If you murder someone to collect their life insurance, are you barred from receiving the proceeds? That would seem to be a simple question, but it isn’t if the Employee Retirement Income Security Act is in the picture.
Issues of ERISA preemption make the question far more complicated than it ought to be, as shown in Standard Insurance Co. v. Guy, a recently issued decision from the U.S. Court of Appeals for the Sixth Circuit.[1]
The case involved Joel M. Guy Jr., who, according to the court’s Aug. 19 opinion, murdered his parents to collect his mother’s life insurance under an ERISA governed benefit plan.
Guy maintained that he was entitled to receive the benefits because ERISA preempted Tennessee’s so-called slayer statute that would otherwise have barred him from receiving the benefits. The Sixth Circuit affirmed the U.S. District Court for the Eastern District of Tennessee’s determination that regardless of whether the state law was preempted, Guy was disqualified from collecting the insurance indemnity.
Without getting into the gruesome details of the crime, the recitation of facts in the opinion relates that Guy was convicted of murdering his parents and his conviction was affirmed on appeal. At the time of the murder, Guy’s mother was a participant in an employer sponsored life insurance plan, as well as an accidental death insurance plan governed by ERISA. Guy was a named beneficiary under both plans.
ERISA preempts any state laws that “relate to any employee benefit plan.”[2] Under Tennessee law, “[t]he felonious and intentional killing of the decedent … [r]evokes any revocable … [d]isposition or appointment of property made by the decedent to the killer in a governing instrument.”[3]
To further clarify that law, the statute adds that a “wrongful acquisition of property or interest by a killer not covered by this section must be treated in accordance with the principle that a killer cannot profit from the killer’s wrong.”[4] Since the Tennessee law affected the status of a named beneficiary under an ERISA plan, Guy argued that the law was preempted, and that as the named beneficiary, he was entitled to the insurance proceeds.
The issue was made even more complicated by the 2001 U.S. Supreme Court decision in Egelhoff v. Egelhoff, which ruled that ERISA preempted a state law that automatically revoked an ex-spouse’s life insurance beneficiary designation upon the entry of a judgment for dissolution of marriage.[5]
Even though the Egelhoff ruling discussed whether ERISA-preempted state laws affecting life insurance beneficiary designations extended to slayer statutes as well, the issue was not resolved. However, in 2018, the U.S. Court of Appeals for the Seventh Circuit determined in Laborers’ Pension Fund v. Miscevic that the Illinois slayer statute was not preempted by ERISA.[6]
Regardless, the Sixth Circuit in Guy concluded that it did not need to definitively resolve the issue because federal law precluded Guy from collecting his mother’s life insurance.
In doing so, the court rejected Guy’s argument that if the Tennessee slayer statute were preempted, Guy would be entitled to the insurance proceeds because there is no provision of ERISA that addresses this scenario. Guy also maintained that his position was supported both by Egelhoff and by the Supreme Court’s 2009 decision in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, which held that a plan administrator was required to pay retirement benefits to a deceased participant’s ex-wife, even though she had waived her right to the benefits in a marital settlement agreement that had been entered into at the time of the divorce.[7]
In the absence of a qualified domestic relations order, the court followed Egelhoff in laying down a “pay the designated beneficiary” rule to avoid subjecting plan administrators to the burden of having to consult extrinsic documents and make determinations regarding state law. However, the court maintained that the general rule was not absolute and was situation-dependent, such as where a beneficiary designation was the result of undue influence or a fraudulently procured designation.
The Sixth Circuit in Guy explained that the situation of a designated beneficiary who murders a life insurance plan participant is “much like” situations involving undue influence and fraud since they are all derived from “the recognition that the law prohibits a wrongdoer from benefitting from his crime and in part by assumptions about the donor’s intent.”
Yet another rationale offered by the court was that applying a slayer rule “does not require a plan administrator to make ‘factually complex and subjective determinations,’ unaccounted for in plan documents.”[8] In this instance, Guy had been found guilty of murder and his conviction was upheld by a reviewing court.
The court also pronounced that federal common law was applicable, citing Supreme Court precedent directing lower courts to develop a “federal common law of rights and obligations under ERISA-regulated plans.”[9] In Egelhoff, the Supreme Court observed in dictum that the principle behind slayer rules “is well established in the law and has a long historical pedigree predating ERISA.”[10]
Indeed, as far back as 1866 in New York Mutual Life Insurance Co. v. Armstrong, the Supreme Court concluded: “It would be a reproach to the jurisprudence of the country, if on [sic] could recover insurance money payable on the death of a party whose life he had feloniously taken.”[11] The Sixth Circuit also cited numerous other sources showing how well entrenched the slayer rule is in American jurisprudence.
