Court does not enforce spreadsheet entry

In McKenzie v. McKenzie, SA-17-CA-232-HJB (W.D. Tex. Apr. 9, 2019) the United States District Court, Western District of Texas San Antonio Division the court considered whether an electronic spreadsheet indicating an ERISA policy beneficiary absent any of the other required designations of beneficiary forms offered by the insurance provider would suffice to establish beneficiary status. The court concluded that under ERISA strict compliance with the policy’s documentation requirements were not satisfied by a notation of the decedent’s beneficiary on an electronic spreadsheet.

Tressa McKenzie and Aaron McKenzie were married on July 26, 2009. Aaron’s first marriage had ended in divorce but had produced a daughter, Antwonique McKenzie. Aaaron McKenzie was employed by Star Shuttle which offered an "employee welfare benefit plan" as defined by ERISA.  On or about May 20, 2016, Aaron McKenzie purchased an $80,000 term life insurance policy from Dearborn through Star Shuttle. A third party, Sun Life Financial, acted as the enroller for the Policy.   The Dearborn policy stated that life insurance proceeds would be paid to the decedent’s “beneficiary.”

Aaron McKenzie passed away on January 22, 2017. After his death Star Shuttle attempted to determine the beneficiary of his life insurance policy. Upon investigation it found that there Aaron McKenzie had not designated a beneficiary on a written form; rather, because Aaron had signed up for the policy through an online “enroller” system, there was only a computer spreadsheet indicating the beneficiary. The spreadsheet indicated that the beneficiary was Aaron’s daughter, Antwonique McKenzie.

After Aaron McKenzie’s death, both Plaintiff and Defendant filed claims seeking life insurance benefits. Star Shuttle informed Dearborn that Plaintiff was the beneficiary of the policy, but that it had no more than a spreadsheet entry to show this. Dearborn, in turn, contacted both Plaintiff and Defendant by letter, advising them of their competing claims and indicating that, if an agreement could not be reached between them, it would file an interpleader action in court “to determine judicially which [of them] is the rightful claimant.” “In other words,” Dearborn continued, “if we cannot determine who the beneficiary is, the courts decide.” In response to Dearborn’s letter, Defendant agreed to a 50/50 split of the life insurance proceeds; Plaintiff, however, did not. In light of the dispute regarding the proceeds of the death benefit, Dearborn filed an interpleader action.

The Dearborn policy included a provision allowing for electronic forms to be treated as “written”; by its terms, however, this provision applies only to claim forms, not to the designation of beneficiaries. Further, the policy required that the designation of the life insurance beneficiary “must be made on a form which [Dearborn] provide[s] or on a form accepted by [Dearborn].” According to the policy if no beneficiary was named, Dearborn “will pay the amount of insurance ... to [the decedent’s] spouse, if living.”

For purposes of the above Policy provisions, the term "form" is not defined. However, Dearborn's "Statement of ERISA Rights," which was submitted in evidence, indicates that a "form in writing" may include electronically submitted documents.

According to testimony in a deposition upon written questions given by Star Shuttle records custodian Christina Carmen Casas, Antwonique McKenzie was the designated primary beneficiary under the policy. The only source Casas could identify for this information was a spreadsheet entry in Star Shuttle records indicating that Antwonique McKenzie was the beneficiary.

In consideration of the competing claims to the policy, the court looked to the statutory language of ERISA. Under the statute, a plan administrator is obliged to act following the documents and instruments governing the plan insofar as such documents and instruments are consistent with the applicable provisions of ERISA. See 29 U.S.C § 1104(a)(1)(D).  In accordance with the guidance provided by ERISA, the court noted that the Policy states that the participant may designate a beneficiary "on a form which [Dearborn] provide[s] or on a form accepted by [Dearborn]." Accordingly, the court concluded that Aaron McKenzie did not submit a "form"—his enrollment and designation were processed electronically online and recorded in a spreadsheet maintained by a third-party enroller.

Because Antwonique McKenzie was not the properly designated beneficiary of the Dearborn Policy, the benefits of the Policy must be paid to Aaron McKenzie's surviving spouse, Tressa McKenzie. Because Dearborn neither provided nor accepted the electronic spreadsheet as a form designating a beneficiary, Aaron McKenzie did not "name a beneficiary" under the terms of the Policy. Accordingly, the Policy requires that the insurance benefit be paid to Aaron McKenzie's "spouse if living.” Tressa McKenzie was Aaron McKenzie's spouse at the time of his death; accordingly, she is entitled to the death benefit under the Policy.

J. Michael YoungComment