2017 UT App 26

THE UTAH COURT OF APPEALS

DIANE WELTY AND JACOB LOPEZ,

Petitioners,

v.

RETIREMENT BOARD,

PUBLIC EMPLOYEES’ GROUP TERM LIFE PROGRAM,

Respondent.

Opinion

No. 20150746-CA

Filed February 9, 2017

Original Proceeding in this Court

Diana J. Huntsman, Steven M. Rogers, and Chelsey 

Phippen, Attorneys for Petitioners

David B. Hansen, Liza J. Eves, and Erin L. Gill, 

Attorneys for Respondent

JUDGE KATE A. TOOMEY authored this Opinion, in which JUDGES

STEPHEN L. ROTH and DAVID N. MORTENSEN concurred.

TOOMEY, Judge:

¶1 Diane Welty and Jacob Lopez (Petitioners) seek review of 

the Utah State Retirement Board and Public Employees’ Group 

Term Life Program’s decision denying their claim for payment 

of life insurance benefits under the Utah State Retirement and 

Insurance Benefit Act (the Act). We decline to disturb the 

Board’s ruling.

BACKGROUND

¶2 Welty and Jesse Lopez were married and had children, 

including Jacob Lopez, before they divorced in 1997. Their 

divorce decree provided:
Welty v. Retirement Board

20150746-CA 2 2017 UT App 26

That [Jesse Lopez] currently has in force and effect 

a life insurance policy on his life in the face amount 

of $325,000.00. That [Lopez] is ordered to maintain 

in full force and effect said life insurance policy 

until such time as the last of the parties’ children 

reaches age 18 or alimony terminates, whichever is 

later. During the period that the child support is 

due, [Lopez] should be ordered to irrevocably 

designate [Welty], as trustee for the minor 

children, beneficiary on said life insurance policy. 

[Lopez] should be ordered to provide [Welty] with 

proof that the insurance is in effect within 30 days 

of entry of the Divorce Decree and provid[e]

verification that said insurance is in effect by 

January 15th of each year thereafter.

¶3 Lopez was employed by Salt Lake City Corporation (the 

City) where he was covered by a group term life insurance 

policy offered to City employees through the Public Employees’ 

Health Program (PEHP) Life Program.1 Lopez had $173,000 in 

 

1. Title 49 of the Utah Code is the Utah State Retirement and 

Insurance Benefit Act. The Act’s purpose is to establish 

retirement systems which provide benefits for members and “a 

central administrative office and a board to administer the 

various systems, plans and programs established by 

the . . . board.” Utah Code Ann. § 49-11-103(1) (LexisNexis 2015). 

The Utah State Retirement Board is required to “ensure that the 

systems, plans, programs, and funds are administered according 

to law” and to “take action consistent with this title for the 

administration of the systems, plans, and programs in order to 

carry out the purposes of this title.” Id. § 49-11-203(c), (n). 

Among the plans and programs is the Public Employees’ Benefit 

and Insurance Program, which offers a number of employee 

benefit plans, including life insurance. Id. §§ 49-20-101, -102(3). 

The Public Employees’ Benefit and Insurance Program 

(continued...)
Welty v. Retirement Board

20150746-CA 3 2017 UT App 26

coverage with the Life Program, and in December 1999 he 

applied for additional coverage. The application named Welty as 

primary beneficiary for the minor children, and Lopez’s current 

wife, Mary Ellen Lopez, as secondary beneficiary.2 Lopez also 

signed and filed a Beneficiary Change Form (the 1999 

Designation) that listed as primary beneficiary “Diane 

(petitioner) for minor children as per attached divorce decree,” 

and Mary Ellen Lopez as secondary beneficiary. The divorce 

decree was attached to the 1999 Designation.

¶4 Between 2003 and 2006, Lopez signed and filed two more 

Beneficiary Change Forms that revoked previous nominations of 

beneficiaries and made new designations. Then in March 2006, 

Lopez signed and filed a Group Term Life/Accident Plan 

Beneficiary Change Form (the 2006 Designation) “*r+evoking any 

previous nominations or beneficiary(ies)” and designating Mary 

Ellen Lopez as primary beneficiary.

¶5 The Self-Funded and Administered Group Term Life and 

Accident Plan Master Policy (the Master Policy) “establishes the 

coverage and benefits available to Employees and their eligible 

Dependents.” The Master Policy cannot be changed “unless 

 

(...continued)

administers these benefit plans. Id. § 49-20-103. Political 

subdivisions, such as Salt Lake City Corporation, are eligible to 

participate on behalf of their employees. Id. § 49-20-201(1)(b). 

