In a decision involving determination of a life insurance policy’s proper beneficiary, the Sixth Circuit ruled that the language of ERISA and the insurance policy must be followed before a court may resort to the application of federal common law.

In Union Security Insurance Co. v. Blakeley (6th Cir., No. 09-4368, Feb. 15, 2011) [PDF], the Court reviewed the district court’s application of federal common law and conclusion that Appellee Billet, the cohabitant and purported fiancée of the decedent, was the policy’s beneficiary. The policy itself did not specify a beneficiary, and decedent’s three children and Ms. Billet all claimed to be the proper beneficiaries. In the absence of a named beneficiary, the policy distributed benefits in the following order of precedence: spouse, domestic partner, children, living parents and the decedent’s estate. After determining that the policy was an ERISA plan and finding no express definition of “domestic partner” in the policy, the district court applied federal common law, obtained a definition from Ohio law, determined that Ms. Billet qualified as a domestic partner, and ruled that she was the proper beneficiary.

Writing for a unanimous panel that included Circuit Judges Martin and Stranch, Judge Thapar, U.S. District Judge for the Eastern District of Kentucky, reversed. The Court observed that “[w]hile courts do sometimes resort to federal common law to identify beneficiaries under ERISA plans, the text of the plan is the much preferred source.” And while the general definition section of the insurance policy did not define domestic partner, the Court found that the policy, when “read as a whole,” did provide a definition. Citing criteria regarding the qualification for being a domestic partner that was listed elsewhere in the policy, the Court ruled that such criteria “ought to have been the last stop in the lower court’s search for a way to decide whether Sondra Billet qualified.” The Court remanded for the lower court to apply the criteria to Ms. Billet and determine whether she qualified as a domestic partner under the policy.