Importance of Reviewing and Updating Life Insurance Coverage After a Divorce

Employees in Chicago with life insurance coverage for their spouses often reach some agreement on retaining coverage when going through a divorce. Commonly, a person with life insurance coverage will agree to retain the coverage for the benefit of the ex-spouse as security for child support or maintenance. Some group policies allow an employee to elect coverage on a spouse’s life for their own benefit. When going through a divorce, people should be cautious about using this option in lieu of requiring a spouse to provide coverage for them as security for maintenance, as many group policies exclude ex-spouses from coverage. A person recently fell victim to this pitfall.

In Staropoli v. Metropolitan Life Insurance Company, No. 21-2500, 2023 WL 1793884 (3d Cir. Feb. 7, 2023), Ms. Staropoli had life insurance coverage on her husband under spousal coverage under her employer’s group life insurance policy. When Ms. Staropoli and her husband divorced, she reenrolled her ex-spouse as an insured and increased the coverage, unaware the group policy excluded former spouses from eligible insureds. For a few years, Staropoli paid the premiums for her ex-husband’s coverage, until he died. After he died, MetLife denied the claim, contending the group policy excludes former spouses from eligible insureds. Staropoli sued MetLife and her employer under ERISA § 502(a), contending the two-year non-contestability clause prevented MetLife from contesting coverage, and that the employer failed to disclose the policy exclusion.

Staropoli lost at both the district court and on appeal to the Third Circuit. The court held MetLife clearly was not liable because the group policy excluded former spouses from coverage. Also, though Staropoli may not have read the various disclosures, the employer disclosed to employees that former spouses were not eligible for spousal coverage under the policy.

If you have spousal coverage under your employer’s group life insurance plan and are negotiating retaining insurance coverage in a divorce proceeding, talk to an experienced ERISA lawyer about your policy’s limitations and exclusions before finalizing any marital settlement agreement.