The Act thus “provide*s+ a mechanism for covered employers to 

provide covered individuals with group . . . life insurance . . . in 

the most efficient and economical manner.” Id. § 49-20-105(1).

2. This request for additional coverage was cancelled “based 

upon contact from the City’s Human Resources Department.” So 

far as we can tell from the record, although he made another 

attempt, Lopez never secured additional coverage through the 

Life Program.
Welty v. Retirement Board

20150746-CA 4 2017 UT App 26

approved by the Plan and unless such approval is evidenced by 

endorsement or amendment.” It provides for payment of 

benefits to designated beneficiaries. “A subscriber may change 

his or her beneficiary(ies) by filing a written notice of the change 

with the Plan. The change will take effect as of the date the 

subscriber signed the notice of change . . . .” Written notices of 

claim “must be given to the Plan within twenty (20) days after 

the death of a Subscriber . . . unless it was not reasonably 

possible to do so.” The Master Policy provides that benefits “will

be paid as soon as reasonably possible after receipt of an 

acceptable written proof of loss together with supporting 

materials,” and “*a+ny payment made in good faith pursuant to 

this provision fully discharges the Plan to the extent of the

payment.” Further, “*n+o legal action may be brought after the 

expiration of three years after the time written proof of loss is 

required to be furnished.”

¶6 Lopez died in July 2006, while his son, Jacob Lopez, was 

still a minor. Shortly after Lopez’s death, Mary Ellen Lopez filed 

a Group Term Life Program Claimant’s Statement, and PEHP 

paid her $173,000.

¶7 In August 2012, six years after Lopez’s death, Petitioners 

submitted a notice of claim to the Life Program, disputing the 

distribution of Lopez’s life insurance proceeds. PEHP’s Life 

Claims Review Committee and the Executive Director each 

denied Petitioners’ claim, and the Petitioners appealed, 

ultimately filing a Request for Board Action. An adjudicative 

hearing officer conducted a hearing and determined “*t]he 

procedure followed by [PEHP] was in accord with its master 

policy terms created by statutory framework. . . . [P]etitioners 

have not met their burden to [show] that there was error or a 

legal defect in *PEHP’s+ conduct.” The Board adopted the 

hearing officer’s ruling.

¶8 Petitioners now seek judicial review of the Board’s final 

action.
Welty v. Retirement Board

20150746-CA 5 2017 UT App 26

ISSUE AND STANDARD OF REVIEW

¶9 Petitioners contend the hearing officer erred in his 

interpretation of the Utah Code “by denying [their] requests for 

payment of life insurance proceeds.” “*W+e review the Board’s 

application or interpretation of a statute as a question of law 

under the correction-of-error standard.” McLeod v. Retirement

Board, 2011 UT App 190, ¶ 9, 257 P.3d 1090 (alteration in 

original) (citation and internal quotation marks omitted); see also 

Utah Code Ann. § 63G-4-403(4)(d) (LexisNexis 2016) (stating that 

this court may grant relief if an agency has “erroneously 

interpreted or applied the law”).

ANALYSIS

¶10 Petitioners argue that because a court ordered Lopez to 

irrevocably designate Welty as beneficiary of his life insurance 

coverage on behalf of the minor children, and because Lopez

attached the divorce decree to his 1999 Designation thereby 

incorporating it into his contract with the Life Program, the Life 

Program “breached its contractual duties under the Master 

Policy by paying [Mary Ellen Lopez] pursuant to a forbidden 

change of beneficiary form.” “Our analysis is rooted in the 

concept that an insurance policy is a contract between two 

parties.” Quaid v. U.S. Healthcare, Inc., 2007 UT 27, ¶ 10, 158 P.3d 

525. In Petitioners’ view, the divorce decree is part of the 

contract between Lopez and PEHP. They reason that the 

attachment of the divorce decree, as an incorporated document,

rendered the 1999 Designation irrevocable, and thus that the 

2006 Designation was invalid, in which case PEHP should not 

have paid Mary Ellen Lopez the proceeds of the life insurance 

policy.

¶11 Petitioners’ argument fails for several reasons. First,

[i]n order [f]or the terms of another document to be 

incorporated into the document executed by the 
Welty v. Retirement Board

20150746-CA 6 2017 UT App 26

parties, the reference must be clear and 

unequivocal, and must be called to the attention of 

the other party, [the party] must consent thereto, 

and the terms of the incorporated document must 

be known or easily available to the contracting 

parties.

Interwest Constr. v. Palmer, 886 P.2d 92, 97 n.8 (Utah Ct. App. 

