A TTORNEY FOR A PPELLANT S A TTORNEY FOR A PPELLEE

Benjamin L. Niehoff Brad L. Rigby Bloomington, Indiana Huntingburg, Indiana

______________________________________________________________________________ 

# In the 

# Indiana Supreme Court

_________________________________ No. 51S01

- 1106

- PL

- 366

P HYLLIS H ARDY , A LAX K EITH F URNISH AND M EGAN J ESSICA F URNISH , B Y N EXT F RIEND P HYLLIS H ARDY , Appellant s (Plaintiff s below),

v.

M ARY J O H ARDY , Appellee (Defendant below)

.

_________________________________ Appeal from the Martin Circuit Court, No. 51C01

- 0901

- PL

- 00 59

The Honorable R. Joseph Howell , Judge

_________________________________ On Petition to Transfer from the Indiana Court of Appeals, No. 51A01

- 1005

- PL

- 248

_________________________ ________

March 14, 2012

David, Justice.

In this case, an insured held a life insurance policy issued as part of a federal employee benefit plan . When the insured divorced from his first wife, the divorce decree and property se ttlement required the i n su red (1) to maintain the life insurance policy and (2) to designate the first wife and their grandchildren as equal beneficiaries. Subsequently, the insured remarried
, desi gnated his second wife as the sole beneficiary to the life insurance policy , and inc reased the insu rance coverage . After some time, the insured and second wife divorced. When the insured died, the second wife remained the sole beneficiary on the life insu r ance policy.2

The first wife and grandchildren filed suit, asserting equitable cla ims over the life insu rance proceeds. On cross

- motions for summary judgment, the trial court determined that federal employee benefit law preempted the equitable state law claim s and that the policy proceeds a ccordingl y belonged to the second wife.

We ho ld that the Federal Employees’ Group Life Insurance Act does not preempt the e quitable claims and that the first wife and grandchildren are entitled to a constructive trust over at least a portion of the proceeds.

Facts and Procedural History

Carlos Hardy and Phyllis Hardy were married on December 26, 1976. In 1996, Ca r los began working at the Naval Surface Warfare Center, Crane Division (NSWC Crane) as a c i vilian employee. Through NSWC Crane, Carlos had a life insurance policy with Federal E m ployees’
Gr oup Life Insurance (FEGLI).

On February 2, 1998, Carlos and Phyllis divorced. Their decree of dissolution stated, in part, that “Carlos Hardy shall maintain the Met Life Insurance Policy which has been held during the marriage. Phyllis Hardy and the par ties’ grandchildren shall each be designated as equal
b e neficiaries of the policy. Phyllis Hardy shall continue to maintain the life insurance which she has held during the marriage. ” It continued, “ Neither party shall change any of the life insu r ance

co verage on either policy.” The MetLife policy mentioned in the divorce decree and property

se t tlement is the FEGLI policy. 1

The decree of dissolution also incorporated a property settlement agreement which, among other things, reiterated that Carlos “shal l maintain” the FEGLI policy and that Phyllis and the grandchildren would be equal beneficiaries of the policy.

On September 29, 2000, Carlos married Mary Jo (Hall) Hardy. Several days la t er, on October 4, 2000, Carlos submitted a designation

- of

- benefici ary form, making Mary Jo the sole

1 The Court of Appeals appropriately pointed to a designated affidavit of Phyllis, which explained that the MetLife policy set forth in the divorce decree was actually th e FEGLI policy. Hardy v. Hardy , 942 N.E.2d 838, 840 n.3 (Ind. Ct. App. 2011). The affidavit stated, “MetLife administers the FEGLI policy, which was the reason the divorce decree referred to a ‘MetLife Policy.’” Id.3

beneficiary of his FEGLI policy. That same day, Carlos also increased his insu r ance coverage. On September 17, 2007, Carlos and Mary Jo d i vorced.

Their decree of dissolution incorporated a contract and agreement, which stated in part, “[E]ach of the parties hereto shall be awarded any and all life insurance policies which he or she has securing his or her own respective life. [And] each party shall execute any documents nece ssary to remove his or her name as beneficiari es from each other’s respective life insurance pol icies.”

