What is substantial compliance in a life insurance beneficiary designation?

A common issue we see in many ERISA life insurance beneficiary disputes we handle involves an allegation that an insured attempted to change a beneficiary designation before they died. This may seem cut and dried: the insured either did or did not send in the change form.  But the issue is not necessarily black and white.  Maybe the insured did not send in the right form.  Maybe it was just a letter.  Maybe it was just a phone call. Maybe the form was left on the desk of the insured's home office and never actually mailed before the insured died. Maybe the form was not filled out according to the insurance company's satisfaction. Maybe the form was filled out perfectly, but the insurance company had not processed the change before the insured died.

Most states have developed a doctrine of "substantial compliance" to evaluate a designation that has not been fully accepted and processed by the insurance company.  Federal courts generally also recognize the doctrine in regard to disputes over ERISA life insurance policies. 

The actual wording of the substantial compliance doctrine varies by state and by federal circuit, but generally the doctrine will enforce an attempted beneficiary change if the insured substantially complies with the insurance policy's change of beneficiary provisions.  What constitutes substantial compliance can vary based on the facts of the case and the wording of the actual policy at issue.  Many policies are not exactly clear and detailed in regard to beneficiary designations.  

In a very recent decision, Judge Tharp of the Northern District of Illinois found that an insured's filling out the form designating a new beneficiary was not sufficient when there was no evidence he actually trued to submit the form to the insurance company. 

On the other hand, a guardian was later appointed for the insured.  The guardian did not use the form approved by the insurance company.  However, she did write a letter to the insurance company requesting a new beneficiary and followed up with a phone call. The court found substantial compliance even though the guardian did not use the right form or even reference the specific policy or ERISA plan by name or number.

These cases are very fact-specific and outcomes are not necessarily predictable. Therefore, anyone facing the prospect of a beneficiary dispute should contact a lawyer with experience in evaluating ERISA life insurance disputes.