IN THE MATTER OF NATHANIEL PALLONE

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0968-09T3

IN THE MATTER OF NATHANIEL

PALLONE.

__________________________________

November 24, 2010

Argued: September 22, 2010 - Decided:

Before Judges Cuff and Simonelli.

On appeal from a Final Decision of the Department of the Treasury, Division of Pensions and Benefits.

Douglas H. Riblet argued the cause for appellant Letitia C. Pallone (Curtin & Heefner, attorneys; Mr. Riblet, on the brief).

Danielle P. Schimmel, Deputy Attorney General, argued the cause for respondent Department of the Treasury, Division of Pensions and Benefits (Paula T. Dow, Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Ms. Schimmel, on the brief).

PER CURIAM

This appeal concerns the life insurance benefit payable on the death of a member of the faculty at Rutgers University. Nathaniel Pallone had held teaching and administrative positions at Rutgers University until his death on September 6, 2004. The Division of Pensions (Division) paid the group life insurance benefit to Pallone's first wife; his wife at the time of his death argued the insurance should have been paid to her consistent with a Change of Beneficiary form executed by decedent prior to his death and filed with the Division several days after his death.

This matter returns to this court following a remand to the Division with instructions to forward the matter to the Office of Administrative Law (OAL) for a hearing as a contested case. In the Matter of Nathaniel Pallone, A-6067-04 (App. Div. May 2, 2007). Appellant Letitia Pallone, decedent's wife at the time of his death, appeals from the final decision of the Division Director. He held that appellant failed to demonstrate her eligibility as primary beneficiary and Division personnel properly rejected the form submitted by decedent's attorney and properly ordered payment to the designated beneficiary, decedent's first wife. We affirm.

Briefly stated, the record assembled in the Division and presented to us in the initial appeal focused on a change of beneficiary form executed by decedent days before his death but submitted several days after his death. The form listed appellant as the primary beneficiary. This form also bore "white-out" in the contingent beneficiary portion of the form. Division personnel rejected the form due to the white-out on the form. Appellant argued that decedent intended to designate his current wife as the primary beneficiary and executed a change of beneficiary form to effectuate the change. Appellant argued that the Division's focus on the white-out in the contingent beneficiary portion of the form operated to ignore and subvert decedent's clearly expressed intention to designate his current wife as the beneficiary of his life insurance. Our disposition of the initial appeal in this matter focused on this argument.

We also noted a factual conflict between decedent's attorney and a senior official at the Division. The attorney certified that he called the Division several times and that "he understood from at least one conversation that appellant was considered by the Division as the primary beneficiary." Pallone, supra, slip op. at 4. The official stated that decedent's attorney called only once, was instructed to submit his position in writing, but he did not do so. Ibid. Therefore, when neither appellant nor decedent's attorney submitted anything in writing, the Division authorized payment to decedent's first wife.

It is in this context that we remanded to the Division with instructions to forward this matter to the OAL for a hearing. In doing so, we observed that the instruction to decedent's attorney to submit his position in writing "suggested that a suitable explanation may have altered the disposition of the submitted form." Id. at 7. We noted that when an explanation was submitted to the Director, albeit months after the life insurance proceeds had been paid, the Director rejected it as not worthy of belief. Ibid. We noted that the matter should have been considered a contested case once credibility assessments became a factor in the final decision. Ibid. We, therefore, issued the following instructions:

[t]he hearing will focus on the circumstances of the preparation of the forms and their transmission; the contact between appellant, the attorney and the Division from September 13, 2004 through and after distribution of the death benefit; and the import or lack of import of white-out on the form that affected only the contingent beneficiary designation that the plan participant never intended to change.

[Id. at 7-8.]

The hearing before the OAL commenced on August 11, 2008, and concluded on December 9, 2008. In his Initial Decision, the Administrative Law Judge (ALJ) found that decedent's attorney was careless but Division personnel demonstrated a lack of common sense. The ALJ also found that, although decedent's attorney failed to gather basic information and failed to communicate forcefully to the Division, Division personnel acted unreasonably, which lead to the incomprehensible decision to pay the life insurance proceeds to decedent's first wife. The ALJ also concluded that the remand instructions required him "to decide the ultimate issue of the correctness of the denial of the decedent's Designation of Beneficiary form," but further concluded that the Division acted improperly in rejecting the change of beneficiary form and the events following rejection of the form did not justify payment of the insurance proceeds to the designated beneficiary.

In his Final Agency Decision, the Director noted the record did not support several findings of fact made by the ALJ. In doing so, the Director found that decedent's attorney assumed decedent had named Letitia Pallone as the primary beneficiary and the purpose of the change of beneficiary form was to designate a contingent beneficiary if appellant chose not to accept the life insurance proceeds. The Director also found there was a dispute whether decedent signed the form on September 2, 2004 or September 3, 2004, as set forth on the form. The Director also found that decedent's attorney called the Division once, not several times as the attorney had originally averred. Of greater significance, the Director found that decedent's attorney never realized appellant was not the primary beneficiary; rather the attorney's concern was limited to rejection of the form designating a trust as the contingent beneficiary. Indeed, the Director found decedent's attorney never intended to write to the Division as urged by Division personnel because he never believed the primary beneficiary was anyone other than appellant.

Accordingly, the Director concluded that appellant failed to demonstrate her eligibility as primary beneficiary of her husband's group life insurance policy. He rejected the Initial Decision because the ALJ did not apply the proper standard and the record did not support several critical findings of fact. The Director concluded that the ALJ misinterpreted long-standing administrative practice to reject as not acceptable any designation of beneficiary form that has been altered in any way, including the appearance of white-out, cross-outs or strike-outs.

On appeal, appellant argues that the Director improperly addressed the timeliness of the submission of the change of beneficiary form. Appellant also contends neither the conduct of decedent's attorney nor her conduct excused payment to anyone other than her, and the presence of white-out in the contingent beneficiary portion of the form does not justify rejection of the form. Assuming she prevails on appeal, appellant also requests interest on the improperly paid proceeds.

We have carefully considered the record in its entirety. We are satisfied that the Director's rejection of several findings of fact made by the ALJ is entirely consistent with Cavalieri v. Board of Trustees, 368 N.J. Super. 527, 537 (App. Div. 2004). Moreover, except for the Director's discussion of the timeliness of the submission of the change of beneficiary form, we conclude that the decision of the Division is supported by sufficient credible evidence on the record. R. 2:11-3(e)(1)(D). When this matter was initially presented to this court, the Division withdrew its argument that the submission of the form following the death of decedent barred consideration of the requested change. Although the OAL hearing revealed facts other than as set forth in the initial record developed by the Division, those facts do not alter the viability of the timeliness argument. We add the following brief comments.

In our initial opinion, we noted that the matter had been decided on the papers submitted by appellant. We culled from these papers what appeared to be the undisputed facts and identified certain clearly contested facts, such as the number of times decedent's attorney called the Division. We suggested that a hearing may have been required as soon as the Director determined that certain explanations were not worthy of belief. As the Director, and now this court, learned following the OAL hearing, the change of beneficiary form was intended to add a contingent beneficiary to further an estate plan rather than to change the primary beneficiary. Unbeknownst to decedent's attorney, decedent's first wife remained the primary beneficiary as required by his 1981 divorce judgment. The record developed in the OAL and submitted to the Director and now to this court is in many respects a different case than the case previously before this court. The Director properly reviewed the findings of fact made by the ALJ against this fully developed record, and the Director's decision that appellant did not demonstrate her eligibility for the life insurance proceeds and that Division officials properly rejected the change of beneficiary form is fully supported by the record and consistent with governing law.