Carlos died on August 9, 2008. At the time of Carlos’s death, Carlos and Phyllis had two grandchildren, Alax Furnish and Megan Furnish. Mary Jo was the named beneficiary on the FEGLI policy, whic h had payable benefits of approximately $98,000.

In January 2009, Phyllis, Alax Furnish, and Megan Furnish (collectively, “Phyllis and the grandchildren”) filed a complaint for declaratory judgment and constructive trust over the in su rance proceeds. In J une 2009, Phyllis and the grandchildren filed a motion for summary jud gment, arguing that they were entitled to the proceeds of Carlos’s life insurance policy. They a l so asserted that the doctrines of waiver and estoppel precluded any recovery for Mary Jo

.
Mary Jo filed a response and a cross

- motion for summary judgment, arguing that she was the rightful recipient of the proceeds. She stated that the Federal Employees’ Group Life Insu rance Act (FEGLIA) 2 preempted Carlos and Phyllis’s divorce decree and t hat FEGLIA r e quired the proceeds be paid to the named beneficiary in the policy. Mary Jo asserted that this prevented the court from imposing a constructive trust under state law

. Mary Jo also advanced an altern ative argument: she claimed that in the eve nt Phyllis and the grandchildren were entitled to assert their claims , they were limited to the policy’s value at the time of Carlos and Phyllis’s d i vorce.
The trial court granted Mary Jo’s motion for summary judgment, agreeing with her preemption argumen t. The trial court accordingly awarded all of the FEGLI policy proceeds to Mary Jo. Phyllis and the grandchildren appealed, and Mary Jo argued that the case was not ripe for review. After determining that the case was, in fact, ripe for review, the Cour t of A p peals
affirmed the trial court. Hardy v. Hardy , 942 N.E.2d 838, 842, 848 (Ind. Ct. App. 2011).

2 5 U.S.C. §§ 8701

– 8716 (2006 & Supp. IV 2010)

.4

We granted transfer.

Standard of review
On appeal, t he standard of review of a summary judgment motion is the same as that used
in the trial court. Tom

- Wat, Inc. v. Fink , 741 N.E.2d 343, 346 (Ind. 2001). Summary judgment
is a p propriate only “if the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matte r of law.” Ind. Trial Rule 56(C).

The standard of review does not change if, as here, the parties make cross

- motions for summary judgment. Blasko v. Menard, Inc. , 831 N.E.2d 271, 273 (Ind. Ct. App. 200 5 ), trans. d e nied

. Rather, we apply the standard of review to each motion separately. Id.

We construe all facts and reasonable inferences drawn from those facts in favor of the

non

- moving party, and our review is limited to the materials designated to the trial court. Tom

Wat, Inc. , 741 N.E.2d at 34 6

. We also carefully review a decision on a summary judgment m otion to ensure that the losing party was not improperly denied his day in court. Id.

In this case, both parties’ motions for summary judgment turn on whether FEGLIA preempts the state law cl aim for a constructive trust. Preemption is a question of law. Cf. Mi dwest Sec. Life Ins. Co. v. Stroup , 730 N.E.2d 163, 165

– 166 (Ind. 2000) (“[W]hether ERISA preempts . . . state law claims is a question of law.”). Because there is no factual dispute b earing on the preemption issue , “the appellate court will make a final determination with respect to a pure question of law or a mixed question of law and fact not involving disputed material facts.”
Tom

- Wat, Inc. , 741 N.E.2d at 34 6

.

Preemption, FEGLIA, a nd Equitable State Law Claim s
This Court must decide whether FEGLIA preempts a state law claim for the impos i tion of a constructive trust upon the proceeds of a FEGLI policy.

Mary Jo argues that FEGLIA and its underlying regulations govern the procedur es appl icable to naming designated beneficiaries and that these federal provisions require that Carlos’s5

policy proceeds be paid to her. 3 She contends that a state dissolution decree requiring Carlos to designate Phyllis and the grandchildren as beneficia ries directly conflicts with federal law, and, thus, the doctrine of preemption prevents a court from imposing a constructive trust over the pr oceeds based on the decree.

