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NOT FOR PUBLICATION WITHOUT THE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-6067-04T56067-04T5

IN THE MATTER OF NATHANIEL

PALLONE.

__________________________________

 

Argued: March 28, 2007 - Decided May 2, 2007

Before Judges Cuff and Fuentes.

On appeal from a Final Decision of the Department of the Treasury, Division of Pensions and Benefits, Docket No. ABP #909124.

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

Christine Lucarelli, Deputy Attorney General, argued the cause for respondent Department of the Treasury, Division of Pensions and Benefits (Stuart Rabner, Attorney General, attorney; Patrick DeAlmeida, Assistant Attorney General, of counsel; Ms. Lucarelli, on the brief).

PER CURIAM

Appellant Letitia C. Pallone appeals from a final decision of the Division of Pension and Benefits (Division) denying her request for payment of life insurance proceeds earned by her deceased husband, Nathaniel Pallone. We reverse and remand for a hearing before the Office of Administrative Law (OAL) as a contested case.

Nathaniel Pallone had been employed at Rutgers University as a professor and in two administrative positions. When he enrolled in the Alternate Benefit Program (ABP) administered by the Division, he named his wife at the time as his beneficiary. They divorced in 1981, at which time he did not change the primary beneficiary. In 1983, Pallone remarried and again he did not alter the designated primary beneficiary.

On September 2, 2004, Pallone was hospitalized due to lung cancer. On that date, he signed a Division "Designation of Beneficiary" form presented to him by his attorney. This form designated appellant, his current wife, as the beneficiary of his ABP death benefit. Pallone died on September 6, 2004; his attorney mailed the form to the Division on September 9, 2004. The Division received the form on September 13, 2004, stamped it "not acceptable" and addressed a letter dated September 14, 2004, to Pallone that notified him that the beneficiary nomination was rejected because the contingent beneficiary designation had been altered. The form contained white-out on the lines on which a participant is directed to designate contingent beneficiaries.

These are the uncontested facts. What occurred thereafter is contested and the resolution of these contested facts may influence whether the decedent complied with the statute and regulations governing the ABP and particularly the change of the primary beneficiary. The events following the initial rejection of the form may also explain the reasonableness of the Division's disbursement of the death benefit proceeds to decedent's first wife.

According to an affidavit submitted by decedent's attorney, decedent asked him to deliver the forms. The attorney explained that his secretary had difficulty typing the contingent beneficiaries on the initial form, whited-out what she had typed and re-typed the names of the contingent beneficiaries on an addendum that was not a Division form. The attorney stated that he mailed both forms, the Designation of Beneficiary and the addendum, with a cover letter on September 9, 2004. Virginia Martucci, Chief of the Division's Claims Bureau, stated in an affidavit that the Division received only the Designation of Beneficiary form.

Decedent's attorney certified that he called the Division several times and was instructed to "send something in writing," but he understood from at least one conversation that appellant was considered by the Division as the primary beneficiary. Therefore, the attorney sensed no urgency to write the requested letter because the problem cited by the Division concerned only the contingent beneficiaries.

Contrary to the attorney's affidavit, Martucci stated in her submission that the attorney had not been in contact with the Division on several occasions. Rather, the Claims Bureau had a record of only one contact on October 25, 2004. She recalled speaking to him, advising him to write a letter describing the circumstances of the submission of the forms, and that Claims Bureau employees left at least two voicemail messages for him. The next writing from appellant or her attorney occurred on February 25, 2005, when the Division received a request from appellant for all correspondence, notes, and other materials regarding decedent's insurance.

Meanwhile, on October 13 and November 5, 2004, the Division sent a letter to decedent's first wife advising her of the amount of the insurance benefit. On November 22, 2004, the Division received the requisite forms from the former wife and paid the death benefit to her on November 29, 2004.

On March 24, 2005, the Division informed appellant that the death benefit had been paid to decedent's former wife. Thereafter, appellant contested the rejection of the September 2004 Designation of Beneficiary form and the payment of death benefits to decedent's former wife.

The Director of the Division initially rejected appellant's claim because the form had not been received prior to appellant's husband's death and was not on an acceptable form. Appellant filed a notice of appeal. In response to a motion to supplement the record, the matter was remanded to the Division for consideration of the additional information. The Director of the Division reaffirmed his earlier decision. In addition to the previously expressed reasons, the Director also rejected the attorney's assertion that a cover letter and an addendum accompanied the Designation of Beneficiary form mailed on September 9 and received on September 13, 2004.

On appeal, appellant contends that the Division improperly dishonored the Designation of Beneficiary form and in doing so ignored the clearly expressed intention of the plan participant to alter his primary beneficiary. She also contends that the alteration of the contingent beneficiary portion of the form does not justify dishonor of the participant's intention regarding his primary beneficiary. Finally, she asserts that the matter should have been treated as a contested case and referred to the OAL.

N.J.S.A. 18A:66-180 and N.J.S.A. 18A:66-183, the two legislative provisions governing the designation of beneficiaries, do not expressly invalidate a change in beneficiary if received after the insured's death. Furthermore, the language of the two provisions, although according the Division some discretion in determining whether forms are "satisfactory" or "proper," does not confer unfettered authority that is impervious to the common law, public policy, and principles of equity.

In Estate of Boyle v. Board of Trustees, 234 N.J. Super. 93 (App. Div. 1989), we recognized the importance of effection of a participant's intent regarding his desired beneficiary. By doing so, we held that a change of beneficiary form executed and mailed prior to the death of the participant but received by the Division following his death was effective. Id. at 94-95. We held that the governing statutes, which are substantially similar to N.J.S.A. 18A:66-183, did not require receipt by the system while the member or retiree was alive. Id. at 97.

At oral argument, the Division advised us that it withdrew its argument that the Division could reject the September 2, 2004 designation of beneficiary form because it was received after the participant's death. It continues to argue, however, that it properly rejected the form because it contained white-out and that appellant's lack of communication with the Division failed to impress on it that it should withhold distribution of the death benefit to decedent's former wife.

The Legislature has authorized the Division to develop acceptable forms and prescribe their use. N.J.S.A. 18A:66-183. The Division also, however, invited submission of a letter to explain the circumstances of the submission. This invitation suggested that a suitable explanation may have altered the disposition of the submitted form. When an explanation was submitted, albeit belatedly, the Director discounted that explanation clearly implying that the attempt to supplement the record was after-the-fact rationalization not worthy of belief. Once an explanation was received and rejected as incredible, the matter should have been treated as a contested case.

We, therefore, remand to the Division which will transmit this matter to the OAL for treatment as a contested case. The 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. The hearing shall be on notice to decedent's former wife who has received the substantial death benefit.

Reversed and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.

 

The Judgment of Divorce required Pallone to name his former wife as beneficiary and his two daughters as contingent beneficiaries of his employment-based life insurance. If decedent's former wife remarried, he was no longer required to maintain her as his primary beneficiary. In addition, his obligation to name his children contingent beneficiaries terminated when they reached age twenty-two.

(continued)

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A-6067-04T5

May 2, 2007