Florida Court of Appeal Holds Insured’s Death Alone Does Not Trigger Unclaimed Property Law Obligations

by Eversheds Sutherland (US) LLP
Contact

In an opinion filed August 5, Florida’s First District Court of Appeal held that Florida’s unclaimed property law does not make life insurance proceeds due and payable at the time of the insured’s death and does not impose an affirmative duty on life insurers to search death records to ascertain whether an insured has died. Click here to view opinion.

In Thrivent Financial for Lutherans v. State of Florida, Department of Financial Services, the insurer sought a declaratory statement from Florida’s Department of Financial Services (DFS) that life insurance proceeds become “due and payable as established from the records of the insurance company” under section 717.107 of the Florida Disposition of Unclaimed Property Act when the insurer receives proof of the insured’s death and surrender of the policy.

In response, DFS issued a declaratory statement taking the position that life insurance proceeds are “due and payable” under subsection 717.107(1) upon the death of the insured. Under the DFS interpretation, the dormancy trigger for unclaimed property is triggered by the mere fact of death, and policy proceeds become due to the state as unclaimed property three years after death regardless of whether the insurer received a claim or was even aware of the death. DFS also took the position that section 717.107 creates an affirmative duty on an insurer to search the Social Security Administration’s Death Master File (DMF) or similar commercially available databases to determine if any of its insureds have died, ostensibly for the purpose of identifying purported unclaimed property. The insurer appealed the DFS’s declaratory statement to the Florida Court of Appeal.

The court reversed DFS’s declaratory statement, holding that its interpretation of section 717.107 was clearly erroneous. Construing subsection 717.107(1)’s provision that proceeds “become due and payable as established from the records of the insurance company” consistent with the Florida Insurance Code provision that payment “shall be made upon receipt of due proof of death and surrender of the policy,” the court held that the records of the insurer do not establish proceeds as “due and payable” until “the insurer receives proof of death and surrender of the policy.” (Slip. Op. at 5.) The court stated that “[n]othing in the plain language of section 717.107 supports DFS[’s] interpretation that funds become ‘due and payable’ at the moment the insured dies.” (Id.) The court noted that if proceeds were automatically “due and payable” at the time of death under subsection 717.107(1), that would render meaningless subsection (3)’s provision that contracts “not matured by actual proof of the death” become due and payable when the insured knows the insured had died or when the insured attained or would have attained the limiting age. (Id.)

The court further held that “[n]othing in the plain language of section 717.107 imposes an affirmative duty on insurers to search” the DMF or other database to determine whether any of its insureds have died. This ruling is significant because it interprets Florida’s law, which is based on the widely adopted 1981 Uniform Unclaimed Property Act.

The Thrivent case is one of several cases pending before appellate courts in 2014. Concurrently on appeal in Florida is a trial court decision in a different case holding that there is no duty to search the DMF in Florida. See Total Asset Recovery Servs. LLC, v. Metlife, Inc., Case No. 2010-CA-3719 (Fla. Cir. Ct. Aug. 20, 2013). The West Virginia Supreme Court of Appeals is also expected to consider similar issues in appeals of 63 separate lawsuits filed against life insurers and dismissed by a West Virginia circuit court in late 2013. Recently, the U.S. Court of Appeals for the First Circuit affirmed a decision by the U.S. District Court in Massachusetts, applying Massachusetts and Illinois law, which held in a putative class action brought by a beneficiary that a life insurer need not search the DMF and could await receipt of a proof of death. Feingold v. John Hancock Life Insurance Co., No. 1:13-cv-10185-JLT, 2013 WL 4495126 (D. Mass. Aug. 19, 2013), aff’d Feingold v. John Hancock Life Ins. Co. (USA), 753 F.3d 55 (1st Cir. 2014).

On July 30, in United Insurance Company, et al. v. Boron, Case No. 13-CH-20383 (Circuit Court of Cook County, Illinois), an Illinois trial court issued an oral ruling denying a motion by the Illinois Department of Insurance (DOI) to dismiss two counts of the plaintiff-insurers’ complaint, which sought a declaration that the DOI did not have authority to compel insurers to provide policy records to enable a DMF comparison or require insurers to do the comparison themselves. In so holding, the court emphasized the DOI letter admitting that it “may” run records produced against the DMF. The ruling is expected to be reduced to writing shortly, and the plaintiff-insurers will thereafter move for summary judgment.

Litigation in Kentucky challenging the constitutionality of recent legislation imposing a DMF search requirement is now on appeal to the Kentucky Court of Appeals. United Ins. Co. of Am. v. Kentucky (Ky. Cir. Ct. April 1, 2013). And, in the first litigation arising directly out of the ongoing unclaimed property audits, an insurer is appealing a preliminary injunction issued by a California Superior Court ordering the company to turn over to state auditors all data and documents requested by the state in the course of an unclaimed property audit. Chiang v. American National Insurance Company, Case No. 34-2013-00144517 (Sup. Ct. Sacramento Cal. Oct. 9, 2013). The California Court of Appeal will consider the question of what information must be turned over to the state in an audit. Rulings in these cases could have a substantial impact on ongoing unclaimed property audits and market conduct examinations.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Eversheds Sutherland (US) LLP | Attorney Advertising

Written by:

Eversheds Sutherland (US) LLP
Contact
more
less

Eversheds Sutherland (US) LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.