Phyllis and the grandchildren concede that FEGLIA governs to whom the policy pr oce eds are paid and that Mary Jo has the right to receive the proceeds di rectly. They a r gue, ho wever, that there is a “difference between the right to receive the proceeds directly and the right to ultimate enjoyment of the proceeds.” They contend that noth ing in FEGLIA pr e vents a court from imposing a constructive trust in favor of persons rightfully entitled to a federal life insu rance policy’s proceeds.

This specific preemption question is an issue of first impression for this Court. But we
note that se veral state and federal courts have explored whether FEGLIA preempts equitable
state law claim s and have reached disparate results. T wo schools of thought have emerged: one finding that FEGLIA preempts equitable state law claim s, and the other finding tha t equit a ble
state law claim s may proceed notwithstanding FE G LIA’s provisions.

A. Preemption Generally

The Supremacy Clause of the United States Constitution states in part that “the Laws of the United States . . . shall be the supreme Law of the Land . . . any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. Const. art. VI, cl. 2. This provides

3 Mary Jo does not reassert her ripeness argument before this Court. Regardless, we note that the Court of Appeals analysis of the ripeness issue is on point: To the extent that Mary Jo argues that this case is not ripe for review, we observe t hat “[r]ipeness relates to the degree to which the defined issues in a case are based on actual facts rather than on abstract possibilities, and are capable of being adjudicated on an ad equately developed record.” In ruling on a ripeness challenge, we mus t consider “ ‘ the fi tness of the issues for judicial decision ’ and ‘ the hardship to the parties of withholding court consideration. ’ ” Here, it is undisputed that Carlos had a FEGLI life insurance pol icy, that Carlos died on August 9, 2008, and that the ins urance coverage of the FEGLI po l icy totaled $98,000.00. Consequently, we conclude that the case is ripe for review. Hardy , 942 N.E.2d at 841

– 42 (internal citations omitted).6

Congress with the power to preempt state law. Basileh v. Alghusain , 912 N.E.2d 814, 818 (Ind. 2009).

There are three kind s of federal preemption: (1) express preemption, which occurs when a federal statute contains specific language of preemption; (2) field preemption, which occurs when federal regulation is so pervasive that it is reasonable to infer that Congress intended e xclusive federal regulation of the area; and (3) conflict preemption, which occurs when a direct conflict makes it impossible to comply with both federal and state regulations or when a state law stands as an obstacle to the execution of federal purposes and objectives. Id.

Essentially, preemption is a question of congressional intent. Id. And an express preemption clause is the best evidence of preemptive intent. Geier v. Am. Honda Motor Co.
, 529 U.S. 861, 895 (2000). In the absence of explicit pree mption language, “courts must consider whether the federal statute’s ‘structure and purpose,’ or nonspecific statutory language, noneth eless reveal a clear, but implicit, pre

- emptive intent.” Barnett Bank of Marion County, N.A. v.
Nelson , 517 U.S. 25, 31 (1996) (quoting Jones v. Rath Packing Co. , 430 U.S. 519, 525 (1977))

.
Finally, there exists a presumption against preemption in areas of traditional state regul ation, such as family law. CSX Transp., Inc. v. Easterwood , 507 U.S. 658, 663

– 64 (1993). “Stat e family and family

- property law must do ‘major damage’ to ‘clear and substantial’ federal inte rests before the Supremacy Clause will demand that state law be overridden.” Hisquierdo v.
Hi s quierdo , 439 U.S. 572, 581 (1979) (quoting United States v. Yazell , 382 U.S. 341, 352 (1966)).

