District Court Upholds MetLife’s Payment Of Life Insurance Proceeds To Intestate Decedent’s Mother

In Graves v. Metro. Life Ins. Co., No. 4:23-CV-00947, 2023 WL 4237099 (S.D. Tex. June 28, 2023), Texas Southern District Judge granted MetLife’s Motion to Dismiss a Complaint brought by the estate administrator seeking to bar MetLife from paying ERISA-governed life insurance proceeds to decedent’s mother. This action involves a three-way dispute over the life insurance proceeds of decedent. Plaintiff is the administrator of the decedent’s estate and contends that that the estate is entitled to the proceeds. Cross-Complainant is the former spouse of decedent and contends he is entitled to the benefits. Finally, Defendants MetLife and decedent’s mother assert that the proceeds belong to her.

While employed by Delphi Automotive, decedent held a life insurance policy with Sun Life Financial designating his then-spouse as beneficiary. In 2015, when decedent’s employment terminated, the policy was automatically ported, and he no longer had an active beneficiary designation on file with MetLife. Decedent divorced in 2021 and died intestate on January 27, 2022. A year later, Plaintiff was appointed as the estate administrator, and submitted a claim for the life insurance proceeds. Decedent’s former spouse also submitted a claim. MetLife denied both claims identifying a third-party claimant, decedent’s mother, was eligible to receive the proceeds pursuant to the terms of the policy which stated: “If there is no beneficiary at Your death for any amount of benefits payable because of Your death, that amount will be paid to one or more of the following persons who are related to You and who survive You: (a) Spouse; (b) child; (c) parent. However, we may instead pay all or part of that amount to Your estate. Any payment will discharge Our liability for the amount so paid.”

The administrator filed the instant petition in state court seeking declaratory judgment that the estate is the proper beneficiary, and an injunction restraining MetLife from distributing the proceeds. MetLife removed the action to federal court.

The Court denied both the administrator and former spouse’s motions to remand finding: (1) MetLife did not need to obtain the consent of the defendant former spouse to removal because the exception to the general rule requiring the consent of all defendants applied—that there was no reasonable basis to predict that the plaintiff administrator could recover against the former spouse; (2) federal question jurisdiction exists based on ERISA, so diversity among the parties is unnecessary; and (3) the probate exception, requiring the administration of decedent’s estate remain in probate court does not bar federal courts from adjudicating matters outside the confines of the estate, such as a dispute over life insurance proceeds, governed by ERISA. The Court also granted the motion to dismiss brought by decedent’s mother, concluding that the Court lacked personal jurisdiction over her as she had not resided in Texas since the death of her son.

Finally, the Court granted MetLife’s motion to dismiss the action. MetLife’s motion focused on the plan language stating that MetLife “will” pay the amount to one or more of the individual’s spouse, child, or parent, but “may” pay all or part of that amount to the Estate. MetLife argued that because the “will” language is mandatory, and the “may” language is merely permissive, MetLife must first pay the benefits to an individual in one of the listed categories if such an individual exists. Plaintiff disagreed asserting that the plan language provides that MetLife “may instead” pay the proceeds to the Estate, and use of the word “instead” means that MetLife may alternatively or as a substitute pay the Estate rather than a listed individual. Plaintiff also pointed to the language that states that MetLife can pay “all or part” of the benefits to the Estate.

The Court found that even adopting Plaintiff’s interpretation, she still did not assert a viable claim against MetLife. It reasoned that under MetLife’s interpretation, when there is no beneficiary, MetLife must pay the benefits to a spouse, child, or parent. If none of these options is possible, MetLife can pay the Estate. And, under Plaintiff’s view, MetLife may always choose to pay either the Estate or a spouse, child, or parent. Even if the Court were to adopt Plaintiff’s interpretation, she would still have no claim, because it would be up to MetLife who to pay (since “may” is discretionary). And, because any payment will discharge MetLife’s liability, Plaintiff would still lack any viable claim. The Court, however, did grant Plaintiff leave to file an amended complaint.

As this case demonstrates, policy interpretation is key in disputes over life insurance benefits. If MetLife has denied your life insurance claim, contact us for assistance.