Importance of Updating Beneficiary Designations in Life Insurance Policies

Employees in Chicago with employer sponsored life insurance coverage often enroll for the coverage once, and the benefits automatically renew every year. When enrolling, you need to list a beneficiary of the life insurance coverage, else the beneficiary may be your estate. People usually name a beneficiary upon enrolling in the coverage, but often forget to periodically review and update those beneficiary designations, even after significant life events, such as divorce. There may be reasons to leave a former spouse as a named beneficiary of the life insurance, such as a marital settlement agreement agreeing to keep the former spouse insured to secure maintenance payments. But if there is no such requirement to maintain the former spouse as the beneficiary, you should review and update your coverage. A recent case showed the unintended consequences that can occur from failure to update the beneficiary designation.

In The Lincoln National Life Insurance Co. v. Subramaniam, No. 21-cv-12984, 2023 WL 2789602 (E.D. Mich. Apr. 5, 2023), the decedent divorced Ms. Subramaniam and subsequently married Brindha Periyasamy. But the decedent originally named Subramaniam as beneficiary, but did not update the beneficiary designation after his divorce, or after remarrying Periyasamy. Both Subramaniam and Periyasamy submitted claims for the life insurance: Subramaniam as the named beneficiary, and Periyasamy as the current spouse. Lincoln then initiated an interpleader lawsuit for the court to determine the proper beneficiary of the life insurance proceeds under ERISA § 502(a). Both Subramaniam and Periyasamy filed motions for judgment against each other.

The United States for the Eastern District of Michigan ruled in favor of Subramaniam, the former spouse, and against Periyasamy, the current spouse. Subramaniam argued she was the named beneficiary, and required to be paid under the terms of the plan. Periyasamy argued the court should disregard the beneficiary designation because the decedent and his former spouse did not maintain a friendly relationship. The court found Periyasamy’s argument insufficient to disregard the decedent’s beneficiary designation, and awarded the benefits to Subramaniam.

If your claim for life insurance benefits has been denied, contact an experienced ERISA life insurance attorney today.