B. FEGLIA

FEGLIA’s purpose is “to provide low

- cost group life insurance to Federal employees.” H.R. Rep. No. 83

- 2579, at 1 (1954), reprinted in 1954 U.S.C.C.A.N. 3052, 3052. The U.S. O ffice of Personnel Management (OPM) admi nisters the federal group life insurance program and “may prescribe regulations necessary to carry out the purposes of” FEGLIA. 5 U.S.C. § 8716(a) (2006)

. Mary Jo directs us to several FEGLIA provisions and the United States Supreme Court’s
decision in R idgway v. Ridgway , 454 U.S. 46 (1981), to support her position that FEGLIA pr e-7

c ludes a court from imposing a constructive trust on life insurance proceeds. She also cites fe de r al decisions that have ruled in favor of preemption. 4

Phyllis and the grandchi ldren acknowledge that federal court decisions, including Metr opolitan Life Ins urance Co. v. Christ , 979 F.2d 575 (7th Cir. 1992), have decided that FEGLIA preempts equitable state law claim s. But they point to numerous state courts that have reached a
di fferent result. 5

After careful consideration of the two distinct analyses on this issue, we choose to follow the majority of state courts in finding that there is nothing within FEGLIA or elsewhere preven ting a state court from imposing a constructive tru st on FEGLI proceeds. Accordingly, we co nclude that FEGLIA does not preempt an equitable state law claim for a constructive trust , no twithstanding (1) FEGLIA provisions relating to the designation of beneficiaries; (2) FE G LIA’s preemption clause; and (3) Ridgway , 454 U.S. 46.

1

. Provisions and Regulations Relating to the Designation of Beneficiaries

A section of FEGLIA, coupled with regulations promulgated under FEGLIA, establishes to whom FEGLI proceeds are paid when a policyholder dies. Specifically, the provisions pr ovide an order of pr e cedence for beneficiaries and also explain when a court order alters that order of precedence.
Section 8705(a) sets the “order of precedence” and provides in part
, (a) Except as provided in subsection (e), the amoun t of group life insu r ance . . . in force on an employee at the date of his death shall be paid, on the establishment of a valid claim, to the person or persons surviving at the date of his death, in the following order of precedence:

4 E .g. , Metro. Life Ins. Co. v. Zaldivar , 413 F.3d 119 (1st Cir. 2005); Metro. Li fe Ins. Co. v. Sullivan , 96 F.3d 18 (2d Cir. 1996); Metro. Life Ins. Co. v. Christ , 979 F.2d 575, 578 (7th Cir. 1992); Dean v. Joh nson , 881 F.2d 948 (10th Cir. 1989); O’Neal v. Gonzalez , 839 F.2d 1437 (11th Cir. 1988); Metro. Life Ins. Co. v. McMorris
, 786 F.2d 379 (10th Cir. 1986).

5 E.g. , In re Anderson , 552 N.E.2d 429 (Ill. App. Ct. 1990); McCord v. Spradling , 830 So. 2d 1188 (Miss. 2002); Kidd v. Pritzel , 821 S.W.2d 566 (Mo. Ct. App. 1991) ; Sedarous v. Sedarous , 666 A.2d 1362 (N.J. Super. Ct. App. Div. 1995); Eonda v. Affinito , 629 A.2d 119 (Pa. Super. Ct. 1993); Fagan v. Chai s son , 179 S.W.3d 35 (Tex. App. 2005).8 First, to the benefici ary or beneficiaries designated by the employee in a signed and witnessed writing received before death in the employing o ffice or [under certain circumstances] in the Office of Personnel Manag ement. For this purpose, a designation, change, or cancellation of beneficiary in a will or other document not so executed an d filed has no force or effect. Second, if there is no designated beneficiary, to the widow or widower of the e m ployee.
This priority list continues within subsection (a). Subsection (e) 6 of se ction 8705 states that a dissolution decree that expressly names a person as the recipient of FEGLI proceeds will alter the order of precedence if the decree “is received, before the date of the covered employee’s death, by the employing agency or, if the employee has separated from service, by the Office [of Personnel Management] .” 5 U.S.C. § 8705(e)(2).

