Maretta filed a claim for the death benefit and collected the proceeds, and Jacqueline Hillman sued. Virginia law automatically revokes beneficiary designations to ex-spouses and lets the family of the deceased sue if an ex-spouse collects the proceeds as the named beneficiary. The Federal Employees' Group Life Insurance Act, which governs Hillman's group life policy, states that the death benefit must be paid to the named beneficiary. The Supreme Court ruled that the federal law pre-empts Virginia's law. "It's a very significant case," says attorney Daniel Ruttenberg, a partner at SmolenPlevy in Vienna, Va., who argued the case before the Supreme Court for Jacqueline Hillman. Federal Employees' Group Life Insurance "is the largest life insurance program by far in the world, so it affects millions of individuals." The case emphasizes the need to review and update beneficiary designations after major life changes. Yet many people, like Hillman, neglect to do so. "Divorce is such a hard thing to go through," Ruttenberg says.
Source: http://www.foxbusiness.com/personal-finance/2014/02/11/spouse-right-to-life-insurance-money/