A federal district court in Illinois has ruled that a life insurance company owed no duty to an insured’s employer (in this case, the U.S. government) to properly maintain designation of beneficiary forms. If that duty existed, the district court found, it ran to the insured and beneficiaries.
The case: A lawsuit against the U.S. government alleged that it had failed to properly maintain and/or forward a new designation of beneficiary form signed by Robert Conner, a Small Business Administration (SBA) employee, which meant that the beneficiaries under that form did not receive the life insurance benefits they would have been entitled to receive after Conner’s death.
In response, the government asserted a claim against the Metropolitan Life Insurance Company, contending that it had acted negligently when it had paid benefits to the beneficiaries named in an earlier designation rather than the later one. In the government’s view, MetLife had a duty to determine which beneficiary designation form was correct and to pay benefits in the proportions listed on the correct designation form. The government alleged that, as a result of MetLife’s negligence, the plaintiffs in the underlying lawsuit sustained damages that they sought to recover from the government.
MetLife moved to dismiss.
The decision: The court granted MetLife’s motion, finding that the government’s claim failed because it could not allege any duty owed by MetLife to the government.
According to the court, even if MetLife had a duty to determine which beneficiary designation form was correct and to pay benefits in the proportions listed on the correct designation form, the duty was owed by MetLife to Conner and/or to the beneficiaries, not to the government. The court added that the government’s argument that it had properly discharged its own duty by transmitting the designations to MetLife might be a defense to the plaintiffs’ underlying claims against the government, but was not grounds for a third-party complaint by the government against MetLife, “which owed no tort duty to the [g]overnment.” Simply put, the court found:
If MetLife negligently failed to pay the correct beneficiaries …, its liability would run only to those to whom it owed a duty of care with respect to the payment of insurance benefits.
Whatever the composition of that group, the court concluded, it did not include the government.