Furthermore, regulations promulgated under FEGLIA expand on the subject of benefici a ries. First, 5 C.F. R. § 870.801 (2012) provides in part that if a c ourt order names “a specific

pe r son or persons to receive life insurance benefits upon the death of an insured individual . . . a

ce r tified copy of the court order must be received by the appropriate office on or after July 22,

6 The subsection reads in full as follows: (e)(1) Any amount which would otherwise be paid to a person determined under the order of precedence named by subsection (a) shall be paid (in whole or in part) by the Office to another person if and to the extent expressly provided for in the terms of any court decree of divorce, annulment, or legal separation, or the terms of any court order or court

a pproved property settlement agreement incident to any court decree of divorce, annu lment, or legal separation. (2) For purposes of this subsection, a decree, order, or agreement referred to in paragraph (1) shall not be effective unless it is received, bef ore the date of the covered employee's death, by the employing agency or, if the employee has separated from service, by the Office. (3) A designation under this subsection with respect to any person may not be changed except

— (A) with the written consent of such person, if received as described in paragraph (2); or (B) by modification of the decree, order, or agreement, as the case may be, if r eceived as described in paragraph (2). (4) The Office shall prescribe any regulations necessary to carry out thi s subsection, i ncluding regulations for the application of this subsection in the event that two or more d ecrees, orders, or agreements, are received with respect to the same amount. 5 U.S.C. § 8705(e).9

1998, and before the death o f the insured.” 5 C.F.R. § 870.801(d)(1), (2). 7 And the next section

pr o vides that an insured person may change his or her beneficiary “at any time without the
kno w ledge or consent of the previous beneficiary” and that this right “cannot be waived or r es t ricted.” 5 C.F.R §870.802(f).

In sum, these provisions and regulations (1) provide that an insured has the right to change his or her beneficiary at any time; (2) prioritize who shall be paid FEGLI proceeds, with the designated beneficiary at the top of the list; and (3) state when and how a dissolution d e cree can trump this priority list.

In this case, no one sent a certified copy of Phyllis and Carlos’s dissolution decree to the appropriate office before Carlos’s death. Mary Jo accordingly argues tha t the dissolution decree cannot be enforced against her because the requirements of FEGLIA were not met. Mary Jo
el a borates that Phyllis and the grandchildren “could have guaranteed the m selves at least part of the proceeds of the policy by following [a] s imple procedure, and they had ten years in which to do so, but they did not.”

Mary Jo cites several federal decisions, which presented similar fact patterns, to support her contention. The Court of Appeals found these decisions persuasive and stated, “‘[ t]o alter the designation of a beneficiary in this case by imposing a constructive trust would directly co ntradict the language of § 8705(e) that specifically mandates the conditions that must be met for a court divorce decree to be given effect.’” Hardy
, 942 N.E.2d at 845 (quoting Metro. Life Ins.
Co. v. Zaldivar , 413 F.3d 119, 121 (1st Cir. 2005)). Although this reasoning has been followed by numerous federal courts, many state courts have ruled against preemption. They have found
that section 8705 “me rely provides a simple procedure for payment of the policy’s proceeds” and that a constructive trust imposed after the policy proceeds are paid would not conflict with that procedure. Kidd v. Pritzel , 821 S.W.2d 566, 569, 572 (Mo. Ct. App. 1991) (emphasis added). Phyllis and the grandchildren urge us to adopt that logic, asserting that “the federal objective was

7 As the Court of Appeals correctly noted, 5 C.F.R § 870.801 was amended effective October 1, 2010. Hardy , 942 N.E.2d at 845 n.6. The portion of subsection (d) quoted and cited in this opinion, however, was not affected, and it contains the same language as the version in effect at the time of Carlos’s dea th. The most significant amendment was made to subsection (a), and we note that our analysis remains the same under either version of 5 C.F.R. § 870.801.10

not to provide an absolute right to designate a beneficiary regardless of the content of settlement agreements and divorce decrees but simply to allow for efficiency in the payment of claims d irectly by FE GLIA.”

