Court of Appeals Division II
State of Washington
Opinion Information Sheet
Docket Number: 22293-1-II
Title of Case: In RE the Estate of David A. Engelhoff
File Date: 12/23/98
SOURCE OF APPEAL
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Appeal from Superior Court of Pierce County
Docket No: 94-4-01619-1
Judgment or order under review
Date filed: 08/08/97
Judge signing: Hon. Karen L. Strombom
JUDGES
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Authored by J. Robin Hunt
Concurring: Carroll C. Bridgewater
David H. Armstrong
COUNSEL OF RECORD
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Counsel for Appellant(s)
Michael W. Jordan
Jordan Imler & McGovern
2201 N. 30th St.
Tacoma, WA 98403
Counsel for Respondent(s)
Henry Haas
Mcgavick Graves Beale & McNerthney
P.O. Box 1317
Tacoma, WA 98401-1317
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
IN THE MATTER OF THE ESTATE OF: No. 22293-1-II
DAVID A. EGELHOFF, DECEASED. No. 22562-0-II
(consolidated)
SAMANTHA EGELHOFF, a minor by
and through her natural parent
KATE BREINER; and DAVID
EGELHOFF, a single person,
Appellants,
v.
DONNA RAE EGELHOFF AND "JOHN PUBLISHED OPINION
DOE" EGELHOFF, wife and
husband,
Filed:
Respondents.
Hunt, J. - Decedent David Egelhoff's children from his first marriage
appeal the grant of summary judgment to his second wife, Donna Egelhoff.1
The trial court awarded to Donna, the named beneficiary, the proceeds of
David's employer-provided life insurance and his pension plan benefits,
even though she and David had dissolved their marriage more than two months
before his death. The trial court reasoned that ERISA2 preempted state
law, which otherwise could operate automatically to redesignate
beneficiaries upon dissolution of a marriage. Holding that ERISA does not
preempt the state law in question and that Donna was not entitled to the
insurance proceeds or pension funds, we reverse.
FACTS
David and Donna Egelhoff married on November 4, 1988; they separated
on October 1, 1993. During their marriage, David had named Donna as the
beneficiary of his life insurance policy and his pension plan, both
provided by his employer, the Boeing Company. The decree of dissolution
was entered on April 22, 1994. As part of the property settlement
distribution, David was awarded "100% of his Boeing retirement 401K3 and
IRA4."
On June 23, 1994, David was involved in a serious car accident. On
July 8, 1994, he died from his injuries. Donna was still listed as the
beneficiary of both David's insurance policy and his pension plan. David
died intestate.
David's statutory heirs,5 his children from his first marriage, filed
suit, alleging that under the dissolution decree's property distribution
settlement, Donna had waived her rights to the pension plan. After Donna
received the insurance proceeds, the children filed a conversion action,
alleging that Washington law, specifically RCW 11.07.010, had operated to
remove her as the beneficiary of the insurance policy.
The trial court entered summary judgment for Donna as to both
benefits. The trial court ordered that the insurance policy be
"administered in accordance with the Employee Retirement Income Security
Act and the designated beneficiary, Donna Rae Egelhoff shall have all legal
rights to the proceeds which have been paid thereto."6 The trial court
similarly ordered that the pension plan should be "administered in
accordance with the Employ{ee} Retirement Income Security Act of 1974
("ERISA") and that the designated beneficiary, Donna Rae Egelhoff shall
have all legal rights thereto{.}" The trial court stayed the order for
summary judgment with regard to the pension plan proceeds, directing that
they not be distributed to any party pending the outcome of this appeal.
As noted above, the insurance proceeds had already been distributed to
Donna before the litigation commenced.
The children timely appealed and we consolidated the appeals.7
ANALYSIS
I. STANDARD OF REVIEW
When reviewing a trial court's order of summary judgment, we engage in the
same inquiry as the trial court. Wilson v. Steinbach, 98 Wn.2d 434, 437,
656 P.2d 1030 (1982). Summary judgment is appropriate when there is no
genuine issue of material fact and the moving party is entitled to judgment
as a matter of law. See CR 56(c), Mutual of Enumclaw Ins. Co. v. Jerome,
122 Wn.2d 157, 160, 856 P.2d 1095 (1993). Summary judgment should be
granted only if reasonable persons could reach but one conclusion, after
considering the evidence in the light most favorable to the non-moving
party. Reynolds v. Hicks, 134 Wn.2d 491, 495, 951 P.2d 761 (1998).
