Federal Common Law Bars “Slayer” From Receiving ERISA-Governed Insurance Proceeds

Slayer in 2017. They have nothing to do with this case. Selbymay, CC BY-SA 4.0, via Wikimedia Commons

• Sometimes life insurance beneficiaries find themselves parties to an interpleader suit in which an insurer seeks to have a court settle competing claims over proceeds.  

  • One common dispute can arise over the recognition of benefits awarded in divorce as qualified domestic relations orders (or “QDROs”) under 29 U.S.C. § 1056.  For example, a former spouse may have been awarded ERISA-governed life insurance while the default beneficiary at death is a current spouse and the benefits administrator may assert competing claims requiring a court to determine validity of the order.

• A less-common scenario is the application of “slayer statutes.” 

  • These are laws that treat a living person as “predeceased” for purposes of property transfer like inheritance and life insurance proceeds because the person wrongfully killed or abused the decedent. 

  • In our states of practice these laws are:

    • Alaska – AS 13.12.803: “An individual who feloniously kills the decedent forfeits all benefits under this chapter with respect to the decedent’s estate” and adopting the principle that “a killer may not profit from the killer’s wrong.”

    • Oregon - ORS 112.465: “Property that would have passed by reason of the death of a decedent to a person who was a slayer or an abuser of the decedent . . . passes on death and vests as if the slayer or abuser had predeceased the decedent.”

    • Washington – RCW 11.84.020: “No slayer or abuser shall in any way acquire any property or receive any benefit as the result of the death of the decedent . . “

  • But when life insurance benefits are employer-provided, ERISA throws a wrench in the works because it “supersede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.”  And ERISA contains no slayer provision of its own.  What to do then?

• The Facts:

  • Philip Cloud was murdered by his daughter. 

  • After her conviction, his estate submitted a claim to the decedent’s benefits plan asserting Oregon’s slayer statute, but the plan did not distribute benefits. 

  • The estate then sued under ERISA to claim the benefits. The decedent’s plan interpleaded Cloud’s daughter.

• The Holding:

  • The Oregon Court of Appeals has already found Oregon’s slayer statute to be ERISA-preempted, leaving the District of Oregon to determine whether “federal common law” provided a substantive rule to replace it. It held:

Federal common law derives from the principle that "no person should be permitted to profit from his own wrong." Shoemaker v. Shoemaker, 263 F.2d 931, 932 (6th Cir. 1959). Thus, the "Supreme Court has long held that the law may not allow a person to benefit financially from a murder he has committed: `It would be a reproach to the jurisprudence of the country if one could recover insurance money payable on the death of the party whose life he had feloniously taken.'" Camm, 2007 WL 2316480, at *5 (quoting Mut. Life Ins. Co. v. Armstrong, 117 U.S. 591, 600 (1886)). Courts have uniformly concluded federal common law "`prohibits a life insurance beneficiary who murders an insured from recovering under the policy.'" Standard Ins. Co. v. Guy, No. 218CV00074-DCLCCRW, 2021 WL 2410667, at *1 (E.D. Tenn. May 20, 2021) (quoting Giles v. Ca., 554 U.S. 353, 384 (2008) (Breyer, J., Stevens, J., and Kennedy, J., dissenting)). See also Prudential Ins. Co. of Am. v. Athmer, 178 F.3d 473, 475-76 (7th Cir.1999) ("The principle that no person shall be permitted to benefit from the consequences of his or her wrongdoing has long been applied to disqualify murderers from inheriting from their victims, whether the route of inheritance is a will, an intestacy statute, or a life insurance policy."); Box v. Goodyear Tire & Rubber Co., 51 F. Supp. 3d 1147, 1154 (N.D. Ala. 2014) ("The federal common law principle regarding slayers is that no person should profit from her own wrong.") (citations omitted); Hartford Life & Acc. Ins. Co. v. Rogers, No. 3:13-CV-101, 2014 WL 5847548, at *2 (D.N.D. Nov. 12, 2014) ("It is well established in federal law . . . that a person should not financially benefit from the felonious or intentional killing of another human being.") (citations omitted); Admin. Comm. for the H.E.B. Inv. & Ret. Plan v. Harris, 217 F. Supp. 2d 759, 761 (E.D. Tex. 2002) ("It has long been a principle of federal common law that such killers should not be rewarded with insurance benefits for taking a life.") (citations omitted).

. . . Cloud may not be permitted to profit from her own wrong and Cloud is treated as predeceased Phillip Cloud for purposes of distribution of ERISA plan assets.”

• Well, seems right! You wouldn’t expect a raft of “nah, it’s fine” precedents of course, but still very federal common-law-y in this citation history.  Also, here the United States Supreme Court’s 1886 Armstrong decision was a bit ahead of the English, who adopted a “forfeiture rule” as to murderers and life insurance in the 1892 case of Cleaver v. Mutual Reserve Fund Life Association, a Queen’s Bench decision which many UK websites assure me exists even though I found no publicly-accessible case texts. 

• Also, the plan got a $20,000 attorney fee award under the interpleader rules assessed against the payable proceeds.

In short, under ERISA it cannot pay to slay.