We agree that the imposition of a constructive trust does not conflict with the provisions relating to the order of precedence and designation of beneficiaries. “[T]he sole purpose of se ction 8705 has always been to provide for the speedy and economic settlement of insurance
claims.” Fagan v. Chaisson , 179 S.W.3d 35, 42 (Tex. App. 2005) (citing Kidd , 821 S.W.2d at
569

– 70
, and noting Kidd ’s examination of FEGLIA’s legislature history). Th e section “fu l fills the congressional intention by reducing . . . administrative and legal hassles.” Kidd , 821 S.W.2d at 572. Thus, once proceeds are paid out to a designated beneficiary, the purpose of § 8705 has
been achieved. Id. And state law claim s asserting an equitable interest in those proceeds do not affect that purpose and thus do not conflict with the congressional intent unde r lying FEGLIA.
Id. As aptly stated in Kidd
, Regardless of what claims are brought to recover the proceeds once they are paid out to the designated beneficiary, the purpose of § 8705 has been served. Neither the insurance carrier nor the government can be burdened by participation in a state judicial proceeding to recover the proceeds. Nor will they be saddled with the unpleasant and cumbersome task of interpreting state statutes, divorce decrees, property settlement agreements or wills. Under § 8705 the insurer may simply pay the policy proceeds quickly and directly to the named beneficiary and be done with it. If th e insured fails to designate a beneficiary, the statute provides dire ction to determine the person to pay. This does not bar equitable claims . . . .

Id.

This reasoning applies with equal force to the regulations promulgated under FEGLIA, specif i cally, s ections 870.801 and 870.802. These regulations “compliment [] the Congressional intent of section 8705 (to alleviate administrative hassles and expedite the payment of claims)” and do not preempt equitable state law claims. Fagan , 179 S.W.3d at 44.

Ult imately, a constructive trust does not affect who holds legal title to the FEGLI pr oceeds. That is controlled by FEGLIA and the r egulations promulgated under it

— they control to whom the proceeds are directly paid. A constructive trust, on the other hand, protects an equit able interest in the proceeds.11

2. FEGLIA’s Preemption Clause

FEGLIA also contains a preemption clause, which states,
The provisions of any contract under this chapter which relate to the nature or e xtent of coverage or benefits (includi ng payments with respect to benefits) shall supersede and preempt any law of any State or political subdivision thereof, or any regulation issued thereunder, which relates to group life insurance to the e xtent that the law or regulation is inconsistent wit h the contractual provisions.
5 U.S.C. § 8709(d)(1).
Mary Jo asserts that this preemption clause prevents state law from changing to whom FEGLI proceeds are paid. We agree that FEGLIA and the regulations promulgated under it co ntrol who holds legal title to the proceeds. But we see nothing in the preemption clause that pr ec ludes equitable state law claim s. To interpret the preemption clause as preventing the imp o s ition of a constructive trust extends the clause’s scope beyond its plain la n guage.

“The t ext of section 8709 reveals that it is only concerned with conflicts between state regulation of group life insurance programs and the express contractual provisions contained in FEGLIA policies.” Fagan , 179 S.W.3d at 43. On the other hand, the preemptio n clause “is not concerned with state law claims brought once the proceeds of a policy are paid out.” Kidd , 821
S.W.2d at 573.

Ultimately, the preemption clause’s purpose is to “alleviate the difficulty of interpreting state laws and regulations conce rning group life insurance.” Id. This purpose is consistent with the purpose underlying the provisions discussed in the previous section: the reduction of admi nistrative and legal hassles. Id.

3. Ridgway

Mary Jo argues that the United States Supreme C ourt decision of Ridgway v. Ridgway
, 454 U.S. 46 (1981), supports her preemption argument. Federal decisions have often cited this case in support of a conclusion that FEGLIA preempts equitable state law claims. E.g. , Christ
, 979 F.2d at 58 0

– 82. On the other hand, several state court decisions have found Ridgway ina pplicable to the FEGLIA preemption issue. E.g. , Fagan , 179 S.W.3d at 44

– 45. Importantly,12

Ridgway does not directly address FEGLIA b ut rather the Serviceme n’s Group Life Insurance
Act of 1965 (SGLIA). 8 Ridgway ’s facts, however, are similar to the present case.