1994) (second and third alterations in original) (citation and 

internal quotation marks omitted). In this case, the 1999 

Designation did not explicitly incorporate anything by reference 

into the Master Policy, and there is no evidence PEHP approved 

the incorporation of the divorce decree.

¶12 The 1999 Designation named, as primary beneficiary,

“Diane (petitioner) for minor children as per attached divorce 

decree.” Although this reference acknowledges the divorce 

decree, there is no language to indicate that the 1999 Designation 

was meant to incorporate the terms of the decree as part of the 

Master Policy. See Layne Christensen Co. v. Bro-Tech Corp., 836 

F. Supp. 2d 1203, 1236 (D. Kan. 2011) (“A mere reference in one 

agreement to another agreement, without more, does not 

incorporate the latter agreement into the former by reference. To 

incorporate one document into another, an explicit manifestation 

of intent is required.” (citation and internal quotation marks 

omitted)); United Cal. Bank v. Prudential Ins. Co. of Am., 681 P.2d 

390, 411 (Ariz. Ct. App. 1983) (“A reference to a former paper for 

descriptive purposes . . . cannot have the effect of importing into 

a new contract the conditions and limitations of the former 

agreement.” (citation and internal quotation marks omitted)).

¶13 In addition, incorporation also requires consent. See 

Interwest Constr., 886 P.2d at 97 n.8. Here, there is no indication

PEHP agreed to be bound by the provisions in the divorce 

decree. Petitioners argue that “PEHP’s actions demonstrate that 

it consented to incorporation of the divorce decree by accepting 

the beneficiary change form along with the attached divorce 
Welty v. Retirement Board

20150746-CA 7 2017 UT App 26

decree.” But this is not sufficient. The Master Policy explicitly 

states, “No change in this Master Policy shall be valid unless 

approved by the Plan and unless such approval is evidenced by 

endorsement or amendment to this Master Policy.” The Master 

Policy allows for an insured to make a change of beneficiary at 

any time. To incorporate the divorce decree with the effect of 

making the accompanying beneficiary designation irrevocable 

would modify this clause by forbidding a change in beneficiary. 

The Master Policy makes clear this modification is not valid

absent an “endorsement or amendment” by PEHP. Petitioners 

have not demonstrated that PEHP consented to incorporate the 

divorce decree in the manner the Master Policy requires.

¶14 Second, the Act requires PEHP to pay the last-named 

beneficiary. The Act provides that “*t+he most recent beneficiary 

designations signed by the member and filed with the office . . . 

at the time of the member’s death are binding in the payment of 

any benefits due under this title.” Utah Code Ann. § 49-11-609(2) 

(LexisNexis Supp. 2016). In other words, under the Act’s plain 

language, PEHP is required to pay any benefits owed to the 

deceased employee’s most recently designated beneficiary. The 

Master Policy is consistent with this provision, requiring 

payment to a designated beneficiary and permitting a subscriber 

to change the designated beneficiary effective on the date the 

notice of change was signed.

¶15 Lopez was a City employee covered at the time of his 

death in July 2006 by a group term life insurance policy offered 

through PEHP. In March 2006, just months before his death, 

Lopez signed and submitted a Beneficiary Change Form 

“*r+evoking any previous nominations or beneficiary(ies)” and 

designating Mary Ellen Lopez as primary beneficiary. There 

being no subsequent change, Mary Ellen Lopez was the most 

recent beneficiary designated by Lopez. Soon after Lopez’s 

death, Mary Ellen Lopez filed a claim, and PEHP paid it. The Act 
Welty v. Retirement Board

20150746-CA 8 2017 UT App 26

required PEHP to do this, and so did the policy.3 See id. § 49-11-

609(2).

¶16 Having properly paid benefits to Mary Ellen Lopez, 

PEHP had no further obligation to pay again. “Benefits paid 

under this section shall be: (a) a full satisfaction and discharge of 

all claims for benefits under this title; and (b) payable by reason 

of the death of the decedent.” Id. § 49-11-609(5).

