Fifth Circuit Affirms Insured Substantially Complied with Life Insurance Policy’s Change-of-Beneficiary Requirements

In Morgan, et al. v. Barrera, et al., No. 21-20497, 2025 WL 1157549 (5th Cir. Apr. 21, 2025), a dispute over life insurance benefits under an ERISA-governed plan, the Fifth Circuit Court of Appeals addressed two primary legal issues: standing under ERISA and the doctrine of substantial compliance.

Janie Barrera worked for Walgreens and was insured under Walgreens’ life insurance plan which was administered by Prudential. Barrera initially designated her sisters as life insurance beneficiaries in 2009. Years later, Walgreens informed her that it no longer had access to prior beneficiary designations and that she would need to file a new designation form. If she did not, then insurance benefits would be payable as if there were no beneficiary at her death in accordance with the plan’s provisions. Barrera did not file a new beneficiary form. Before her death, Barrera gave Christine Morgan a general power of attorney as well as durable power of attorney for health care. Barrera signed a document stating that she wanted Christine and Denise Morgan to receive her life insurance proceeds. She also told her pastor that she wanted the Morgans to receive all of her benefits. In multiple calls made by Christine Morgan to Walgreens, she and Barrera confirmed with Walgreens that the Morgans were the beneficiaries. However, after Barrera’s death, Walgreens discovered that the beneficiary changes were made without a power of attorney on file. Prudential had initially written to Christine Morgan recognizing her as the beneficiary. Third-party administrator, Alight Solutions, LLC, did a fraud investigation and froze Barrera’s account. Walgreens advised Prudential to pay benefits as if no designation existed. Prudential notified the Morgans and Barrera’s sisters that it would pay benefits to Barrera’s highest surviving heirs under the plan’s default provisions. The Morgans sued Prudential, who sought interpleader relief. The parties filed cross motions for summary judgment. The district court ruled in favor of the Morgans and Barrera’s sisters appealed.

Barrera’s sisters argued that the Morgans lacked standing to bring their claim under ERISA because they had not exhausted administrative remedies and were not statutory “beneficiaries.” The court countered this by recognizing an exception to the exhaustion requirement when it would be futile, as in interpleader actions where the insurance company faces uncertainty about the rightful beneficiary. The court further noted that in interpleader actions, the standing of claimants is not a bar to asserting a claim, as the primary issue is determining the rightful beneficiary, thereby affirming the Morgans’ standing.

The court analyzed whether Barrera substantially complied with the plan’s change-of-beneficiary requirements. Despite Barrera’s failure to submit a new beneficiary designation form after 2016, the court applied the federal common law doctrine of substantial compliance. This doctrine requires that the insured manifest an intent to change the beneficiary and take positive action towards that end. The court found that Barrera’s expressed intent and actions, including notifying Walgreens and the subsequent actions taken by Prudential, met this standard. Prudential’s recognition of Christine Morgan as a beneficiary, as evidenced by their communications, further supported the conclusion that there was substantial compliance.

Thus, the court affirmed the district court’s summary judgment in favor of the Morgans, holding that they had standing under ERISA and that Barrera had substantially complied with the requirements to change her life insurance beneficiary.