II. FEDERAL LAW
The pension plan and insurance policy at issue in this case fall under
ERISA because they were provided by David's employer, the Boeing Company.
ERISA regulates all employee benefits plans sponsored by an employer or an
employee organization. Cutler v. Phillips Petroleum Co., 124 Wn.2d 749,
756, 881 P.2d 216 (1994).
III. STATE LAW
The children rely on RCW 11.07.010 to support their claim that they, and
not Donna, should receive both the proceeds of the pension plan and the
insurance policy.
RCW 11.07.010 provides:
Nonprobate assets on dissolution or invalidation of marriage
(1) This section applies to all nonprobate assets, wherever situated, held
at the time of entry by a superior court of this state of a decree of
dissolution of marriage or a declaration of invalidity.
(2)(a) If a marriage is dissolved or invalidated, a provision made prior to
that event that relates to the payment or transfer at death of the
decedent's interest in a nonprobate asset in favor of or granting an
interest or power to the decedent's former spouse is revoked. A provision
affected by this section must be interpreted, and the nonprobate asset
affected passes, as if the former spouse failed to survive the decedent,
having died at the time of entry of the decree of dissolution or
declaration of invalidity.
. . .
(5) As used in this section, "nonprobate asset" means those rights and
interests of a person having beneficial ownership of an asset that pass on
the person's death under only the following written instruments or
arrangements other than the decedent's will:
(a) A payable-on-death provision of a life insurance policy, employee
benefit plan, annuity or similar contract, or individual retirement
account{.}
(Emphasis added.)
Donna argues that ERISA preempts RCW 11.07.010. If not preempted by ERISA,
this statute would operate to revoke Donna's status as beneficiary upon
dissolution of her marriage to David. This would leave no beneficiary
listed on either the life insurance or pension plan. As a result, under
the terms of the pension plan, the children would receive David's pension
benefits.8
With regard to the life insurance plan, RCW 48.24.160, which governs
beneficiaries under group life insurance plans, seems to indicate that
every plan should contain a designation of how benefits will be paid should
no beneficiary be listed at the time of decedent's death.9 But the life
insurance plan in this case contains no such designation. Because there
are no relevant reported cases interpreting RCW 11.07.010, an analogy to
the Uniform Simultaneous Death Act (USDA) is helpful: Both the USDA and
RCW 11.07.010 operate, under certain circumstances, to treat the holder of
life insurance as surviving the beneficiary as a matter of law. Under the
USDA, where the beneficiary is treated as having predeceased the
policyholder, the proceeds of a life insurance policy belong to the
policyholder's estate, RCW 11.05.040, unless the insurance plan designates
an alternate procedure for determining a beneficiary. RCW 48.18.390.
Where such a policyholder has left no will, his statutory heirs inherit the
proceeds. In re Saunders' Estates, 51 Wn.2d 274, 276, 317 P.2d 528 (1957);
In re Clise's Estates, 64 Wn.2d 320, 321, 391 P.2d 547 (1964).
Similarly, under RCW 11.07.010, we treat David as having survived Donna for
purposes of distributing life insurance proceeds. As a result, the life
insurance proceeds should have been paid first to David's estate and then
to his children (as his statutory heirs) as part of his estate. Thus,
under RCW 11.07.010, the children, and not Donna, were entitled to both the
insurance proceeds and the pension benefits.
IV. PREEMPTION
ERISA preempts state laws that "relate to" employee benefits plans.10 We
construe this phrase in accordance with Congress's intent in enacting ERISA
- to provide uniformity in the administration of benefit programs. Fort
Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 11, 107 S. Ct. 2211, 96
L.Ed.2d 1 (1987). If state law affects ERISA-covered plans in "too
tenuous, remote, or peripheral a manner," the state law does not "relate{}
to" the plan and is therefore not preempted. Shaw v. Delta Air Lines,
Inc., 463 U.S. 85, 100 n. 21, 103 S. Ct. 2890, 77 L.Ed.2d 490 (1983).
