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Funeral Financial Systems, Ltd. v. Metropolitan Life Insurance Co.

June 29, 2001

FUNERAL FINANCIAL SYSTEMS, LTD., PLAINTIFF-APPELLANT,
v.
METROPOLITAN LIFE INSURANCE COMPANY, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County. No. 98 M 20077 The Honorable Nancy J. Arnold, Presiding Judge.

The opinion of the court was delivered by: Justice Buckley

UNPUBLISHED

This appeal arises out of the assignment of proceeds payable under a federal employees' group life insurance policy issued by defendant Metropolitan Life Insurance Company (MetLife) to the United States Office of Personnel Management (OPM) pursuant to the Federal Employees' Group Life Insurance Act (FEGLIA) (5 U.S.C. §8701 et seq. (1994)). Plaintiff Funeral Financial Systems, Ltd. (FFS), an assignee finance company, brought the underlying action against MetLife seeking damages under the theories of apparent agency and promissory estoppel, based upon an OPM employee's alleged promise to FFS regarding certain proceeds of the policy. The trial court entered summary judgment in favor of MetLife. FFS now appeals. At issue is whether FFS' state-law estoppel claim is preempted by FEGLIA.

I. STATEMENT OF FACTS

Plaintiff FFS is an Illinois corporation whose business includes advancing funds to funeral directors to defray funeral, burial, and other associated expenses for a deceased, and advancing immediate funds to the beneficiaries of a deceased's life insurance benefits. The beneficiaries assign their interest in the deceased's life insurance benefits to the funeral home, which then assigns the benefits to FFS. FFS then pays some or all of the funeral and other expenses.

Defendant MetLife is a mutual life insurance company registered with the Illinois Department of Insurance and licensed to do business in Illinois. MetLife issued a federal employees' group life insurance policy, group policy No. 17000-G (the FEGLI Policy), to the United States Office of Personnel Management, pursuant to the FEGLIA (5 U.S.C. §§8701 through 8716 (1994)). *fn1 The office of federal employees' group life insurance (the FEGLI Office) is the administrative unit of MetLife that is responsible for administering all claim processing under the FEGLI Policy.

Andrew G. Ortega (the Insured) was insured under the FEGLI Policy. Prior to his death on April 7, 1996, the Insured completed a valid designation of beneficiary form that designated three individuals to receive equal shares of the proceeds of his insurance coverage under the FEGLI Policy. Andrew R. Ortega was one of the three individuals designated as beneficiary by the Insured.

On April 17, 1996, the FEGLI Office received an irrevocable assignment and reassignment signed by Andrew R. Ortega. This assignment/reassignment assigned Andrew R. Ortega's rights to the proceeds of Insured's policy to Palm Heights Funeral Home, which then immediately reassigned those rights to FFS. The total benefits payable under the Insured's policy amounted to $3,200. On or about July 18, 1996, the FEGLI Office paid $1,083.33 to FFS. The remaining two-thirds balance of the proceeds was paid to the two other beneficiaries in equal shares.

On January 12, 1998, FFS filed a complaint for promissory estoppel against MetLife in which it sought damages in the amount of $2,116.67 plus costs, interest, and attorney fees. FFS' com-plaint alleged that, on April 8, 1996, one of FFS' representatives spoke with Beverly Taylor, an OPM employee, to verify information about the Insured's life insurance benefits in order to determine whether FFS should advance $5,135 to Palm Heights Funeral Home. According to FFS, Ms. Taylor informed its representative that although there were not enough proceeds to cover an assignment in the amount of $5,135, there were enough proceeds to cover an assignment in the amount of $3,200 and that she would mark OPM's records and MetLife would recognize the assignment. FFS further alleged that, on April 9, 1996, Ms. Taylor contacted FFS and advised that Andrew R. Ortega was the beneficiary of the Insured's policy. FFS next alleged that, on April 10, 1996, in reliance on Ms. Taylor's statements, it authorized Palm Heights Funeral Home to write a draft on FFS' account in the amount of $3,200 less applicable fees and costs. On or around July 22, 1996, the FEGLI Office issued a check to FFS for $1,083.33. FFS alleged that it made repeated demands of MetLife to pay the remaining $2,116.67, allegedly due FSS, which MetLife refused.

MetLife filed a motion for summary judgment, arguing that: (1) FFS's state-court promissory estoppel claim was preempted by FEGLIA, and (2) it was prohibited by federal law from paying out any more money than allowed by FEGLIA and the FEGLI Policy.

The trial court granted summary judgment to MetLife. The court's order stated that it was granting summary judgment "for reasons based upon those arguments raised by MetLife in its motion and corresponding memorandum in support and reply brief."

FFS now appeals.

II. DISCUSSION

Article VI of the Constitution, the supremacy clause, provides that the laws of the United States "shall be the supreme Law of the Land; *** any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. Const., art. VI, cl. 2. Since the Supreme Court's decision in M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 427, 4 L. Ed. 579, 606-07 (1819), it has been well settled that state law that conflicts with federal law is ...


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