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ERISA Preempts State Community Property Law in Interpleader Action

ERISA Preempts State Community Property Law in Interpleader Action

Companion Life Ins. Co. v. McCreary, 2016 WL 3090649 (D.S.C. May 9, 2016)

ERISA and Life Insurance News
(November, 2016)

Companion Life issued a group life insurance policy, insuring employees of The Society of St. Vincent de Paul as part of an employee welfare benefit plan. Rodney Moore, an employee of The Society, enrolled in the group policy and designated his mother, Jean Bankett, as the beneficiary.

The policy was delivered in Arizona, where Moore worked and lived until his death. After his death, Moore’s wife, Michelle McCreary, claimed that she was entitled to 50% of the death benefit under the community property law of Arizona.

Faced with competing claims for the death benefit, Companion Life filed an interpleader action. The court recognized and the parties did not dispute that the policy was governed by ERISA. McCreary argued, however, that there was no conflict with ERISA if the court were to apply the Arizona community property law first, awarding her 50% of the death benefit, prior to administering the plan to pay the remaining benefit to Bankett as the designated beneficiary.

Citing Egelhoff  v. Egelhoff, 532 U.S. 141 (2001), the court rejected McCreary’s argument. The Arizona community property law related to and attempted to affect benefits paid pursuant to the plan, and therefore, was preempted by ERISA.

The court also rejected Bankett’s assertion that she should receive an award of interest on the death benefit as compensation for the delay caused by McCreary’s claim. The court found that Companion Life’s interpleader action was properly filed. Auto Parts Mfg. Miss., Inc. v. King Constr. of Houston, LLC, 782 F.3d 186, 194 (4th Cir. 2015) (“It is not for the district court, in determining whether interpleader is proper, to consider whether the competing claims are meritorious.”).

Click here to view the full November 2016 Edition of the ERISA and Life Insurance News.

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