ERISA Preemption Is an Affirmative Defense Subject to Waiver; Fiduciary Breach Supports a Constructive Trust Over Life-Insurance Proceeds

Introduction

In Regina Geels v. Lindsay Flottemesch, et al. (Ind. Apr. 8, 2026), the Indiana Supreme Court confronted a recurring problem in life-insurance disputes: the person named as beneficiary in plan documents may not match the decedent’s asserted intent for who should ultimately receive the funds. The case arose after David Malinowski (“Father”) named his sister, Regina Geels (“Aunt”), as the sole beneficiary of two employer-provided MetLife life-insurance policies (totaling $150,000), while allegedly instructing her to distribute the proceeds equally to his three daughters (“Daughters”). After Father’s death, Aunt claimed the proceeds for herself, and Daughters sought a constructive trust in their favor.

Two legal issues dominated: (1) whether Aunt waived an ERISA federal-preemption defense by failing to raise it in the trial court; and (2) whether the trial court clearly erred by imposing a constructive trust after finding Aunt breached a fiduciary duty owed to Father. The Court affirmed the constructive-trust judgment, holding that ERISA preemption is a choice-of-law affirmative defense that must be timely raised and was waived here.

Summary of the Opinion

  • Waiver: ERISA preemption is a choice-of-law affirmative defense. Because Aunt did not plead or otherwise raise ERISA preemption in the trial court, she waived it on appeal—even though MetLife raised ERISA in its own answer and the parties’ interpleader filing referenced ERISA.
  • Constructive trust affirmed: Applying Indiana equity principles, the Court held the evidence supported the findings (by clear and convincing evidence) that (a) Father and Aunt had a fiduciary/confidential relationship with Aunt as the superior party, (b) Father designated Aunt to receive proceeds for the purpose of distributing them to Daughters, and (c) Aunt’s refusal to do so constituted a breach of fiduciary duty amounting to constructive fraud, justifying a constructive trust.
  • Procedural posture: The Court of Appeals had twice reversed on preemption grounds (Geels v. Flottemesch (Geels I) and Geels v. Flottemesch (Geels III)). The Supreme Court had earlier issued a per curiam remand requiring the clear-and-convincing-evidence standard (Geels v. Flottemesch (Geels II)). On the second trip up, the Supreme Court resolved waiver and affirmed.

Analysis

1) Precedents Cited

A. ERISA framework and preemption purpose

  • FMS Nephrology Partners N. Cent. Ind. Dialysis Ctrs., LLC v. Meritain Health, Inc.: Cited to describe ERISA as establishing “minimum federal standards” for employee-benefit plans, anchoring why preemption arguments arise in benefits litigation.
  • Egelhoff v. Egelhoff ex rel. Breiner (quoting Ft. Halifax Packing Co. v. Coyne): Used to emphasize ERISA’s interest in “nationally uniform plan administration” and standardized claims/benefit procedures, explaining the policy rationale behind broad preemption language.
  • State Farm Life v. Goecks: Referenced in a footnote as an example of a court applying ERISA preemption even after proceeds were deposited with a court via interpleader. The Indiana Supreme Court expressly declined to decide that downstream question because waiver resolved the case.

B. Waiver and “piggybacking” limits

  • Associates Inv. Co. v. Claeys: The central waiver authority. The Court relied on it for two propositions: (i) ERISA preemption is a choice-of-law defense; and (ii) such defenses must be pleaded as affirmative defenses under Trial Rule 8(C) (or tried by consent), otherwise they are waived—particularly when raised first on appeal. The Court also adopted the equitable/common-sense admonition from Associates: a party cannot “sit idly by” while a court proceeds under the wrong law and complain later.
  • In re Estate of Blair (citing Fowler v. Newsom): Supported the Court’s refusal to let Aunt “piggyback” on MetLife’s ERISA pleading. Just as a litigant cannot preserve an evidentiary issue by relying on another party’s objection, Aunt could not preserve ERISA preemption by relying on MetLife’s answer.
  • Scott v. State: Reinforced that a party must join a codefendant’s motion/position to preserve an issue; silence equals waiver.