The Supreme Court has recently11 suggested that ERISA preemption should be
limited with regard to areas traditionally left to state regulation. See
De Buono v. NYSA-ILA Medical and Clinical Svcs. Fund, 520 U.S. 806, 117 S.
Ct. 1747, 1751, 138 L.Ed.2d 21 (1997). Courts "must go beyond the
unhelpful text and the frustrating difficulty of defining its key term
{'relate to'}, and look instead to the objectives of the ERISA statute as a
guide to the scope of the state law that Congress understood would
survive." New York State Conference of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co., 514 U.S. 645, 656, 115 S. Ct. 1671, 131 L.Ed.2d 695
(1995).
Washington courts have also noted this change in the focus of ERISA
preemption analysis. Division One has indicated that preemption is
appropriate if it advances "ERISA's goal of providing uniform resolution of
disputes for which an ERISA remedy {is} available." Behavioral Sciences
Institute v. Great-West Life, 84 Wn. App. 863, 871-72, 930 P.2d 933 (1997).
Rather than basing preemption on the mention of an ERISA plan in the
complaint, we choose to apply a holistic approach to ERISA preemption
emphasizing congressional intent and the purpose of ERISA.
Behavioral Sciences, 84 Wn. App. at 872. Division One has also ruled,
"{W}e presume that ERISA does not supercede the historic police powers of
the states unless that was the clear and manifest purpose of Congress."
Kahn v. Salerno, 90 Wn. App. 110, 133, 951 P.2d 321 (1998).
Following Division One, we "begin our analysis with the presumption
that ERISA does not preempt" the state law in question here -- that spouses
named as insurance and pension beneficiaries automatically lose such
designation upon dissolution of marriage. Kahn, 90 Wn. App. at 134; See
also California Div. of Labor Standards Enforcement v. Dillingham Constr.,
N.A., Inc., 519 U.S. 316, 325, 117 S. Ct. 832, 136 L.Ed.2d 791 (1997).
"Thus, the burden is on the party arguing for preemption to show, as a
matter of law, that it was the clear and manifest purpose of Congress to
supersede this type of . . . claim." Kahn, 90 Wn. App. at 134.
The most comprehensive summary of the current state of ERISA
preemption law is Emard v. Hughes Aircraft Co., 153 F.3d 949 953 (9th Cir.
1998) (citing Toumajian v. Frailey, 135 F.3d 648, 654 n. 3 (9th Cir.
1998)), in which the Ninth Circuit noted that "{r}ecently, the scope of
this broad 'relate to' preemption was markedly narrowed." The Emard court
ruled:
To guide our preemption analysis within the specific context of ERISA, we
ask whether the state law at issue has (1) a "reference to" or (2) a
"connection with" an ERISA plan.
Emard, 153 F.3d at 954.
A state law has "reference to" an ERISA plan where it "acts immediately and
exclusively upon ERISA plans, . . . or where the existence of ERISA plans
is essential to the law's operation." Dillingham, 519 U.S. at 325. RCW
11.07.010 does not act "immediately and exclusively upon ERISA plans," nor
is the existence of ERISA plans "essential to the law's operation."
Consequently, RCW 11.07.010 does not have a "reference to" ERISA plans and
is preempted only if it has a "connection with" ERISA benefit plans.
The Emard court considered four factors in determining whether the
California statute at issue had a "connection with" ERISA "such that
application of the state law would frustrate ERISA's purposes":
(1) whether the state law regulates the types of benefits of ERISA employee
welfare benefit plans;
(2) whether the state law requires the establishment of a separate employee
benefit plan to comply with the law;
(3) whether the state law imposes reporting, disclosure, funding, or
vesting requirements for ERISA plans; and
(4) whether the state law regulates certain ERISA relationships, including
the relationships between an ERISA plan and employer and, to the extent an
employee benefit plan is involved, between the employer and employee.
