TAG | Nationwide Life Insurance Co failure to pay death benefits
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In an April 26th, 2011, article from InvestmentNews.com, Darla Mercado writes that attorneys have set their sights on life insurers as state regulators investigate the carriers for their failure to pay out death benefits or submit the money to the state in a timely fashion, allegedly while still collecting fees in some cases, and leading the way is California’s controller and insurance regulator, which announced jointly a subpoena and investigative hearing of MetLife Inc.’s practices on paying death benefits.
Ms. Mercado goes on to say that the preliminary findings from a three-year audit by the state revealed that for 20 years, the carrier failed to pay benefits to named beneficiaries or the state after learning that a customer had died. MetLife’s hearing has been set for May 23. That same audit, which covered 21 life insurers, led to a settlement between John Hancock Financial Services Inc. and California on Friday. That day, Florida’s Office of Insurance Regulation announced a May 19 hearing on the same topic. That office also had subpoenaed MetLife and Nationwide Life Insurance Co., asking that the companies bring representatives to discuss the carriers’ practices.
The regulatory activity has garnered the attention of plaintiff’s attorneys, who are watching the drama unfold and expect some litigation fallout as a result. According to the InvestmentNews.com article, the key legal question is what exactly were the insurer’s responsibilities in performing the due diligence to find the beneficiaries. Carriers use the Social Security Administration’s death master list database for reference.
The beneficiaries of these policies are supposed to submit a claim for the death benefits, but if a carrier doesn’t hear from a beneficiary and has information on hand to show that an insured person has died, then at what point does the company escheat the money to the state?
It was noted that aside from following regulatory and statutory requirements, the insurer used its electronic death master file in 2006 and 2007 to identify individual life insurance policies for which a death benefit was due but no claim had been filed to date. The carrier will expand its use of the electronic death master file to identify potentially payable policies this year.
Depending on applicable state law, when beneficaries can’t be located within 3 to 5 years after the company receives notice of a death, the policy proceeds are considered unclaimed and go to the appropriate state. MetLife escheated $51 million to the states in 2010.
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