A MILITARY LIFE INSURANCE POTHOLE
December 10, 2010 § 2 Comments
You have tried your divorce case to a conclusion and your client, the wife, is awarded custody and statutory child support. The husband, an active-duty member of the Navy, is ordered to maintain his Serviceman’s Group Life Insurance (SGLI) policy for benefit of the minor child. It would appear that everything is peachy-keen. Your client is on cruise control, right?
Not so fast, my friend. Your client’s limo is headed for a major pothole. Consider the following:
Richard and April Ridgway were divorced in 1977 in the State of Maine. They had three children at the time.
In the divorce judgment, the trial court ordered Richard to maintain his SGLI policy in the face amount of $20,000 with April as beneficiary for benefit of the three minor children.
Richard later married Donna and changed the designation of the beneficiary to provide that the proceeds would be paid as specified “by law,” which under federal law means that it would be paid to his widow, who would be Donna. Richard died and both April and Donna filed claims to the proceeds.
April filed suit in Maine courts seeking imposition of a constructive trust for benefit of her children. Donna joined the suit seeking payment to herself based on the designation of beneficiary by Richard.
The case wended its way to the U.S. Supreme Court, and in Ridgway v. Ridgway, 454 US 46 (1981), that court held that due to the supremacy clause, a state court ruling must yield to federal law that gives a serviceman the unfettered right to designate his own SGLI beneficiary, and for such policies to be exempt from attachment, execution and other process for collection.
What all this means is that the state trial court judge’s rulings vis a vis the SGLI is essentially meaningless.
So what can you do? One solution may be to ask the court to take judicial notice of the Ridgway decision (and provide the judge a copy), and have your client testify that she insists that the husband obtain and maintain a private policy of life insurance with the children as sole named beneficiary. If you put all your client’s eggs in the SGLI basket, she may find it empty when egg-gathering time arrives. And she just might look to you to make things right.
Thanks to attorney Bill Jacob for this. I have not researched this issue for later authority, but Bill tells me it is good law.
The Better Chancery Practice Blog 
[…] Another post highlighting a similar preemption problem with military life insurance beneficiary designation is here. […]
[…] judge will usually order the servicemember to maintain the child as beneficiary on the SGLI policy. Judge Larry Primeaux notes in his blog that such an order violates the Supremacy Clause of the U.S. […]