Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 98 C 1153, 98 C 4771, 98 C 7186--Robert W. Gettleman, Judge.
Before Flaum, Chief Judge, and Ripple and Diane P.
Wood, Circuit Judges.
The opinion of the court was delivered by: Diane P. Wood, Circuit Judge.
This case pits a surviving husband and child against a sister in a fight over the proceeds of three insurance policies. Brenda Combes was the insured person; she died suddenly at the age of 43. Her husband, David Combes, was surprised to discover that Brenda had changed the beneficiaries on these policies (or had tried to do so) from himself and the couple's daughter Ashley to Brenda's sister, Linda Davis. In time, two of the insurance companies filed interpleader actions (one in the Eastern District of North Carolina and one in the Northern District of Illinois) to determine the rightful beneficiaries of their respective policies, and deposited the policy proceeds with the court. The third policy was part of a benefit plan established under the Employment Retirement Income Security Act, or ERISA. Linda filed her own suit in the Eastern District of Pennsylvania against the issuer of that policy and against David and Ashley (to whom we refer collectively as David, since their interests are aligned for present purposes), seeking a declaration that she was the sole beneficiary of that policy as well and demanding payment of the proceeds.
The Pennsylvania and North Carolina actions were later transferred to the Northern District of Illinois, the three cases were consolidated, and all contested proceeds were deposited with the court. After a one-day bench trial, the district court ruled in favor of David, relying principally on an alleged oral agreement described by David under which Brenda promised to maintain insurance for his benefit. While we do not doubt that David and Ashley were sympathetic figures, we conclude that the oral agreement is not sufficient under the law of Illinois to override a written designation of a beneficiary on an insurance policy. We also conclude that the flaws David identifies in the ERISA change of beneficiary form were not enough to defeat its effectiveness. We therefore reverse.
Before Brenda and David were married in February 1994, each had life insurance policies that named family members as beneficiaries. Brenda had a $150,000 policy issued by Life Investors, and David had a $100,000 policy issued by Equitable Life Assurance Society. Less than a week before the wedding, Brenda made David the 67% beneficiary on her Life Investors policy, and David increased his Equitable policy to $200,000 and made Brenda the 50% beneficiary. David testified that they took these steps to begin fulfilling their oral agreement "to provide for [each] other through the purchase and maintenance of life insurance."
Apart from this alleged oral agreement, David and Brenda kept their financial lives almost entirely separate after the marriage. For example, they did not have a joint checking account, joint credit cards, or joint investments; they did not file a joint tax return; and until July of 1997, when they co-signed a mortgage for a home, they had no joint interest in any assets. Instead, they covered joint expenses by repaying one another for particular expenditures. This was, however, something of a one-way street. Until 1996, David had very little to contribute to the household. He was a rather unsuccessful insurance salesman, with an income in 1994 of less than $2,000, and a 1995 income of less than $6,000. His financial picture brightened in 1996, when he took a position with a company that paid just under $40,000 per year. Brenda, in contrast, had advanced degrees in physical therapy and public health, including a Ph.D. from the University of Illinois, and regularly earned more than David: her 1995 income was about $71,000; her 1996 income was roughly $96,700; and her income in 1997, the year of her death, was about $90,000.
A year after their marriage, Brenda and David purchased additional life insurance. Brenda acquired a $50,000 policy from Continental Assurance Company and named David as the sole beneficiary, while David acquired a $50,000 policy from Continental and designated Brenda as the sole beneficiary. According to David, these actions amounted to further performance of the pre-nuptial oral agreement.
In May 1995 the couple's first child, Ashley, was born, and a few months later, Brenda began to work for NovaCare, Inc. Through NovaCare's ERISA plan, she purchased a $100,000 policy on David's life naming herself as the 95% beneficiary and Ashley as the 5% beneficiary. She also purchased a $100,000 policy on her own life, under which she named Ashley the 95% beneficiary and designated the remaining 5% for her sister Linda. A month later, David modified the beneficiary designations on his Equitable policy. He removed Brenda altogether from the policy and split it among Ashley (35%), his daughter from a previous marriage, Danielle (50%), and his mother (15%). In November of the same year, Brenda tinkered further with her NovaCare policy: she raised the amount to $272,000, she removed Linda as a beneficiary, and she designated an 80% share for Ashley and the remaining 20% for David.
When David started his job at Industrial Risk in January 1996, he took out a $135,000 policy on his life with Brenda as the sole beneficiary. In July of that year, he acquired a credit life insurance policy for $100,000, in which he named Brenda the residual beneficiary. The last insurance policy he purchased before Brenda's death was a $250,000 policy from Security Mutual Life Insurance Company of New York. He bought that policy in July 1997 and once again named Brenda the sole beneficiary.
Brenda, in the meantime, had begun making changes to her beneficiary designations, without telling David what she was doing. On August 16, 1996, she removed David from the Continental policy and named Linda the sole beneficiary. She did the same thing on September 3, 1996, to her Life Investors policy. Finally, she attempted to complete a change of beneficiary form for her NovaCare policy (which was issued by Reliance Standard Life Insurance Company), although the effectiveness of that effort is in dispute here. She filled out--in her own handwriting--the form NovaCare gave her. On that form, she provided all the necessary information, including her designation of Linda as the new beneficiary and September 1, 1996, as the effective date. She did not, however, sign and date the form on the lines provided for that purpose. NovaCare's benefits coordinator, Linda Dean, accepted the form and entered the beneficiary change in NovaCare's computer files. Dean placed the hard copy of the form in Brenda's benefits file. Finally, Dean generated a letter entitled "Confirmation of Your 1996 Flex Benefit Choices." Unfortunately, the record does not indicate whether Brenda received her copy of that letter, but it does show that Brenda never received anything that would have suggested a problem with her effort to change the beneficiary on that policy.
To sum up, as of the fall of 1996 Brenda and Ashley were the beneficiaries of several policies on David's life, but Brenda had removed David and Ashley from her own policies (or attempted to do so, in the case of the NovaCare policy) and substituted Linda in their place. The couple had a second child, Julius, in November 1996, but he was not a beneficiary on any policy carried by either parent. David, as we have already noted, did not know about the changes Brenda had made. He discovered them only after her death.
Relying heavily on the alleged oral agreement, David challenged Linda's right to collect on the policies. The three insurers left the contestants to resolve this problem among themselves. With respect to the Life Investors and Continental policies, which Brenda had unambiguously amended, David argued that the district court should impose a constructive trust on the proceeds because Brenda committed fraud when she cut him (and Ashley) out of the picture. He also argued that the constructive trust was justified under a theory of promissory estoppel. With respect to the NovaCare policy, he urged that the attempted change of beneficiary was ineffective because it lacked Brenda's signature on the signature line of the form and that she was equitably estopped from effecting the change. After a bench trial, the district court found for David on all three policies: the court awarded ...