C. Standard of review for findings and conclusions

  • In re Adoption of T.W. and Trial Rule 52(A): Provided the “clearly erroneous” review framework for findings and judgment when the trial court issues findings and conclusions.
  • Oil Supply Co., Inc. v. Hires Parts Serv., Inc.: Cited for the two-tiered analysis: (1) whether findings are supported by evidence/inferences; and (2) whether the judgment is supported by findings.
  • Kalwitz v. Est. of Kalwitz: Used both for appellate restraint (no reweighing/credibility review) and as a substantive constructive-trust/fiduciary-relationship authority.

D. Constructive trust doctrine, fraud, and fiduciary breach

  • Melloh v. Gladis: Quoted for the unjust-enrichment rationale of constructive trusts and cited for the rule that a constructive trust must be proven by clear and convincing evidence.
  • Geels v. Flottemesch (Geels II): Quoted for the proposition that “Fraud constitutes an essential ingredient in a constructive trust,” and served as the source of the clear-and-convincing requirement on remand.
  • Hall v. Ind. Dep't of State Revenue: Quoted (via Geels II and other citations) as part of the doctrinal line that fraud in constructive-trust cases includes constructive fraud arising from fiduciary breach.
  • Zoeller v. E. Chicago Second Century, Inc.: Clarified that “fraud” for constructive-trust purposes is broader than criminal fraud and includes breach of duty arising out of confidential/fiduciary relationships.
  • Morfin v. Estate of Martinez: A close factual analogue: a life-insurance beneficiary kept proceeds contrary to the insured’s wishes, and a constructive trust was imposed due to a fiduciary/confidential relationship and resulting constructive fraud. This case supplied both a template and a persuasive comparator validating the trial court’s equitable response.
  • Matter of Living Trust Agreement of Morningstar: Cited for the “duty of complete loyalty” owed by fiduciaries and the prohibition on self-interest.
  • J.C.C. v. State (quoting Est. of Reasor v. Putnam Cnty.): Explained the purpose of the clear-and-convincing standard as an intermediate burden used when heightened certainty is warranted.

2) Legal Reasoning

A. The new procedural holding: ERISA preemption is waivable and must be raised by the party who seeks it

The Court treated ERISA preemption not as a jurisdictional bar, but as a choice-of-law affirmative defense. That classification drove the outcome: affirmative defenses must be asserted in a responsive pleading (Trial Rule 8(C)) or later by consent. Aunt’s answer did not mention ERISA, and she tried the case on an Indiana-law theory (including proposed findings), making waiver especially clear.

Two attempted “saves” failed:

  • MetLife’s answer: MetLife’s ERISA pleading applied to “claims against MetLife, if any,” and sought to protect MetLife. The Court held this did not put Daughters on notice that Aunt would rely on ERISA to defeat a constructive trust against her.
  • Interpleader stipulation referencing ERISA: Even if the policies were governed by ERISA, that did not substitute for Aunt’s obligation to raise preemption as a defense. The Court emphasized that Aunt affirmatively litigated under Indiana law and never invoked ERISA at trial.

The Court’s reasoning materially tightens litigation discipline in ERISA-adjacent state cases: defendants must personally and explicitly plead preemption or risk forfeiting it.

B. The equitable holding: constructive trust based on fiduciary breach (constructive fraud)

Having found waiver, the Court proceeded under Indiana constructive-trust principles. A constructive trust requires clear and convincing proof and is predicated on “fraud,” which includes constructive fraud—i.e., a breach of duty arising from a fiduciary/confidential relationship. The Court upheld the trial court’s key factual findings:

  • Fiduciary/confidential relationship: The evidence showed Aunt’s superiority and influence: Father’s durable power of attorney, Aunt’s management of finances and taxes, joint bank accounts, health-care representative designation, and substantial control over Father’s living arrangements. Sibling relationship plus demonstrated dependence and control supported the fiduciary finding (with analogies to Kalwitz v. Est. of Kalwitz and Morfin v. Estate of Martinez).
  • Instruction/understanding regarding the proceeds: A key text exchange showed Aunt acknowledging a plan to split proceeds among Daughters with Marley’s share held in trust. Father’s will also reflected a consistent intent to provide for his children and appoint Aunt to implement that intent.
  • Breach and self-interest: By claiming all proceeds for herself rather than carrying out Father’s instructions, Aunt violated fiduciary loyalty, producing the “constructive fraud” needed to justify a constructive trust.

