## Facts

- Kevin Spann, an Illinois resident and U.S. Army soldier, owned two life-insurance policies while stationed in Germany.
- A $200,000 Servicemembers’ Group Life Insurance (SGLI) policy listed Spann’s wife, Gina Spann, as primary beneficiary and her son, Steven M. Hill, Jr., as contingent beneficiary.
- A $100,000 non-SGLI policy listed Gina as primary beneficiary and her sister, Betty Jo Pierce, as contingent beneficiary.
- Neither policy named Spann’s natural daughter, Chrystal Athmer; paternity was established by DNA testing after Spann’s death, and Spann had not acknowledged the relationship during his life.
- Spann’s will left his estate to Steven Hill, whom Spann described as “my son.”
- In 1997, Gina Spann arranged Spann’s murder; she pleaded guilty and was sentenced to life imprisonment without parole plus additional time.
- Gina was disqualified from receiving the policy proceeds as the slayer-beneficiary.
- The insurers filed an interpleader action to determine whether the proceeds should go to Athmer or to the contingent beneficiaries (Hill and Pierce), who were related to Gina but not alleged to have participated in the killing.

## Issues

1. For the SGLI policy, whether unresolved questions are governed by state law or by federal common law implementing federal policy.
2. For the non-SGLI policy, whether Illinois or Georgia law governs the slayer-related dispute.
3. Whether the slayer rule disqualifies contingent beneficiaries who are innocent but closely related to the murdering primary beneficiary, where the insured’s natural child claims the proceeds.

## Decision

- The Seventh Circuit affirmed judgment awarding the proceeds to Steven Hill and Betty Jo Pierce.
- For the SGLI policy, the court applied federal common law to fill statutory gaps affecting administration and interpretation.
- For the non-SGLI policy, the court applied Illinois choice-of-law rules and concluded Illinois law governed.
- Under both federal common law principles applicable to SGLI and Illinois law applicable to the other policy, the slayer rule barred the murderer but did not bar Hill or Pierce absent proof of participation, knowledge, or a realistic likelihood that Gina would benefit from their recovery.

## Legal Principles

- When a federal insurance program (such as SGLI) leaves an issue unresolved, federal common law supplies the rule to effectuate federal policy and maintain uniform administration.
- Under slayer principles, the disqualification primarily targets the wrongdoer and extends further only to prevent meaningful indirect benefit to the wrongdoer.
- Innocent contingent beneficiaries are not disqualified solely because of their familial relationship to the slayer; disqualification requires wrongdoing, complicity, or circumstances showing the slayer would obtain an appreciable benefit.
- Courts generally honor the insured’s beneficiary designations and other reliable evidence of intent unless doing so would confer a prohibited benefit on the killer.

## Conclusion

Because the contingent beneficiaries were not shown to have participated in the murder and the record did not support a realistic indirect benefit to the slayer, the proceeds of both policies were properly paid to the designated contingent beneficiaries rather than to the insured’s natural daughter.


Prudential Ins. Co. of Am. v. Athmer, 178 F.3d 473 (7th Cir. 1999)