On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-3526-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Lisa, Baxter and Alvarez.
This appeal requires us to decide whether the Law Division erred when it determined that the decedent's wife, rather than his daughter, was entitled to the refund of his pension contribution payments and to the proceeds of his employment-related life insurance policy. We reject the judge's conclusion that the decedent's substantial compliance with applicable regulations for changing a beneficiary demonstrated decedent's intent to name his wife as beneficiary, and therefore his failure to utilize the prescribed method for beneficiary designation should be excused. We likewise reject the judge's conclusion that the Department of Treasury, Division of Pensions and Benefits (Division) breached its affirmative obligation to advise decedent that he had not properly changed his beneficiary designation. We reverse.
On December 1, 1971, while employed by Rutgers University, decedent James Mahone enrolled in the Public Employees Retirement System (PERS) and was an active member of PERS until the time of his death on December 14, 2005. Because he had not yet retired at the time of his death, James's named beneficiary was entitled to an active service life insurance death benefit in the amount of $157,158, payable through a group life insurance policy administered by plaintiff Prudential Insurance Company of America (Prudential). Similarly, because James died while in active service, PERS was obliged to return his accumulated pension contributions, with interest to the date of his death, which totaled $98,436.72, to the person or persons whom he had designated as his beneficiary for purposes of the return of his pension contributions.
PERS records reflect that on July 21, 1971, when James enrolled in the pension system, he designated his then-wife, defendant Connester Mahone, the beneficiary of his group life insurance policy and for return of any accumulated pension deductions. He named his children as his contingent beneficiaries. A few months later, on November 1, 1971, James completed a new designation of beneficiary document in which he retained his wife Connester as his primary beneficiary and "my children" as his contingent beneficiaries for his life insurance benefit; however, he altered the beneficiaries for the return of his accumulated pension benefits. In particular, he designated his daughter, defendant April Mahone, as his primary beneficiary, and his sons James, Jr. and Sean, as contingent beneficiaries for the return of his accumulated pension deductions. James never sent PERS any additional change in beneficiary designation after November 1, 1971.
James and Connester divorced on September 9, 1981, and James married defendant third-party plaintiff Jannie B. Mahone, on April 22, 1988. On October 25, 2005, James and Jannie met with Judith Crespo, a Human Resources Administrator at Rutgers-Newark, to discuss the benefits Jannie would receive upon James's death. According to a letter Crespo prepared on May 12, 2006, which Jannie submitted in support of her motion for summary judgment, Crespo questioned James as to whether he had updated his beneficiary information. According to Crespo, James assured her that he had indeed completed an updated beneficiary form designating Jannie Mahone as his sole beneficiary.
During that same meeting, Crespo assisted James in preparing a written request to PERS to provide him with two retirement estimates on forms entitled "Request for a Retirement Estimate." One estimate was for an early retirement allowance and the other for an ordinary disability retirement allowance. Both requests asked PERS to assume a retirement date of March 1, 2006, and to assume his wife, Jannie, would be designated on the retirement application as the beneficiary of his pension benefits. Significantly, both of the Request documents clearly indicated that the Request for a Retirement Estimate is not a retirement application, and contained the notice "This Form Is Not An Application For Retirement."
Subsequently, on November 10, 2005, PERS sent James each of the "estimated retirement benefits" that he had requested, each one showing Jannie as the sole beneficiary and displaying four different levels of monthly benefit payments, depending upon certain variables that are not pertinent to this appeal. Notably, like the Request for a Retirement Estimate, the actual Estimates that PERS provided on November 10, 2005 bore the statement "This is not an Application for Retirement Allowance" immediately below James's name and address, and immediately preceding the balance of the relevant information.
Upon her husband's death on December 14, 2005, Jannie contacted Crespo, who directed her to contact Carmela M. Joseph of the Division of Pensions. Joseph informed Jannie that Jannie was not the designated beneficiary on the records of the Division of Pensions, and that instead, the beneficiaries were as stated on the November 1, 1971 Designation of Beneficiary form. In response, Jannie notified the Division that James assured her he had completed an updated Designation of Beneficiary form; however, she was unable to find it. In that same letter, Jannie advised the Division that she intended to contest the designation of April and Connester as her late husband's beneficiaries. Additionally, Prudential notified Jannie that based upon the information in its file, Connester was the designated beneficiary of James's life insurance policy and he had never changed that designation.
Aware of the dispute between Connester, Jannie and April, Prudential filed an interpleader complaint against Jannie and Connester on April 26, 2006, in which it asserted that because it was unable to determine which party should receive James's life insurance benefits, Prudential sought a judgment authorizing it to pay the proceeds into a fund maintained by the court, and directing defendants to then interplead their rights to that sum.
Separately, Jannie filed a complaint against both the Division of Pensions and April on August 4, 2006. After cross-complaints were filed, the parties to Jannie's complaint included the Division of Pensions, April, Connester, Jannie, and Prudential. James Jr. and Sean never filed answers to the complaint. During the course of the litigation, both Prudential and the Division of Pensions received authorization ...