Emard, 153 F.3d at 958 (quoting Operating Engineers Health and Welfare
Trust Fund v. JWJ Contracting Co., 135 F.3d 671, 678 (9th Cir. 1998)). The
Emard court determined that the first three factors were not at issue and
then rejected the contention that the California statute violated the
fourth factor "by altering the administrative process for plans in
California and by altering the designation of beneficiaries." Emard, 153
F.3d at 958.
Although ERISA preempts state laws affecting the administration of
employee plans, RCW 11.07.010, like the California statute at issue in
Emard, "does not affect the administration of plans; instead, it affects
merely the ultimate ownership of distributed benefits." Emard, 153 F.3d at
959. As with the California statute at issue in Emard, under RCW
11.07.010, an ERISA administrator may pay insurance to the named beneficiary unless a
contending claimant properly notifies the plan of his or her claim to the
proceeds. In the absence of such a claim, payment to the named beneficiary
absolves the plan of liability for further claims. California law
therefore does not alter plan administration.
Emard, 153 F.3d at 959 (citations omitted). But if a "contending claim is
made before disbursement, the administrator can leave the determination of
the proper recipient of the proceeds to the parties through application of
state property law{.}"12
The court also noted that:
{u}nder the majority approach of {previous} opinions {concerning ERISA
preemption}, application of California law concerning the designation of a
beneficiary has a connection with ERISA and would therefore be preempted.
Those opinions, though, rely on the Supreme Court's former approach to
ERISA preemption, and their analyses therefore provide us little guidance.
Applying the preemption approach required by the Court's recent cases, we
hold that ERISA does not preempt California's law of community property in
this instance.
Emard, 153 F.3d at 956-57. The court saw "no indication that Congress
intended to safeguard an individual beneficiary's rights to the proceeds of
an ERISA insurance plan as against another person claiming superior rights,
under state law, to those proceeds." Emard, 153 F.3d at 958. The court
also recognized that in the circumstances of a case such as this, the plan administrator must
take certain steps to answer the complaint and either disburse the disputed
funds to the prevailing claimant or deposit the funds with the court. But
this burden on the administrator is too slight to overcome the presumption
against preemption of state family and family property law.
Emard, 153 F.3d at 959 (citing Boggs v. Boggs, 520 U.S. 833, 117 S. Ct.
1754, 1760, 138 L.Ed.2d 45 (1997); Hisquierdo v. Hisquierdo, 439 U.S. 572,
581, 99 S. Ct. 802, 59 L.Ed.2d 1 (1979)).13
As the final step of preemption analysis, the Emard court noted that
Congress has not completely occupied this field such that state laws are
preempted. Emard, 153 F.3d at 960-61 (citing Boggs, 117 S. Ct. at 1760).
"Congress pre-empted state laws relating to plans, rather than simply to
benefits." Coyne, 482 U.S. at 11.
Because California's law does not regulate ERISA plans (other than
operating to redesignate the beneficiary), the Emard court found that ERISA
did not bar application of state law. Emard , 153 F.3d at 961. The Ninth
Circuit believed that "Congress did not preempt state rules" with regard to
alternate distribution of insurance proceeds: "State community property
laws 'implement policies and values lying within the traditional domain of
the states.'" Emard, 153 F.3d at 961 (citing Boggs, 117 S. Ct. at 1760).
Courts therefore require that State family and family-property law must do "major
damage" to "clear and substantial" federal interests before the Supremacy Clause
will demand that state law be overridden.
Hisquierdo, 439 U.S. at 581. ERISA does not preempt application of state
laws that merely redesignate the beneficiary under an ERISA plan, because
such laws do not do "major damage" to a "clear and substantial" federal
interest. Emard, 153 F.3d at 961.
While we are not bound by the Ninth Circuit's interpretation of ERISA
preemption,14 we find it persuasive and adopt its analysis in Emard. Emard
is consistent with the United States Supreme Court's current interpretation
of ERISA preemption. The Supreme Court's recent cases indicate that ERISA
preemption has been much too broadly construed in the past and must be
narrowed; Emard follows that directive in a principled, logical manner.
Although Emard addresses only life insurance, the same principle should
apply to pension fund benefits.
