Ohio Lawsuit Targets Unpaid Life Insurance Death Benefit PaymentsSep 30, 2011 | Parker Waichman LLP
A lawsuit is pending before U.S. District Judge Dan Polster of the Northern District of Ohio that slams two life insurance companies over the way they allegedly handle the payment of unclaimed death benefits. Policyholder Rita Koenig, 85, alleges that while Western & Southern Mutual Holding Co. and Columbus Life Insurance Co. use a Social Security database called the "Death Master File" to cut off payments to deceased policyholders, it does not utilize this tool to ensure that unclaimed death benefits go to their rightful beneficiaries.
Death Master lists all Americans who have died. She is seeking an injunction ordering the two companies to scan the Death Master File annually for the names of all policyholders who have a mortality probability of 70% or higher to ensure that there aren't benefits that ought to have been paid.
According to insuancenewsnet.com, Koenig is seeking class action status for her lawsuit. While she is still alive, actuarial tables predict that her mortality is greater than 91% and her complaint contends that there are many other similarly aged policyholders who have died and have beneficiaries who are owed money.
The issue of unclaimed death benefits has also attracted the attention of state insurance regulators. Florida, for example, is chair of a multi-state National Association of Insurance Commissioners (NAIC) task force investigating life and annuity claims practices. The primary charge of the task force is to coordinate the activities of state insurance regulators in pursuing investigations / settlements regarding possible unfair claims practices. Other states on the task force include California, Iowa, Louisiana, North Dakota, New Jersey, New Hampshire, Pennsylvania and West Virginia.
In May, John Hancock agreed to pay $3 million to the Florida Office of Insurance Regulation and other state agencies to cover investigative costs and attorney fees stemming from the investigation, and to establish a $10 million fund for paying beneficiaries who can’t be contacted.
In July, it was learned that the New York Attorney General's office subpoenaed nine large insurance companies over similar issues.