Federal common law of waiver was applicable in determining that decedent's ex-wife, the named beneficiary in an ERISA life insurance plan, had waived her rights to insurance policy proceeds, the Fifth Circuit recently held.  The life insurance policy at issue was an employee welfare benefits plan governed by ERISA.  The insured died intestate six months after the divorce and had not changed the named beneficiary of his life insurance policy.  The decedent's estate claimed that when the insured and his first wife divorced, the ex-wife waived all of her right, title and interest in the life insurance proceeds.   The life insurance company brought an interpleader action to determine whether decedent's ex-wife or decedent's estate should receive the life insurance proceeds. 

The Fifth Circuit rejected the contention that the Supreme Court's decision in Egelhoff v. Egelhoff, 532 U.S. 141 (2001) precluded the court from relying on federal common law to determine whether the ex-wife waived her rights.   In Egelhoff, the Supreme Court held that beneficiary determination must be made in accordance with plan documents rather than by state statute.  The Fifth Circuit held that while Egelhoff required adherence to plan documents, it did not address application of federal common law to ERISA plans and did not preclude application of federal common law to resolve the issue.  Egelhoff only held that ERISA preempts a state statute that automatically revokes the designation of a spouse as the beneficiary of a life insurance policy upon divorce.

Because the ex-wife's waiver in the divorce agreement was "explicit, voluntary and made in good faith," the Fifth Circuit concluded it was a valid and effective waiver under federal common law.

The Guardian Life Insurance Company of America v. Finch, 395 F.3d 238 (5th Cir. 2004), cert. denied 125 S.Ct. 2305 (2005).