During the New Year’s season we often reflect on the blessings we have received over the course of the last year and give thanks. Many of us visit family during this time and if we are fortunate enough our parents. This past week, the Sixth Circuit of the United States Court of Appeals affirmed the decision of the United States District Court in the case of Sun Life Assurance Co. v. Jackson that involved the distribution of a deceased father’s life insurance policy proceeds to his daughter even though he failed to change the beneficiary designation to his daughter from his brother. In this case the parties were married in 1993 and one child was born of the marriage in 1995. The mother and father were divorced in 2006 and the father agreed to maintain any employer-related life insurance policy for the benefit of his only daughter. The provision read as follows: “In order to secure the obligation of the parties to support their child during her minority, Father and Mother shall maintain, unencumbered, all employer provided life insurance, now in existence at a reasonable cost, or later acquired at a reasonable cost, naming their minor child as primary beneficiary during her minority; and the obligation to do so shall continue until she . . . reach(es) the age of eighteen (18) or graduates from high school, whichever occurs last . . . .”
Sadly, the father died in 2013 and litigation later ensued because he never changed the beneficiary designation before his death. The insurance company sought declaratory judgment that they properly paid the proceeds to the father’s brother who was still listed as the beneficiary. The daughter crossclaimed that the proceeds were rightfully her property under the divorce decree. The court found in favor his daughter because “the divorce decree suffices as a qualified domestic relations order that ‘clearly specifies’ [daughter] as the beneficiary under the Employee Retirement Income Security Act, 29 U.S.C. § 1056(d)(3)(C). In its decision the court addressed two questions: “One: What is the test for determining whether a qualified domestic relations order permissibly changed the beneficiary of an ERISA-covered life insurance plan? Two: Does this divorce decree satisfy that test?”
The test the court applied in in answering question one was the “clearly specifies” test. Under § 1056(d)(3)(C) “a domestic order meets the requirements of this subparagraph only if such order clearly specifies— (i) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order, (ii) the amount or percentage of the participant’s benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined, (iii) the number of payments or period to which such order applies, and (iv) each plan to which such order applies.” In digging down to determine what exactly is meant by the term “clearly specifies” the court noted that it does not require “Simon Says rigidity or demands magic words.” The court went on to state: “One may ‘clearly specify’ something by implication or inference so long as the meaning is definite. See Oxford English Dictionary 159 (2d ed. 1989) (To specify means ‘to mention, speak of, or name (something) definitely or explicitly’); Webster’s New International Dictionary 2415 (2d ed.1934) (‘to mention or name in a specific or explicit manner’).” An everyday example of this point that the court mentions is that one may clearly specify to a grocery cashier when asked “paper or plastic?” by stating either “paper” or “not plastic” to effectuate the same outcome. Here the court concluded that “a similar approach, informed by common sense and context, applies to the naming of the beneficiary of a life insurance policy. The statute does not require that a particular provision of the divorce decree clearly specify the relevant details.” The court then applied the “clearly specifies” test to the divorce decree and found it passes the test being that it incorporates both the separation agreement and shared parenting plan. They identified the parties and listed their addresses. Article IX required the father to maintain life insurance “naming their minor child as primary beneficiary.” Page 1 stated that “[t]he parties have one (1) child born the issue of this marriage, namely: Sierra N. Jackson, born February 9, 1995.” The court concluded that the “agreement thus clearly specifies Sierra Jackson as the alternate payee.” Article IX specifies that father shall maintain “all employer provided life insurance . . . naming their minor child as primary beneficiary.” As to plan identity, Article IX identifies “all employer-provided life insurance.” Therefore, the daughter prevailed and the proceeds from the policy were paid to her with interest.