Michigan federal court does not fault insurer for paying portion of policy proceeds

Metlife v. Robinson is a life insurance beneficiary dispute pending in the federal Eastern District of Michigan. Metlife filed an interpleader lawsuit after facing competing claims to the life insurance proceeds of a former employee of General Motors.

The Decedent had basic and optional life insurance coverage through General Motors, administered by Metlife. He had executed a series of different beneficiary designations from 2014 through 2017. According to Metlife, the first designation in 2014 left 100% of the proceeds of the basic and optional policies to his wife. The second designation in 2015 modified the supplemental coverage, leaving it to the decedent’s two children and to his sister. The third designation in 2017 was somewhat confusing. In a form, he designated his spouse as 80% beneficiary of both policies, with the remaining to his two children. But the letter stated he was leaving 100% of the basic and 80% of the supplemental to his wife, with his two children receiving the balance of the supplemental. Metlife then sent him a letter confirming the letter designation. There was also a new designation by telephone later in 2017 that included his two stepchildren.

After his death, Decedent’s two children notified Metlife they were contesting one or more of the designations. They included various documents intended to show Decedent had a negative view of his wife and that he intended a designation scheme different from those Metlife had on file.

Metlife sent 80% of the basic life proceeds to the wife, because under the various designations she was to receive at least that amount. Metlife than filed an interpleader for a court to resolve who should receive the remainder of the benefits.

After Metlife filed the interpleader, the sister and two children filed a counterclaim against Metlife. They contended Metlife wrongfully paid 80% of the basic life benefits to the wife, claiming that: (1) MetLife acted arbitrarily and capriciously to change Decedent’s beneficiary designations; (2) MetLife breached Decedent’s insurance agreement; (3) MetLife breached an implied covenant of good faith and fair dealing; (4) MetLife tortiously breached an implied covenant of good faith and fair dealing; (5) MetLife acted in bad faith; and (6) MetLife engaged in unfair trade practices.

Because the policy was governed by ERISA, Metlife moved to dismiss all of the state law claims. The Court unsurprisingly agreed that federal ERISA law preempted claims under Michigan state law. The court did find that the children could assert an “arbitrary and capricious” claim against Metlife under ERISA. However, the Court ultimately dismissed that claim, finding that under the circumstances Metlife did not abuse its ERISA discretion in distributing 80% of the basic life proceeds to the wife and only interpleading the rest.

Anyone contesting or defending an ERISA life insurance beneficiary designation should consult an attorney experienced in evaluating such claims.

J. Michael YoungComment