In Ridgway , the United States Supreme Court considered whether SGLIA precluded the imposition of a constructive trust. 454 U.S. at 47

. Ridgway involved a divorce decree that o rdered the insured to maintain life insurance policies, including a SGLIA policy, for the benefit of the three children from the first marriage. Id. at 48. After the divorce, the insured remarried and essentially designated his second wife as the beneficiary of his SGLIA policy. Id. at 48

– 49. A fter the insured died, both the first and second wives filed claims for the SGLIA proceeds. Id. at 49. Subsequently, the first wife, on behalf of the three minor children, filed suit, seeking to e njoin the payment of t he SGLIA proceeds to the second wife. Id. Ultimately, the United States Supreme Court decided that SGLIA preempted equitable state law claims. Id. at 60, 62. The Court found that the beneficiary designation controlled, and thus the second wife was enti tled to the proceeds. Id. at 62.

Although FEGLIA and SGLIA share similarities , there is one significant difference b etween the two Acts. Ridgway ’s language on this difference is instructive.

In Ridgway , the Court determined that SGLIA’s order of pre cedence conferred a right on
an i n sured to designate his policy beneficiary. Id. at 55

– 57. As discussed above, section 8705 of FEGLIA also confers this right on an insured. But Ridgway also extensively discussed SGLIA’s
anti

- attachment provision, which provided that SGLIA policy proceeds were exempt from cred itors and “an y ‘attachment, levy, or seizure by or under any legal or equitable process whatever,’ whether accomplished ‘either before or after r e ceipt by the beneficiary.’” Id. at 61. The Court
fo und that a constructive trust on the SGLIA proceeds would operate as a prohibited “seizure” of the SGLIA proceeds, in contr a vention of the anti

- attachment provision. Id. at 60. Furthermore,

“ Ridgway expressly stated that if Congress chose to avoid the re sult in that case, it could do so by enacting legislation which did not include an anti

- attachment provision.” Kidd , 821 S.W.2d at 571 (citing Ridgway , 454 U.S. at 63).

8 SGLIA is now the Servicemembers’ Group Life Insurance Act and is found at 38 U.S.C. §§ 1965

– 1980A ( 2006 & Supp. IV 2010).13

Mary Jo argues that although Ridgway discussed the anti

- attachment provision, it was one of two separate bases for preemption. Mary Jo asserts that because SGLIA’s order of prec edence alone was sufficient to find that SGLIA preempted equitable state law claim s, it is of no import that FEGLIA lacks an anti

- attachment provision. The Court of Appeals agreed with Mary Jo’s contention, citing numerous federal decisions, including Christ , in support. Ha r dy
, 942 N.E.2d at 846

– 47.

In response, Phyllis and the grandchildren note that Ridgway (and Christ ) were decided before 1998. In 1998, subse ction (e) was added to section 8705 to provide, as discussed above, that dissolution decrees could alter FEGLIA’s order of precedence where the decree was fo rwarded to the appropriate office prior to the insured’s death. Phyllis and the gran d children argu e that “[t]his provision is further evidence that the FEGLIA order of prec e dence is not about who ultimately receives the proceeds after they are paid . . . but rather is about a concern for admini strative eff i ciency in the payment of claims. ”

We first no te that SGLIA does not contain a method, like section 8705(e) of FEGLIA, by which a decedent’s designation of beneficiary can be overridden. We also note that the purpose behind SGLIA is quite different than FEGLIA. As explained above, FEGLIA’s primary p urpose revolves around administrative efficiency. On the other hand, when enacting SGLIA, Congress

“ ‘ spoke[] with force and clarity in directing that the proceeds belong to the named beneficiary
and no other. ’ ” 454 U.S. at 56 ( quoting Wissner v. Wissner
, 338 U.S. 655, 658 (1950) )

.
Ultimately, the lack of an anti

- attachment provision within FEGLIA, the divergent pu rposes underscoring FEGLIA and SGLIA, and the 1998 amendment to section 8705 of FE G LIA compel us to conclude that Ridgway is not controlling he re

. T he order of preference in FEGLIA is an administrative tool to allow for the efficient payment of FEGLI proceeds. We realize that
some dec i sions have interpreted Ridgway differently, but we respectfully disagree.

