AETNA Life Insurance Company v. Rosen

Background

These three interpleader actions—cases filed by entities holding disputed funds so competing claimants can resolve their rights—concerned the proceeds of Erich Frank’s life-insurance policy, UBS 401(k) plan, and UBS Resource Management Account (RMA). Phyllis Frank was Erich Frank’s mother, and Emily Rosen was his longtime partner. Before his death, Erich Frank was the beneficiary of the life-insurance and 401(k) proceeds through designations naming Phyllis Frank. On December 20, 2018, while receiving hospice care, he expressed a desire during a telephone call to change those beneficiaries to Emily Rosen.

The life-insurance policy and 401(k) plan required a new beneficiary-designation form to make a change. UBS sent forms for that purpose, but neither Erich Frank nor his lawyer returned a completed form. Erich Frank died on January 6, 2019. Regarding the RMA, a beneficiary form naming Emily Rosen was faxed back with what purported to be Erich Frank’s signature.

Phyllis Frank moved for summary judgment—judgment without a trial when no genuine dispute of important fact requires one—on the life-insurance and 401(k) proceeds. Emily Rosen cross-moved for summary judgment on those proceeds and also sought judgment concerning the RMA proceeds. The parties disputed Erich Frank’s mental capacity, whether Emily Rosen exercised improper pressure, whether he substantially complied with the plans’ beneficiary-change requirements, and whether his signature on the RMA form was forged.

Resource Management Account

The court first addressed whether Phyllis Frank had standing, meaning a sufficient legal interest to bring the RMA claim. Unlike the life-insurance and 401(k) accounts, the RMA had not previously named Phyllis Frank as a beneficiary. If Emily Rosen’s RMA designation were invalid, the proceeds would go to Erich Frank’s estate rather than directly to Phyllis Frank.

The court explained that, under New York law, heirs generally cannot sue merely because misconduct reduced a potential inheritance. Claims on behalf of an estate ordinarily must be brought by the estate’s executor or administrator. The executor here was Frank Sabia, not Emily Rosen. Phyllis Frank alleged that Emily Rosen had used improper pressure and forged Erich Frank’s signature, and she alleged that Sabia had colluded with Rosen. But the court found no evidence supporting the alleged collusion or showing that Sabia engaged in the asserted misconduct.

The court therefore concluded that Phyllis Frank lacked standing to assert claims concerning the RMA proceeds and granted summary judgment to Emily Rosen on that issue.

Life-Insurance and 401(k) Plans

The court held that state laws governing beneficiary designations in these employee-benefit plans were displaced by the federal Employee Retirement Income Security Act (ERISA). ERISA plans are interpreted under ordinary contract principles, so the court applied the plans’ clear language. Both plans expressly required a participant to complete or file a new beneficiary-designation form to change a beneficiary.

Emily Rosen argued that other UBS statements referring employees to a website for beneficiary changes made the plans’ requirements unclear. The court rejected that argument because the statements were separate from the plans and there was no evidence that they amended the plans under the plans’ formal amendment procedures. The court also noted that UBS sent a form stating that the beneficiary designation would be valid only if the form were completed and returned by the specified deadline.

The court considered the doctrine of substantial compliance, which can sometimes recognize a beneficiary change when an insured clearly intended the change and took positive action substantially similar to what the plan required. The court found that Erich Frank’s telephone expression of intent was not enough. UBS sent forms to him and his lawyer, but neither form was returned, and there was no evidence that either person completed the forms or submitted another writing confirming the change. The court therefore held that Erich Frank did not substantially comply with the plans’ requirements.

Because the court resolved the claims on the form requirement, it did not separately decide whether Erich Frank had the mental capacity to change his beneficiaries or whether Emily Rosen exercised improper pressure.

Disposition

The court granted Phyllis Frank’s motion for summary judgment. It granted Emily Rosen’s cross-motion for summary judgment in part and denied it in part. The court declared Phyllis Frank entitled to the Aetna life-insurance death benefit and the UBS-administered 401(k) plan proceeds, and directed the Clerk of Court to disburse those funds to her. It declared Emily Rosen entitled to the UBS RMA proceeds and directed UBS Financial Services Inc. to disburse those proceeds to her. The court directed the Clerk to close the motions and all three cases.