Phillips v. Prudential Insurance Company of America, 3:24-cv-01224

Gloria Phillips is the former spouse of Leroy Lafayette Phillips, a retired Navy veteran with a $100,000 life insurance policy through the Veterans’ Group Life Insurance (VGLI) program.
As part of their 2011 divorce settlement, Leroy agreed to maintain a $100,000 policy naming Gloria as beneficiary, as long as he owed her alimony, which was still owed at his death.
Before his death, Leroy changed the VGLI beneficiary to Tonya Phillips, his spouse at the time of death; both Gloria and Tonya claim entitlement to the proceeds.
Gloria filed suit in federal court seeking the insurance proceeds; the insurer, Prudential, interpleaded the funds and sought to be dismissed from the case.
Tonya Phillips moved to dismiss, arguing the court lacked subject matter jurisdiction because the claim arose under the Servicemembers’ Group Life Insurance Act, which she argued permitted suits only against the U.S. government.

Issue	Plaintiff’s Argument	Defendant’s Argument	Held
Does the federal court have subject matter jurisdiction over a VGLI beneficiary dispute?	Gloria: Federal question jurisdiction is proper since the claim arises under federal law.	Tonya: Only the United States can be sued under the Act; this is not a proper federal claim.	The court has federal question jurisdiction as the claim arises under federal law.

Prudential Ins. Co. of America v. Athmer, 178 F.3d 473 (7th Cir. 1999) (SGLI is a federal program; suits concerning proceeds arise under federal law)
Rice v. Office of Servicemembers’ Group Life Ins., 260 F.3d 1240 (10th Cir. 2001) (claims for SGLI benefits arise under federal law)
Prudential Ins. Co. of America v. Tull, 690 F.2d 848 (4th Cir. 1982) (disputes over SGLI proceeds involve federal subject matter jurisdiction)