Unclaimed Property Round Up

by Carlton Fields

The battle over unclaimed property continues to spawn increased litigation and regulatory activity.

Litigation Highlights

In December 2013, a West Virginia court dismissed 63 lawsuits brought by the Treasurer of the State of West Virginia (Treasurer) against life insurance companies doing business in West Virginia. The court rejected the Treasurer’s attempt to accelerate when a life insurer’s obligation to escheat policy proceeds arises. The lawsuits sought to create a duty on the insurance industry to search public records, such as the Social Security Administration’s Death Master File (DMF), for deceased policyholders, even where the insurer received no claim or notice of the insured’s death. The Treasurer alleged that insurers violated the Unclaimed Property Act (UPA), underreported abandoned property, and breached duties of good faith and fair dealing by failing to conduct annual searches of the DMF or similar databases for deceased policyholders.

The court held that the viability of the Treasurer’s claims raised a threshold legal question: whether "the UPA creates a statutory duty obligating life insurance companies to periodically search the DMF or other similar database to determine if any of their policy holders have died." The court ruled that no such duty exists under West Virginia law, rejecting the Treasurer’s arguments that the UPA created general duties to act with "good faith" and pursuant to "reasonable commercial standards" which, in turn, required insurers to conduct annual DMF searches. Finally, the court found that recent legislation imposing DMF or similar search requirements upon life insurers supported its finding that no such duty existed under the current UPA.

The Treasurer filed a notice of appeal to the Supreme Court of West Virginia on January 24, 2014.

Elsewhere, unclaimed property litigation is rising. The Controller of the State of California filed separate actions against four insurers and their subsidiaries accusing them of failing to use the DMF to determine if life insurance benefits were payable. The Controller seeks injunctive relief against several of the companies for their alleged failure to cooperate with audits conducted by Verus Financial LLC. Most of these actions are in the preliminary pleading stages, although the Superior Court granted a motion for preliminary injunction filed by the Controller, requiring an insurer to turn over in-force life insurance policyholder records related to the Verus unclaimed property audit. The insurer has appealed the ruling.

The industry is also carefully watching several actions pending in Florida.

Legislative and Regulatory Updates

Multiple carriers entered into settlements of multi-state unclaimed property examinations in late 2013 and early 2014.

In December 2013, the U.S. Government Accountability Office (GAO) released its final report on the DMF, which raised numerous concerns and questioned the "accuracy and usefulness" of its data. The report further noted that the SSA does not verify all death reports before including them in the DMF and found that its "methods for processing death reports may result in inaccurate, incomplete, or untimely information for users of its death data," which "could lead to improper payments if benefit-paying agencies rely on this data."

Federal legislation imposing restrictions on DMF access was subsequently enacted in December 2013. The legislation prohibits disclosure of information contained in the DMF for three years following an individual’s death, unless the person seeking the information is certified under a program to be established by the Secretary of Commerce. To be eligible for certification they must have a legitimate fraud prevention interest or business purpose in accessing the information, and established procedures to safeguard the information.

In early 2014, several states, including Indiana, Iowa, Mississippi, Oklahoma, Pennsylvania, and Rhode Island, introduced legislation requiring insurers to undertake routine DMF searches, a sure sign that states have not relented in their fight to accelerate escheatment of unclaimed property.


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.

© Carlton Fields | Attorney Advertising

Written by:

Carlton Fields

Carlton Fields 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.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

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.


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.