¶17 Notwithstanding the Act’s requirements, Petitioners 

contend that “*c+hanging an irrevocable beneficiary designation 

is forbidden under Utah law.” In support, Petitioners rely on 

Travelers Insurance Co. v. Lewis, 531 P.2d 484 (Utah 1975). In 

Travelers, a divorce decree ordered the decedent to maintain a 

life insurance policy with his ex-wife as beneficiary and the 

minor children as contingent beneficiaries in the event the exwife remarried or died. Id. at 485. The decedent, “contrary to the 

order . . . , changed the beneficiary of the policy to be his second 

wife.” Id. The second marriage failed and the first wife 

remarried. Id. Following the decedent’s death, “a dispute arose 

between [the second wife] and the children as to whom the 

proceeds of the policy should be paid,” and the insurance 

company filed an interpleader action to determine who was 

entitled to the proceeds. Id. The district court granted summary 

judgment for the children, and our supreme court affirmed,

determining “that the provisions of a divorce decree control the 

disposition of the proceeds of an insurance policy between 

contending beneficiaries.” Id. at 485–86. Travelers, then, does not 

 

3. We note that our legislature could amend the Act to allow for 

irrevocable designations of beneficiaries under similar 

circumstances, in which a divorce decree requires a party to 

maintain life insurance to secure payment of child support 

during a child’s minority or other obligations created by decree. 

This is a policy determination which belongs to the legislative 

branch.
Welty v. Retirement Board

20150746-CA 9 2017 UT App 26

address an insurer’s responsibility to a previously designated 

beneficiary; rather, it allows a divorce decree to direct the 

payment of life insurance benefits between contending 

beneficiaries.

¶18 Petitioners also contend that under section 49-20-401(1)(a) 

of the Act, PEHP is responsible to monitor the beneficiaries.

Section 49-20-401(1)(a) states, “The program shall . . . act as a 

self-insurer of employee benefit plans and administer those 

plans.” But PEHP’s mandate to “administer” the plan does not 

create a statutory duty to monitor submitted change-ofbeneficiary forms for possible conflict with extraneous 

documents of which it may or may not be aware. If this were the 

rule, an insurer would not be able to “rely on the insured’s 

designation of a beneficiary.” See Simonds v. Simonds, 380 N.E.2d 

189, 192 (N.Y. 1978). Determining the validity of a beneficiary 

designation is not PEHP’s responsibility, and it may not have 

access to the information necessary to determine whether a 

beneficiary designation is valid. The insured is responsible to 

abide by any court-ordered constraints and provide PEHP with 

proper beneficiary designations.

¶19 Petitioners nevertheless argue that “principles of equity 

dictate” that they should receive the insurance proceeds because 

“(A) public policy concerns favor upholding an irrevocable 

beneficiary designation pursuant to a divorce decree, and (B) the 

Life Program is the only entity or person in a position to monitor 

beneficiary designations.” PEHP counters that the equitable 

considerations point in the other direction because it paid Mary 

Ellen Lopez in good faith and because Petitioners delayed 

bringing their claim for six years.

¶20 Although Petitioners correctly observe that parents with 

child support obligations are sometimes required by court order 

to obtain life insurance to secure payment of those obligations, 

no one other than the parties to the divorce in this case—Welty 

and Lopez—were bound by the decree. What the Petitioners 
Welty v. Retirement Board

20150746-CA 10 2017 UT App 26

suggest, without supporting authority, is that the divorce decree

imposed duties upon PEHP even though PEHP was not a party 

to the divorce proceeding. It did not. A court order “bind*s+ only 

the parties before the court.” See In re Howard, 76 U.S. 175, 183 

(1869); Hiltsley v. Ryder, 738 P.2d 1024, 1025 (Utah 1987) (“Courts 

can generally make a legally binding adjudication only between 

the parties actually joined in the action.”). Because judicial

mandates to irrevocably designate a beneficiary “involve only 

the [policy] owner, not the insurer, . . . [the insurer] may not be 

bound by the promise, or order, if the owner fails to name the 

appropriate beneficiary, or subsequently changes that 

designation.” Kelvin H. Dickinson, Divorce and Life Insurance: 

Post Mortem Remedies for Breach of a Duty to Maintain a Policy for a 

Designated Beneficiary, 61 Mo. L. Rev. 533, 537 (1996). And, as 

explained above, PEHP is not in a position to monitor 

beneficiary designations; rather, the insured is responsible to 

comply with court orders in designating beneficiaries. Indeed, 

the decree itself required that Lopez provide annual 

confirmation that there was appropriate insurance in place, a 

provision that, in turn, gave Welty some ability to hold Lopez to 

account.

¶21 Accordingly, even if equitable considerations applied 

here, we are not persuaded that they clearly favor Petitioners.

CONCLUSION

¶22 The Board did not err in interpreting or applying the Act, 

and the plain language of the contract required PEHP to pay 

Lopez’s last named beneficiary—Mary Ellen Lopez. Having 

done so, PEHP’s duties were discharged, and the equities of the 

situation do not require PEHP to pay a second time to 

Petitioners. We therefore decline to disturb the Board’s decision.