We therefore hold that, under the circumstances of the case before us,
ERISA does not preempt RCW 11.07.010, a statute similar to the one at issue
in Emard.15 Consequently, under the plain language of the statute, the
children are entitled to the proceeds of their father's pension fund, which
have not yet been distributed. They are also entitled to the insurance
proceeds.
But whether they can look to the insurer for this amount depends on whether
the children demanded the insurance proceeds in compliance with the
requirements of RCW 11.07.010.16 If they did not comply with RCW 11.07.010,
the children will not be able to recover the insurance proceeds from the
insurer, but instead will have to look solely to Donna for the funds.17 RCW
11.07.010(3).
We reverse summary judgment granted to Donna and remand for entry of
summary judgment for the children with regard to the pension plan and life
insurance proceeds.18
Hunt, J.
We concur:
Bridgewater, J.
Armstrong, J.
FOOTNOTES
1 For ease of reference we refer to the parties by their first names; we
mean no disrespect.
2 Employee Retirement Income Security Act, 29 U.S.C. 1001, et seq.
3 Defined by 26 U.S.C. sec.401(k).
4 Defined by 26 U.S.C. sec.408(a).
5 RCW 11.04.015 provides that:
The net estate of a person dying intestate . . . shall be distributed as
follows:
. . .
(2) Shares of others than surviving spouse. The share of the net estate
not distributable to the surviving spouse, or the entire net estate if
there is no surviving spouse, shall descend and be distributed as follows:
To the issue of the intestate; if they are all in the same degree of
kinship to the estate, they shall take equally, or if of unequal degree,
then those of more remote degree shall take by representation.
6 The trial court apparently disregarded an affidavit from the children's
mother, David's first wife, attesting to Donna's statements that she knew
David had intended to remove her as beneficiary of his life insurance
policy and would be angry if he knew Donna had received the proceeds.
7 Because we hold that RCW 11.07.010 is not preempted by ERISA, we need not
address the children's alternative assertion that Donna "waived" her right
to the pension proceeds via the dissolution decree.
8 "If you have not designated a beneficiary on the appropriate form, you
have an invalid beneficiary designation, or your beneficiary is no longer
living, benefits will be paid in the following sequence:
1. To your surviving spouse.
2. If there is no surviving spouse, to your children in equal shares."
9 "There shall be a provision that any sum becoming due by reason of the
death of the individual insured shall be payable to the beneficiary
designated by such individual, subject to the provisions of the policy in
the event there is no designated beneficiary. . ." RCW 48.24.160.
10 29 U.S.C. 1144(a) provides, in relevant part, that:
Except as provided in subsection (b) of this section, the provisions of
this subchapter and subchapter III of this chapter shall supersede any and
all State laws insofar as they may now or hereafter relate to any employee
benefit plan described in section 1003(a) of this title and not exempt
under section 1003(b) of this title.
11 Earlier, the Supreme Court had interpreted ERISA's preemption statute as
creating a "deliberately expansive" preemption of state law. Pilot Life
Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 107 S. Ct. 1549, 95 L.Ed.2d 39
(1987). In Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S. Ct.
478, 112 L.Ed.2d 474 (1990), the Court ruled that "a state law may 'relate
to' a benefit plan, and thereby be pre-empted, even if the law is not
specifically designed to affect such plans, or the effect is only
indirect." The Washington Supreme Court's traditional analysis of ERISA
"preemption" is illustrated by Cutler, 124 Wn.2d at 763, in which it relied
primarily on Ingersoll-Rand's holding that employees' state law claims were
preempted when they directly conflicted with an ERISA cause of action or
rested upon the existence of an ERISA plan. Ingersoll-Rand, 498 U.S. at
140. As recently as 1996, the Washington Supreme Court indicated that
ERISA "preempts any state law touching on ERISA benefit plans, even if
those laws merely supplemented the Act and were consistent in purpose."
Stevedoring Svcs. of America, Inc. v. Eggert, 129 Wn.2d 17, 26, 914 P.2d
737 (1996).
12 The Emard court did not address the situation where a competing claim was
made for insurance proceeds after the proceeds had already been distributed
to the named beneficiary. It is an issue in this case, but RCW 11.07.010
provides resolution.
