Legal Alert: Federal District Court Validates Insurer's Retention of Policy Proceeds Until Receiving Proof of Death


On August 20, 2013, the United States District Court for the District of Massachusetts dismissed a putative class action over an insurer’s alleged failure to timely pay life insurance policy death benefits to beneficiaries. Feingold v. John Hancock Life Insurance Co., No. 1:13-cv-10185-JLT (D. Mass.). In granting the insurer’s motion to dismiss, the court affirmed the insurer’s practice of requiring life insurance policy beneficiaries to submit proof of death before making any payments under the policy at issue.

The lawsuit challenged the insurer’s alleged practice of holding policy proceeds until receiving proof of the insured’s death, arguing that the insurer acted unreasonably in failing to investigate whether Plaintiff’s mother had died. Plaintiff alleged that the insurer routinely consulted the Social Security Administration’s Death Master File (DMF) to check whether annuity holders had died, so the company could halt those annuity payments immediately. At the same time, Plaintiff alleged, the insurer failed to routinely use the same database to check whether life insurance policy holders were deceased, allowing the insurer to wrongfully delay paying beneficiaries.

The insurer moved to dismiss Plaintiff’s state consumer protection claims, as well as his claims for conversion, unjust enrichment, breach of fiduciary duty and declaratory relief, arguing that Plaintiff sought to “discard settled law” by requiring payment or escheatment of life insurance proceeds where a beneficiary has made no claim on the policy.

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