Matschiner v. Hartford Life & Accident Insurance

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 09-3576
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Katherine Matschiner; Kristina *
Matschiner, *
*
Plaintiffs - Appellees, *
*
v. *
* Appeal from the United States
Hartford Life and Accident Insurance * District Court for the
Company, * District of Nebraska.
*
Defendant - Appellant. *
------------------------------------------------ *
Hilda Solis, Secretary of Labor, *
*
Amicus on Behalf of Appellant. *
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Submitted: June 15, 2010
Filed: October 7, 2010
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Before LOKEN, ARNOLD, and GRUENDER, Circuit Judges.
___________

LOKEN, Circuit Judge.

In 1991, RoJane Lewis obtained life insurance under a group policy issued by
Hartford Life and Accident Insurance Company to her employer, Inacom Corporation.
She submitted a beneficiary designation form granting sixty percent of the death
benefit to her husband, Alan Lewis, and twenty percent to each of her daughters,
Katherine and Kristina Matschiner. RoJane died in April 2005. When Hartford
located the designated beneficiaries in June 2007, Katherine Matschiner advised that
Kristina had a more recent beneficiary designation and that Alan Lewis intended to
disclaim his share of the $122,000 death benefit. Hartford contacted Alan, who stated
that he wished to collect his share of the death benefit and submitted a signed claim
form. The daughters also submitted claim forms, and Kristina faxed Hartford a copy
of a November 2000 divorce decree in which a Nebraska state court awarded Alan and
RoJane, individually, the “cash values of any life insurance policies currently owned
by him or her or the cash proceeds . . . to be received therefrom.” When neither
daughter submitted a more recent beneficiary designation, Hartford paid the policy
benefits in accordance with the 1991 designation in its files.

The Matschiners sued Hartford and Alan Lewis in state court to recover the
benefit paid to Alan. Hartford removed the action because the policy was an
employee welfare benefit plan governed by the Employee Retirement Income Security
Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq. The district court granted
summary judgment to the Matschiners, concluding that Hartford abused its discretion
by paying the death benefit in accordance with the 1991 designation. Hartford moved
for reconsideration after the Supreme Court decided Kennedy v. Plan Administrator
for DuPont Savings & Investment Plan, 129 S. Ct. 865 (2009). The district court
denied the motion, distinguishing Kennedy, ordered Hartford to pay the contested
benefit directly to the Matschiners, and awarded them attorneys’ fees. Hartford
appealed after the court directed entry of final judgment pursuant to Rule 54(b) of the
Federal Rules of Civil Procedure.1 The Secretary of Labor, appearing as amicus
curiae, argues that Hartford paid the death benefit in accordance with the plan

1
We independently review whether the district court’s Rule 54(b) determination
that there was “no just reason for delay” properly conferred appellate jurisdiction
under 28 U.S.C. § 1291. See Interstate Power Co. v. Kansas City Power & Light Co.,
992 F.2d 804, 806-07 (8th Cir. 1993). As the district court granted relief against
Hartford that, if upheld, would likely make it unnecessary to resolve the distinct
claims against Alan Lewis, there was no abuse of the court’s Rule 54(b) discretion.

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documents and therefore complied with ERISA as construed in Kennedy. We agree
and accordingly reverse.

I.

When RoJane became permanently disabled in 1994, Hartford continued her
group life insurance, with premiums waived, even after Inacom, the group life
policyholder, went out of business some years later. Hartford learned of RoJane’s
death in 2005 and began an extensive search for the designated beneficiaries. When
Katherine responded in June 2007 and advised that her sister had a later beneficiary
designation, Hartford asked that it be submitted. Instead, Kristina faxed a copy of the
divorce decree. Hartford’s attempt to obtain more information from defunct Inacom
went unanswered. After Alan submitted a claim for his share of the death benefit, he
complained to the Nebraska Department of Insurance when Hartford did not promptly
pay the claim. The Department demanded that Hartford explain the delay. Hartford
then paid the death benefit in accordance with the 1991 beneficiary designation form,
the only designation in its files. After these payments, the Matschiners’ attorney sent
Hartford a beneficiary designation signed by RoJane in December 1997 granting forty
percent of the life insurance benefit to Alan and thirty percent to each daughter. This
document was found in RoJane’s “personal files.”