13 Furthermore, as other courts have noted, "{b}lindly paying the proceeds
as specified in the {plan documents} would be inconsistent with the
statutory preemption exception that recognizes the validity of domestic
relations orders affecting beneficiary designations." See, e.g. Carland v.
Metropolitan Life Ins. Co., 935 F.2d 1114, 1121 (10th Cir. 1991).
Similarly, contrary to Donna's assertions here, holding that RCW 11.07.010
is not preempted will not complicate the administration of ERISA-covered
plans in Washington. "ERISA already requires an administrator of a pension
plan to investigate the marital history of a participant and determine
whether a domestic relations order exists that could affect the
distribution of benefits." Carland, 935 F.2d at 1122. Compliance with RCW
11.07.010 requires no more.
14 Even where the matter is one of federal law, Washington courts are not
bound by the interpretations of non-constitutional federal law rendererd by
inferior courts -- even the Ninth Circuit. State v. Barefield, 110 Wn.2d
728, 732 n.2, 756 P.2d 731 (1988); Amalgamated Clothing Workers of Am. v.
Richman Bros., 348 U.S. 511, 75 S. Ct. 452, 99 L.Ed. 600 (1955).
15 Although statutes similar to RCW 11.07.010 have been found to be
preempted, all of those cases arose before the Supreme Court announced its
new reasoning with regard to ERISA preemption. See, e.g., Metropolitan
Life Ins. Co. v. Pressley, 82 F.3d 126 (6th Cir. 1996).
16 The plan administrator must have actual knowledge of dissolution and/or
conflicting claims for proceeds of a given policy before being liable for
the decision to make payment to the named beneficiary. RCW 11.07.010(3).
17 As Donna notes, seemingly the most relevant Washington case is Aetna Life
Ins. Co. v. Wadsworth, 102 Wn.2d 652, 689 P.2d 46 (1984). Wadsworth
involved a remarried man dying while his ex-wife was still designated as
beneficiary of his life insurance policy. The woman to whom he was married
at the time of his death opposed his ex-wife's collecting under the policy.
Without mentioning ERISA, the court ruled:
In general, the beneficiary named in the policy will be entitled to the
proceeds to the extent that the present spouse's community property rights
are not invaded. We believe this general rule should not apply, however,
where the dissolution decree clearly indicates an intent to divest the
former spouse of his or her expectancy as beneficiary, so long as that
intention is acted upon within a reasonable time after dissolution by
formal execution of the change of beneficiary. If the intention is not
acted upon within a reasonable time {conclusive presumption after one year
after date of dissolution}, the owner should be deemed to have decided to
retain the named beneficiary as the one entitled to the proceeds.
Wadsworth, 102 Wn.2d at 662. The court added, "if the insured spouse dies
within a reasonable time period without formally executing the previously
stated intention to change the beneficiary, the former spouse will not be
entitled to the proceeds." Wadsworth, 102 Wn.2d at 663.
Because the Egelhoff divorce decree did not mention the life insurance
policy, Donna could arguably be entitled to the insurance proceeds under
Wadsworth. But whether Wadsworth is still good law is highly questionable
on two grounds: (1) The opinion does not mention ERISA (and seems to have
concerned an ERISA-covered policy, given that it was "paid in full on a
monthly basis as a benefit of employment by the Boeing Company."
Wadsworth, 102 Wn.2d at 654); and (2) RCW 11.07.010 was not in existence at
the time of the Wadsworth decision (RCW 11.07.010 was originally enacted by
Laws of 1993, ch. 236, sec. 1). As a result, we look elsewhere, namely the
Ninth Circuit's opinion in Emard, for a contemporary analysis.
18 Donna is clearly liable to the children for the insurance proceeds. But
a determination, under RCW 11.07.010, of whether the children can look to
the insurer for the life insurance benefits erroneously paid to Donna, or
whether they can look only to Donna herself for reimbursement of the funds
she wrongfully received, cannot appropriately be made as part of the
present action. Because the insurer, Aetna, is not a party to this case,
the children will have to bring a separate action against Aetna should they
seek to recover from it the proceeds wrongly paid to Donna.