “state-slayer”
statutes, where state law bars any beneficiary who has committed acts such
as murder from inheriting from the decedent. Even in that exceptional (and
thankfully rare) situation, however, the federal courts are careful to point
out that the goal of uniformity of plan administration can still be achieved:

Unlike state testamentary transfer laws, state laws
prohibiting murderers from receiving death benefits are
relatively uniform. Thus, there is little threat of creating a
“patchwork scheme of regulation.” Fort Halifax Packing
Co. v. Coyne, 482 U.S. [at 11].

Mendez-Bellido v. Board of Trustees of Div. 1181, A.T.U. N.Y. Employees
Pension Fund & Plan, 709 F. Supp. 329, 332 (E.D.N.Y. 1989) (citations
omitted).

19

CONCLUSION

For the above reasons, Amicus ACLI respectfully requests
that this Court grant the Petitioner’s writ of certiorari and reverse
the decision of the Washington State Supreme Court.

Respectfully submitted,

STEPHANIE W. KANWIT
~ Counsel of Record
STEPHEN N. LAMB
EpsTeIN BECKER & GREEN, P.C.
1227 25" Street, N.W.
Suite 700
Washington, D.C. 20037-1156
(202) 861-0900

Victoria E. FIMEA

Senior Counsel, Litigation
AMERICAN COUNCIL OF LIFE INSURERS
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004

(202) 624-2183

Attorneys for Amicus Curiae

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0359%3A06. Public record. Not legal advice.