In granting summary judgment to the Matschiners, the district court relied on
Eighth Circuit cases applying federal common law and concluded that the divorce
decree divested Alan of his beneficiary rights to the life insurance proceeds even
though RoJane submitted no designated beneficiary form reflecting this change. See
Hill v. AT&T Corp., 125 F.3d 646, 648-50 (8th Cir. 1997); Mohamed v. Kerr. 53 F.3d
911, 914 (8th Cir. 1995). In Kennedy, a unanimous Supreme Court resolved a conflict
in the circuits on this issue. Consistent with its prior decision in Egelhoff v. Egelhoff
ex rel. Breiner, 532 U.S. 141, 147-48 (2001), the Court held that ERISA’s statutory
mandates that a plan “specify the basis on which payments are made to and from the

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plan,” 29 U.S.C. § 1102(a)(1), and that the plan administrator act “in accordance with
the documents and instruments” of the plan, § 1104(a)(1)(D), foreclose any federal
common law inquiry into whether a properly designated beneficiary’s divorce decree
waived his or her entitlement to plan benefits. 129 S. Ct. at 875-77. Hartford and the
Secretary argue that principle is controlling here.

The savings and investment plan at issue in Kennedy was an “employee pension
benefit plan” under ERISA, 129 S. Ct. at 868, whereas the group life insurance plan
here at issue was a “welfare benefit plan.” Although the distinction is important in
other ERISA contexts, we agree with Hartford and the Secretary that the “plan
documents rule” of Kennedy applies to the payment of benefits under both kinds of
plans. First, the Court in Kennedy concluded that the rule is mandated by 29 U.S.C.
§§ 1102(a)(1) and 1104(a)(1)(D), ERISA provisions that apply to both kinds of plans.
Second, the Court’s reasons for applying the plan documents rule, rather than federal
common law “inquiries into nice expressions of intent,” apply to the administration
of both kinds of plans -- a “straightforward rule of hewing to the directives of the plan
documents” has the virtues of “simple administration, avoiding double liability, and
ensuring that beneficiaries get what’s coming quickly, without the folderol essential
under less-certain rules.” 129 S. Ct. at 875-76 (quotation omitted). Finally, among
the prior cases expressly overruled in Kennedy was our decision in Mohamed v. Kerr,
which involved a group life insurance plan like the plan here at issue. Id. at 870 n.5.

The district court did not discuss whether Kennedy applies to welfare benefit
plans generally. Rather, the court held that the holding in Kennedy was limited by
footnote 13, in which the Court stated, “[w]e do not address a situation in which the
plan documents provide no means for a beneficiary to renounce an interest in
benefits.” Id. at 877. As the plan in Kennedy included an express provision for the
disclaimer of an interest in a savings and investment account, and Hartford’s group
policy contained no “formal procedures” for the waiver of a designated beneficiary’s
interest in life insurance proceeds, the district court concluded that the federal

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common law of trusts as construed in Mohamed, rather than the plan documents rule,
applies in this case. We disagree.

The Supreme Court did not explain why it added the cautionary footnote 13, but
we are confident the Court did not intend to exempt from the plan documents rule all
welfare benefit plans that do not contain an express waiver-of-benefits provision. As
Kennedy explained, employee pension plans under ERISA must contain an anti-
alienation provision but may permit a beneficiary to submit a disclaimer of benefits
if it is “qualified” under the Tax Code. 129 S. Ct. at 868-69. Welfare benefit plans
are not subject to ERISA’s anti-alienation requirement and have no corresponding
need to include an express waiver-of-benefits provision. Before its discussion of the
plan documents rule, where footnote 13 appears, the Court noted that “[c]ommon
sense and common law both say that the law certainly is not so absurd as to force a
man to take an estate against his will.” Id. at 872 (quotation omitted). We suspect
that footnote 13 was simply a reminder that “common sense and common law” may
apply to prevent the plan documents rule combined with ERISA’s anti-alienation
provision from precluding a pension benefit plan beneficiary from disclaiming an
unwanted interest. Here, by contrast, the plan beneficiary, Alan Lewis, has claimed
his interest in the death benefit. As in Kennedy, the plan documents, not the divorce
decree, are controlling.

