Hardy v. Hardy
2012 Ind. LEXIS 28
| Ind. | 2012Background
- Phyllis Hardy and grandchildren claim constructive trust over FEGLI proceeds after divorce decree required equal designation of Phyllis and grandchildren as beneficiaries.
- Carlos Hardy’s FEGLI policy was increased and Mary Jo became sole beneficiary following a 2000 designation and later divorce from Carlos.
- Carlos and Mary Jo divorced in 2007; their decree stated each party would receive their own life insurance, removing the other’s designation.
- Carlos died in 2008 with Mary Jo as the FEGLI beneficiary and approximately $98,000 in proceeds; Phyllis and grandchildren sought equitable recovery.
- Trial court granted summary judgment to Mary Jo, holding FEGLIA preempts state-law constructive-trust claims; Court of Appeals affirmed.
- Indiana Supreme Court granted transfer to decide FEGLIA preemption and the proper scope of any constructive trust.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does FEGLIA preempt equitable claims to FEGLI proceeds? | Hardy argues FEGLIA does not preempt. | Mary Jo argues FEGLIA preempts. | FEGLIA does not preempt. |
| Whether a constructive trust on FEGLI proceeds is compatible with FEGLIA provisions and regulations | Phyllis/grandchildren entitled to equitable interest after decree. | Proceedings should go to designated beneficiary who holds legal title. | Constructive trust permissible; not precluded by FEGLIA. |
| What remedy or scope of recovery applies to the equitable claim (e.g., value at date of decree vs. death value) | Phyllis/grandchildren entitled to the death-benefit value under Option A at death. | Recovery limited to value at the 1998 decree date as argued by Mary Jo. | Remand to determine Option A value at death and construct trust over that amount; balance to be allocated. |
Key Cases Cited
- Ridgway v. Ridgway, 454 U.S. 46 (1981) (SGLIA preemption with anti-attachment considerations; controlling absence in FEGLIA here)
- Metropolitan Life Ins. Co. v. Christ, 979 F.2d 575 (7th Cir. 1992) (FEGLIA preemption analyses in federal courts)
- Kidd v. Pritzel, 821 S.W.2d 566 (Mo. Ct. App. 1991) (FEGLIA preemption not necessary to bar equitable claims; constructive trust may follow)
- Fagan v. Chaisson, 179 S.W.3d 35 (Tex. App. 2005) (FEGLIA preemption does not bar equitable claims; administrative efficiency interest)
- Meece v. Meece, 495 N.E.2d 827 (Ind. Ct. App. 1986) (contractual basis for proceeds under a divorce decree and potential recovery against named beneficiaries)