Delayed/Denied FEGLI Claims

All FEGLI insureds must name a beneficiary and are extremely strict. For example, a named FEGLI beneficiary is the only valid recipient of FEGLI policy proceeds. FEGLI’s mandate regulates FEGLI policies, and therefore, state law is secondary to FEGLI claims. Recently, the Supreme Court heard a FEGLI case based on a FEGLI beneficiary dispute. The Supreme Court’s opined based on FEGLI claim precedent. During that case, the FEGLI insured died and the insured’s first wife was listed on the FEGLI policy. The insured failed to change his FEGLI beneficiary designation to his second wife. As a result, the Supreme Court ruled that the first wife was entitled to the policy proceeds. The second wife’s divorce argument failed due because federal rules regulate FEGLI beneficiary changes. Therefore, the federal FEGLI standard outweighs state life insurance laws.

A FEGLI insured may change beneficiaries if the insured complies with FEGLI’s beneficiary change form. The insured must sign the beneficiary change form in the presence of 2 witnesses. Prior to the insured’s death, OPM must approve of the beneficiary change. An issue may arise when OPM receives an insured’s beneficiary change form prior to the insured’s death, yet failed to approve of the beneficiary change before the insured dies. Additional issues arise where the beneficiary dispute form is submitted after the insured dies.

Interpleader arises in a life insurance dispute when an insurer cannot determine the beneficiary of a claim. Interpleader may come in many forms, however, the most common interpleader actions arise during disputes between beneficiaries. Beneficiary disputes can lead to an insurer filing an interpleader action. If the insurer files an interpleader lawsuit, the insurer places the policy proceeds in trust with the court. As a result, the court becomes the fact finder and determines the party entitled to the claim.

If a FEGLi policy fails to name a beneficiary, the law looks toward several individuals. First, the insured’s FEGLI policy proceeds go to the insured’s widow. Second, the FEGLI policy proceeds go to the insured’s children. Third, the FEGLI policy proceeds go to the insured’s parents. Fourth, the FEGLI policy proceeds go to the insured’s estate. Lastly, the insured’s FEGLI policy proceeds go to his/her next of kin.

When an insured fails to pay his/her FEGLI premiums, the insured’s life insurance coverage may lapse. If the insured fails to pay FEGLI premiums, FEGLI insurance benefits may terminate. During a non-payment of premiums period, the insured has 31-days repay back dated premium payments before the insured’s FEGLI insurer terminates the insured’s policy.

If the insured intends to reinstate his/her FEGLI policy, the insured must complete a new beneficiary form. The insured may need to pay premiums and interest on unpaid premiums to reinstate the insured’s life FEGLI policy. A denied FEGLI claim can occur when an insured fails to address unpaid premiums.