II.

Without examining the plan documents, the district court ruled, alternatively,
that Hartford abused its discretion when it paid the death benefit according to the 1991
designation, six weeks after Katherine Matschiner advised that Kristina had a later
designation. Though Hartford requested the later designation, and neither daughter
furnished it, the court concluded that Hartford should have warned the Matschiners
that it would pay in accordance with the 1991 designation; instead, it “abruptly” paid
Alan’s claim in response to a Department of Insurance investigation despite being on

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notice of “a legitimate dispute between the beneficiaries.” On appeal, the Matschiners
do not defend this alternative ruling, and Hartford argues the issue is therefore waived.
We put the issue of waiver aside because we conclude that Hartford acted in
accordance with the plan documents and therefore did not abuse its discretion. See
King v. Hartford Life & Accident Ins. Co., 414 F.3d 994, 998-99 (8th Cir. 2005) (en
banc) (standard of review).

As relevant here, Hartford’s Group Insurance Policy provided:

BENEFITS
Life Insurance

Death Benefit and to Whom Payable

When The Hartford receives due proof of your death, the Amount of Life
Insurance on your life will be paid.

Payment will be made in a lump sum to the beneficiary or beneficiaries
named in writing by you, provided the names are on file with the
Policyholder.
* * * * *

Any payment made in accordance with the preceding provisions shall
release The Hartford from further liability for the amount paid.

* * * * *

Change of Beneficiary

You may change your beneficiary at any time by:
(1) making such change in writing on a form acceptable to The Hartford;
and
(2) filing the form with the Policyholder.
After such notice is received, the change will take effect as of the date
you signed it, even if you have since died. However, The Hartford will

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 not be liable for further payment of any amounts paid before it receives
such written notice of change.

* * * * *

CLAIMS
Life Insurance

If you die, your beneficiary will be furnished a claim form. . . . When
the required claim papers are received and approved by The Hartford, the
Amount of Life Insurance on your life will be paid.

* * * * *

Time Payment of Claims
. . . . Payment for loss of life will be made:
(1) according to the beneficiary designation in effect when payment is
made, or, if none is in effect;
(2) to your estate.

In applying these plan documents, the 2000 divorce decree was irrelevant
because RoJane never signed and submitted a beneficiary designation form
eliminating Alan as a designated beneficiary, in accordance with that decree, to the
Policyholder (Inacom) or to Hartford. The record does include a 1997 designation
reducing Alan’s share from sixty to forty percent of the death benefit. Though in
writing and apparently in proper form, there is no evidence this designation was
submitted to the Policyholder, or directly to Hartford, before the death benefit was
paid. When Katherine Matschiner advised Hartford of a later designation in June
2007, Hartford asked for a copy. If the Matschiners had complied before the death
benefit was paid, Hartford might well have been obliged to pay in accordance with
this later designation because the Policyholder was out of business and the policy
otherwise terminated. But the Matschiners did not comply, and Hartford promptly
paid the claims submitted by the three beneficiaries in accordance with the only
designation in its files, as the policy required. The policy expressly provided that

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Hartford is not liable for further payment of amounts paid under an earlier designation
before it received a later designation.

In these circumstances, applying the plan documents rule, summary judgment
in favor of Hartford is clearly warranted. As the Supreme Court explained, “[t]he plan
provided an easy way for [the Matschiners] to change the designation, but for
whatever reason [they] did not. . . . The plan administrator therefore did exactly what
[29 U.S.C.] § 1104(a)(1)(D) required: the documents control . . . .” Kennedy, 129
S. Ct. at 877 (quotation omitted).

The judgment of the district court dated October 5, 2009, is reversed, including
the award of attorneys’ fees, and the case is remanded with instructions to enter
judgment dismissing the claims against Hartford with prejudice. That will leave the
Matschiners’ separate claims against Alan Lewis, which may or may not have an
independent basis of federal jurisdiction. If not, the district court will need to decide
whether to exercise its supplemental jurisdiction or to dismiss these state law claims
without prejudice. See 28 U.S.C. § 1367(c); cf. Hall v. Hall, 2009 WL 2837720 (E.D.
Pa. Sept. 3, 2009).
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