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Rollins v. Metropolitan Life Insurance Co.

decided: December 19, 1988.


Appeal from the United States District Court for the Southern District of Indiana, Terre Haute Division. No. 86-C-187-Larry J. McKinney, Judge.

Woods, Jr. and Cudahy, Circuit Judges and Fairchild, Senior Circuit Judge.

Author: Wood

WOOD, JR., Circuit Judge.*fn*

Donald R. Rollins was insured for $100,000 under a life insurance policy governed by the Federal Employees Group Life Insurance Act (FEGLIA). The insured failed, however, to designate a beneficiary. Upon his death, both his widowed second wife and his children by a previous marriage claimed the insurance proceeds. The second wife argued she was entitled to the proceeds under the terms of FEGLIA; the children contended they were entitled to the proceeds, either under the provisions of the statute or, alternatively, under the doctrine of constructive trust. The district court granted the second wife's motion for summary judgment, ruling that: 1) she was the beneficiary under the statutory scheme of FEGLIA, and 2) federal law preempted the imposition of a constructive trust upon FEGLIA insurance proceeds. The children appeal. We reverse and remand to the district court for a determination of the constructive trust claim under the laws of the state of Indiana.*fn1


Donald R. Rollins, the insured, married Kellen S. Rollins in 1968. Three children were born of that marriage: Donald R. Rollins, now approximately 16 years of age; Douglas R. Rollins, now approximately 15 years of age; and Misty D. Rollins, now approximately 13 years of age. During that marriage, the insured was privately employed. The marriage was dissolved in 1981. In its final decree granting the divorce, the Indiana Circuit Court provided, inter alia: "Court now orders the Petitioner [Donald Rollins] to maintain life insurance upon his life with the children named as beneficiaries thereon and further maintain life insurance policies on the lives [sic] of each child." In addition, the insured was ordered to pay child support. The insured, however, was not always faithful in making his child support payments and died leaving a deficiency.

In 1982 the insured married defendant Nancy J. Rollins. No children were born of this marriage. The defendant had a child by a previous marriage, but the insured did not adopt that child. On April 28, 1986, the defendant filed a petition for dissolution of the marriage. The petition was still pending on May 14, 1986, the date of the insured's death.

During his second marriage the insured became and remained a civilian employee of the federal government. As a federal employee, he was covered by a life insurance policy with a face amount of $100,000 issued by the defendant Metropolitan Life Insurance Company pursuant to the Federal Employees Group Life Insurance Act, 5 U.S.C. ยงยง 8701-8716 (1982).*fn2 FEGLIA allows the insured employee to designate the beneficiary of his insurance policy. In the absence of a designated beneficiary, FEGLIA provides that the insurance proceeds will be paid to the employee's spouse. If there is no surviving spouse, then the proceeds go to the employee's children.*fn3 During the term of the policy at issue, the insured failed to designate a beneficiary. The defendant now claims that as the insured's widow she is entitled to the insurance proceeds.

The defendant and the insured had separated in April 1986 due to their marital difficulties and were living apart. In her verified petition to dissolve her marriage to the insured, the defendant alleged that there had "been an irretrievable breakdown of the marriage," and therefore she sought its dissolution and the restoration of the name she had used prior to her marriage. At the same time, she filed a verified motion for a temporary restraining order against the insured to prevent him from harassing or molesting her. As a basis for the motion, she alleged that the insured had "in the past caused or threatened her with bodily injury," putting her in fear for her personal safety. The restraining order was issued and was to remain in effect until the final hearing. The final hearing was set for July 14, 1986.

The insured did not contribute to the defendant's support during the separation. The couple had not yet entered into a written property settlement agreement, but had reached an oral agreement as to the disposition of all of their joint property, except for one gun, a reclining chair, and an end table. According to the defendant, the insured, notwithstanding the restraining order, visited her either very late on May 12 or very early on May 13, 1986. The insured was upset; the defendant and the insured had a quarrel. Later that same day, following the quarrel, the defendant discovered the insured's body at his trailer. The insured's death was ruled a suicide.


A. Statutory Beneficiary

In Count I, the plaintiffs claim that the marriage between the defendant and the insured was over as a practical matter, with nothing but the formality of a hearing to technically dissolve it. The defendant claims that in spite of the bad state of the marriage, she and the insured were still married and were friends. The plaintiffs argue that the defendant was not the insured's widow under FEGLIA, but only his "friend," so that the defendant should not be eligible to receive the insurance proceeds in the absence of a specific beneficiary designation.

The defendant has a very simple view of this case. Her late husband was insured, he died, and as his widow, in the absence of some other designated beneficiary, she maintains that she is entitled to the insurance proceeds as a matter of law.

FEGLIA provides a rather simple priority of beneficiaries, without any reference to the common marital difficulties that often complicate real life, as in this case. We will not undertake the likely impossible task of trying to rewrite the statute to fairly provide for all eventualities. We agree that in spite of the total collapse of the marriage the defendant technically qualifies as the widow of the insured within the meaning of the statute.

The statute does not immediately solve this case however. The plaintiffs also raised the issue of constructive trust, which the district court failed to fully address. Therefore, even though the defendant qualifies as the insured's widow, we cannot simply conclude the matter by mechanically applying the statute.

B. Constructive Trust

In Count II of their complaint, the plaintiffs allege that the state court, in the dissolution of the insured's first marriage, imposed on the insured a fiduciary duty to maintain life insurance on his life for the benefit of his children, the plaintiffs. The plaintiffs contend that the insured's failure to name his children as beneficiaries of his government life insurance policy constituted a breach of trust and permitted the proceeds to go to the defendant, unjustly enriching her. The plaintiffs further allege that they are without a legal remedy to ...

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