Importantly, the Court reconciled the trial court’s findings that there was no undue influence or fraud in designating Aunt as beneficiary with the conclusion that Aunt nonetheless committed constructive fraud later by breaching fiduciary obligations in retaining the proceeds. Thus, the absence of misconduct in the beneficiary designation did not immunize later wrongful retention.

3) Impact

A. Litigation practice in Indiana: preemption defenses must be pleaded early and personally

The decision establishes (and strongly signals) that ERISA preemption, as litigated in Indiana courts, will be treated as a standard affirmative defense: it can be waived by failure to plead, and one defendant cannot preserve it for another. This will affect:

  • Answer practice: Defendants in benefits-related disputes must evaluate and assert ERISA preemption at the outset, rather than relying on codefendants or later appellate arguments.
  • Interpleader cases: Even when an insurer interpleads proceeds and references ERISA, competing claimants/beneficiaries must still plead preemption if they want the federal choice-of-law rule to control equitable remedies.
  • Trial strategy coherence: The Court’s reliance on the “theory upon which the case was tried” discourages litigants from trying a state-law case and then switching to federal preemption on appeal.

B. Substantive equity: constructive trust remains potent where fiduciaries divert intended benefits

On the merits, the decision reinforces that Indiana courts can impose constructive trusts over life-insurance proceeds when a fiduciary relationship exists and the beneficiary’s retention of proceeds contradicts the decedent’s entrusted instructions. The Court’s emphasis on fiduciary “superiority and influence” and “duty of complete loyalty” may broaden the practical availability of constructive trusts in family-and-caregiver contexts—especially where one person informally assumes “de facto guardian” control.

C. Open question left unresolved

The Court expressly declined to decide whether ERISA preemption applies after a plan administrator has distributed proceeds (or deposited them with a court via interpleader). That question remains available for future cases where preemption is properly preserved.

Complex Concepts Simplified

  • ERISA preemption: A federal rule that can displace (“preempt”) state laws affecting employee benefit plans, aiming for uniform administration. Here, it mattered because ERISA often requires paying benefits strictly according to plan documents.
  • Affirmative defense (choice-of-law defense): A legal defense a party must raise in its pleadings; if not raised, it is usually lost (“waived”). The Court treated ERISA preemption this way.
  • Waiver: Losing the right to argue a point because you did not raise it at the proper time in the trial court.
  • Constructive trust: An equitable remedy where a court treats someone holding property as if they are holding it for the rightful beneficiaries, to prevent unjust enrichment.
  • Clear and convincing evidence: A heightened proof standard requiring a firm belief that the claim is true—more than “more likely than not,” less than “beyond a reasonable doubt.”
  • Fiduciary/confidential relationship: A relationship of trust where one person has superiority/influence and owes loyalty to the other (e.g., managing finances, holding power of attorney, controlling important decisions).
  • Constructive fraud: A legal concept that does not require intent to deceive; it can arise simply from breaching fiduciary duties in a way that produces unfair advantage.
  • Interpleader: A procedure allowing a stakeholder (here, MetLife) to deposit disputed funds with the court and exit the case, leaving claimants to litigate entitlement.

Conclusion

The Indiana Supreme Court’s decision delivers two principal takeaways. First, ERISA preemption is not self-executing in state litigation: it is a waivable, affirmative, choice-of-law defense that must be timely asserted by the party who seeks its benefit; one cannot rely on another party’s pleading or a general ERISA reference in interpleader filings. Second, when state law applies, a constructive trust may be imposed over life-insurance proceeds where clear and convincing evidence shows a fiduciary/confidential relationship and a breach of fiduciary duty amounting to constructive fraud—even absent undue influence or fraud in the beneficiary designation itself. In combination, the case strengthens both procedural accountability in ERISA-adjacent disputes and the continued vitality of Indiana equity in policing fiduciary opportunism.