Thus, absent any existing contrary public or statutory policy, the Sixth Circuit ruled: “Assuming that ERISA preempts Tennessee’s slayer statute, the federal common-law slayer rule controls in this case.”
The final issue for the court’s consideration was whether Guy’s conduct fell within the slayer rule. In some jurisdictions, the slayer rule is inapplicable to self-defense or in cases of insanity.[12] However, first-degree murder is not excepted. Thus, given Guy’s conviction, the court ruled he was barred from receiving the proceeds of his mother’s life insurance.
While the conclusion reached by the court in Guy is consistent with well-established public policy, state appellate courts in Ohio and Oregon found the ruling in Egelhoff meant that state slayer laws were preempted because they related to employee benefit plans, thus permitting murderers to recover their victims’ life insurance.[13] Therefore, absent a ruling from the U.S. Supreme Court, the preemption issue remains open to question.
Something akin to the court’s alternative finding in Guy, that federal common law could apply a general slayer rule, was also used by the U.S. District Court for the Southern District of Indiana in 2007. In Life Insurance Company of North America v. Camm, the court ruled that it need not decide the question of preemption because federal common law would preclude a convicted murderer from recovering life insurance as a beneficiary of his murder victim.[14]
While Camm and Guy are relatively easy cases, applying federal common law to situations where a state statute would not exempt an insane killer from the prohibition against inheriting from the victim, or a situation involving self-defense, would present a much more difficult case.
What the ruling in Guy illustrates is that the Supreme Court’s Egelhoff and Kennedy decisions have raised difficult questions that have required courts to engage in extensive mental gymnastics to avoid the broad reach of ERISA preemption. As to the slayer rule, this issue could be resolved in one of two ways — either the Supreme Court can issue a definitive opinion on ERISA preemption that clears up the confusion, or Congress could pass a federal slayer statute since ERISA preemption applies only to state law.
A federal judge for the U.S. District Court for the Northern District of Alabama began a 1993 opinion in Florence Nightingale Nursing Service Inc. v. Blue Cross and Blue Shield of Alabama with these words: “A hyperbolic wag is reputed to have said that E.R.I.S.A. stands for ‘Everything Ridiculous Imagined Since Adam.'”[15] The Guy ruling reveals the truth of those words when it comes to ERISA preemption, although the court still managed to apply common sense to avoid a perverse outcome.
Mark DeBofsky is a shareholder at DeBofsky Law Ltd.
This article was first published by Law 360 on September 3, 2024.
[1] Standard Insurance Co. v. Guy, 2024 U.S. App. LEXIS 20896, 2024 FED App.0185P (6th Cir.) (August 19, 2024).
[2] 29 U.S.C. § 1144(a).
[3] Tenn. Code Ann. § 31-1-106(c)(1)(A).
[4] Id. § 31-1-106(f).
[5] Egelhoff v. Egelhoff, 532 U.S. 141, 144, 146, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001).
[6] Laborers’ Pension Fund v. Miscevic, 880 F.3d 927, 934 (7th Cir. 2018).
[7] Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285, 129 S.Ct. 865, 172 L.Ed.2d 662 (2009).
[8] Kennedy, 555 U.S. at 302, 129 S.Ct. 865 (internal quotation marks omitted).
[9] Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989).
[10] Egelhoff, 532 U.S. at 152, 121 S.Ct. 1322 (citing Riggs v. Palmer, 115 N.Y. 506, 22 N.E. 188 (1889)).
[11] Mut. Life Ins. Co. v. Armstrong, 117 U.S. 591, 600, 6 S.Ct. 877, 29 L.Ed. 997 (1886).
[12] See, e.g., Holdom v. Ancient Order of United Workmen, 159 Ill. 619, 43 N.E. 772, 774 (1895) (excluding insanity from slayer rule).
[13] Ahmed v. Ahmed, 158 Ohio App. 3d 527, 533, 817 N.E. 2d 424, 429 (Ohio App. 2004); Herinckx v. Sanelle, 281 Or. App. 869, 875-77, 385 P.3d 1190 (2016).
[14] Life Ins. Co. of N. Am. v. Camm, No. 4:02-cv-00106, 2007 U.S. Dist. LEXIS 58456, 2007 WL 2316480 (S.D. Ind. August 6, 2007).
[15] Forence Nightingale Nursing Serv. v. Blue Cross & Blue Shield, 832 F.Supp. 1456, 1457 (N.D. Ala. 1993).
