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Win for Life Insurer in Unclaimed Property Arena

Scrutiny over the life insurance industry’s “asymmetric” use of the Social Security Administration’s Death Master File has come primarily from the regulatory community in the form of unclaimed property audits and market conduct examinations, where life insurers do not have the benefit of a neutral arbiter of the law. In the few instances where insurers have been able to defend their practices in court, however, they have fared well. The life insurance community scored another victory this week in Feingold v. John Hancock Life Insurance Co., No. 13-10185 (D. Mass.).

In January 2013, Richard Feingold brought a putative class action against John Hancock alleging that it acted unreasonably in failing to search the DMF to determine whether his mother had died. Feingold alleged that “John Hancock regularly uses this database to determine when it may stop paying death benefits but never to determine whether to start.” As a result, according to Feingold, John Hancock was able to collect and use the interest on unclaimed policy proceeds for its own benefit. Feingold alleged that John Hancock’s so-called asymmetric use of the DMF violated Massachusetts’ consumer protection laws and also resulted in unjust enrichment.

On August 19, 2013, Judge Joseph L. Tauro of the United States District Court for the District of Massachusetts granted John Hancock’s motion to dismiss Feingold’s complaint. At the core of the order dismissing the case was an endorsement of the “established principle[] of insurance law” that John Hancock could require a beneficiary to submit proof of an insured’s death before payment of a death benefit. The Court analyzed Feingold’s various claims and rejected each of them, noting that “John Hancock’s practice of requiring the life insurance policy beneficiary to submit proof of death before payment comports with both Massachusetts and Illinois law.” 

This decision builds on the industry’s victory last year in Andrews v. Nationwide Mut. Ins. Co., No. 97891 (Ohio App. Ct. Oct. 25, 2012). In that decision, an Ohio appellate court similarly found that life insurers have no obligation to seek out potential claims by searching the DMF or other public databases.

Despite the fact that two courts have now rejected the notion that an insurer’s use of the DMF for life insurance business, but not for annuity or other pay-out business, does not constitute an unfair claim practice, it is doubtful that regulators will reconsider the merits of their campaign against life insurers. Nevertheless, these decisions should encourage life insurers to take a stand against overly aggressive regulators and to defend their practices.

©2019 Drinker Biddle & Reath LLP. All Rights Reserved

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About this Author

Jason P. Gosselin, Commercial Litigation Lawyer, Drinker Biddle
Partner

Jason P. Gosselin is a veteran litigator and trial attorney whose national practice involves a wide range of civil litigation, including insurance coverage, commercial disputes, and constitutional freedoms. He has served as lead counsel in multiple jury trials and dozens of arbitrations. Jason also has an active appellate practice and has argued numerous cases in federal and state appellate courts.

Jason represents clients in a wide range of insurance coverage disputes, including claims involving life, health, disability,...

215-988-3371
Stephan A. Serfass, Insurance attorney, Drinker Biddle
Partner

Stephen A. Serfass concentrates his practice on financial services issues, principally related to long term care insurance, life insurance, environmental insurance and debt collection matters. He also has significant experience resolving privacy and security compliance and breach issues related to personally identifiable health and financial information. He is nationally recognized as a leader in the long term care insurance community and leads Drinker Biddle’s 20 lawyer long term care insurance team. In that arena, Steve’s work spans the product life cycle from cradle to grave. Steve's insurance industry practice includes representation of domestic and international insurance companies in business, claims and coverage litigation. He also has experience representing managing general agents in a variety of contexts..

Insurance. Steve's insurance industry practice includes representation of domestic and international insurance companies in business, claims and coverage litigation. He also has experience representing managing general agents in a variety of contexts.

215-988-3313
Timothy O'Driscoll Insurance Litigation Lawyer Drinker Biddle
Partner

Timothy J. O’Driscoll counsels clients on a broad range of insurance litigation and regulatory matters.

Tim’s insurance litigation experience includes coverage and extra-contractual disputes in state and federal courts across the country, involving life, long-term care, annuity and property and casualty policies. He has successfully resolved many cases, winning jury trials, dispositive pre-trial motions and appeals, prevailing at arbitrations and obtaining favorable settlements.

Tim also advises insurer and broker clients...

(215) 988-2865