We often discuss the bad conduct by insurance companies and plan administrators. But what if a beneficiary engages in bad conduct? Some bad conduct can be grounds for refusing to pay a claim. For example, if a husband murders his wife, is he still entitled to her life insurance benefits? That doesn't seem right. And in fact, most state laws prevent one from profiting from such conduct. But ERISA preempts state law.
In Hartford Life Ins. Co. v. LeCou, the court found, “‘Congress could not have intended ERISA to allow one spouse to recover benefits after intentionally killing the other spouse.' Laborers' Pension Fund v. Miscevic, 880 F.3d 927, 934 (7th Cir. 2018) (citing Conn. Gen. Life Ins. Co. v. Riner, 351 F. Supp. 2d 492, 497 (W.D. Va. 2005). Consistent with those decisions, the Court finds that ERISA does not preempt Montana Code Annotated § 72-2-813 (2).” The Montana statute cited by the court precludes a murderer from receiving a benefit because of the murder.
If the murderer or bad actor is prevented from receiving the benefits, what happens then?
Many pension plans contain something called a “bad boy or bad girl” clause in which a recipient of the survivor benefit is precluded from receiving that benefit if the recipient's conduct caused the death of the pensioner.
We handled a case where the pensioner was shot to death while he was sleeping on a couch. His wife went to prison for it. The pension plan did not have a “bad girl” clause precluding her from receiving the pension benefit. But it would be inequitable for his murderer to receive the benefits. The problem was that the pension plan did not provide for alternate beneficiaries. We argued for the kids – requesting that the pension benefit be paid to the wife but held in trust for the kids. The court didn't buy it and allowed the pension to keep the proceeds.
ERISA is unfair. But we are not deterred. If your client has an ERISA life insurance case, it is crucial that they hire an experienced life insurance attorney.