Accordingly, we hold that FEGLIA d oes not preempt equitable state law claims to reco ver FEGLI proceeds that have been paid in accordance with FEGLIA’s provisions and the regul ations promulgated under it. A different conclusion would run afoul of the strong presumption against preemption i n this traditional area of state regulation. As the Pennsylvania Superior
Court fi t tingly recognized
,14

[W] e are confident that Congress did not intend that the vast number of federal employees in this country be permitted to enter into voluntary, state cou rt

sanctioned agreements . . . and then shirk completely the duties imposed by those agreements. The federal interest in doing so is far too minimal and the damaging impact to state domestic relations law far too grave.

Eonda v. A f

finito
, 629 A.2d 119, 123 (Pa. Super. Ct. 1993)

.

C. Equitable State Law Claim

Because FEGLIA does not preempt equitable state law claim s, we turn to the merits of the parties’ arguments. Phyllis and the grandchildren argue that they are entitled to the full pr oceeds of Carlos’s FEGLI policy. Mary Jo argues that if this Court allows Phyllis and the gran dchildren’s equitable claim s to proceed, this Court should find that they are e n titled to only the value of the FEGLI policy at the time of the 1998 divorce d e cree

.

As stated earl ier, this case involves cross

- motions for summary judgment. Here it is u ndisputed that in 1998 Carlos and Phyllis entered into a property settlement agreement that was incorporated into their final decree of dissolution of marriage. This agreement provid ed that “Carlos Hardy shall maintain the Met Life Insurance Policy which has been held during the ma rriage. Phyllis Hardy and the parties’ grandchildren shall each be designated as equal benefici a ries of the policy.” At the time of the divorce, the death benefit value of the policy was based on Carlos having elected the policy’s “Option A.” Furthermore, i t is undisputed that Carlos subs equently married Mary Jo, designated her as the beneficiary of his FEGLI policy, and increased his FEGLI policy coverag e by electing “O p tion B

. ” And when Carlos and Mary Jo divorced, they were each awarded any life insurance policies securing their respective lives.

Property settlement agreements crafted upon divorce are contractual and binding. Rodr iguez v. Rodriguez
, 818 N.E.2d 993, 996 (Ind. Ct. App. 2004), trans. denied

. An action to reco ver the proceeds of a life insurance policy based on an insured’s viol a tion of a divorce decree may be brought against any person or entity designated by the insured as a beneficiar y of the policy in question. See Meece v. Meece , 495 N.E.2d 827, 827

– 28 (Ind. Ct. App. 1986). Mary Jo

a c knowledges these established legal principle s , but she argues that “the amount of recovery is
l i mited to the contracted amount between parties.” She contends that the word “maintain” in the15

1998 settlement agreement means she is entitled to any gains of the policy after Carlos and Phy llis d i vorced.

Here, the divorce decree and property settlement agreement undoubtedly entitle Phyllis and the grandchil dren to whatever the death benefit under Option A would have been at the date of Carlos’s death, as Carlos had to “maintain” his policy for the benefit of Phyllis and the gran dchildren. The trial court never reached the issue of who is entitled to any bal ance above that

amount , as it agreed with Mary Jo’s preemption argument and awarded all of the proceeds to her. Accordingly, r e mand ing to the trial court on that issue is appropriate.

Conclusion

We find that FEGLIA does not preempt an equitable state law claim for a constru c tive trust over FEGLI policy proceeds. We also find that the property settlement in this case r e quired
Ca r los to “ maintain ” his FEGLI policy for the benefit of Phyllis and the grandchildren. Phyllis and the grandchildren are at least entitled to whatever the death benefit value under “O p tion A” would have been at the date of Carlos’s death, and they hold the equitable right to enjoy those proceeds once they are paid.

Accordingly, we reverse the trial court’s grant of summary judgment in favor of Mary Jo. We remand to the trial court to determine what the death benefit value under “Option A” was at the date of Carlos’s death; place a constructive trust over that amount in favor of Phyllis and the grandchildren ; and determine who is en titled to any balance.

Shepard, C.J., and Dickson, Sullivan, and Rucker, JJ., concur.