Monday, October 22, 2012

Another Insurance Settlement Announced: $300 Million from AIG

The now long running audits of the life insurance industry continue to bear fruit for state governments.  According to CBS News, (which cites statements from the California State Controller's Office) AIG will pay approximately $300 million to state governments to settle claims that the company failed to pay death benefits in a timely manner.  According to the article, the $300 million will be divided among 30 states and the District of Columbia.

Thursday, October 18, 2012

Lost & Found: Escheat's Ancient Origins, (e-)Bay State Auction, Spooky Deadlines Approaching

Unclaimed Property's Ancient Origins Alive & Well - As we've mentioned before, modern unclaimed property laws in the United States derive, in part, from the ancient doctrine of bona vacantia by which "vacant goods" (i.e., ownerless property) would become property of the sovereign.  Recently the London Telegraph ran an article describing how unclaimed estates in the Duchy of Cornwall ultimately become the property of Prince Charles.  In the U.S., the sovereign powers formerly belonging to the British royals have largely become the powers of state governments.  No word on whether Prince Charles will be retaining a contingency fee auditing firm to make sure that he is getting his share of unclaimed funds in the Duchy.  (Hat Tip to LinkedIn's Unclaimed Property Holder Forum).

 Bay State Unclaimed Property Auction Set to Begin -- From the former mother country to the Cradle of the Revolution.  This Saturday, Massachusetts is set to commence an unclaimed property auction on eBay.  According to MassLive, over 2,000 lots of items, including coins, jewelry and collectibles will be put up for auction.  The Commonwealth hopes to earn $500,000 from the auction, which will  run until December 22nd.

Fall Reporting Deadline Fast Approaching -- Beware!  It's nearly October 31.  The spookiest time of the year (at least in most states).  That's right, the fall unclaimed property reporting deadline is approaching in several dozen states.  Be sure to get those long forgotten treats reported to the state, lest you receive a trick in the form of an audit.

Wednesday, October 10, 2012

Two Different Traveler's Check Stories, Same Ending

Two long-running judicial disputes over traveler's checks ended recently, both with the same result: shortened dormancy periods.

Travelers' checks have always been something of an outlier in the context of unclaimed property laws, as they generally have a relatively long dormancy period (about 15 years, as opposed to 3 or 5 years for most items) before they are eligible for reporting and delivery to state custodians.  These longer periods are arguably justified by the fact that travelers' checks are usually purchased by travelers for future use (hence, the name "traveler's check").  In recent years, states have begun to question the necessity for these longer dormancy periods, and have been amending their unclaimed property laws to bring the dormancy periods for traveler's check in line with those of other property types.  Two states where this was done recently are Kentucky and New Jersey.

In both instances, traveler's check issuers did not take the change lightly.  In both states, lawsuits were filed challenging the states' decision to shorten the dormancy period.  The suits originally garnered mixed results:  in New Jersey, a trial court upheld the state's amendments, but a trial court in Kentucky ruled in favor of check issuers and ordered that the dormancy period remain 15 years.  The issuers' success was fleeting, however, as a federal appellate court reversed that ruling last year.  In the New Jersey case, a federal appeals court affirmed the district court's decision upholding the New Jersey legislation.

Both of those stories are now (probably) concluded.  In Kentucky, after reversing the trial court's ruling, the U.S. Court of Appeals for the Sixth Circuit sent the case back to the trial court for further proceedings.  On September 12, the trial court issued an opinion granting Kentucky summary judgment  regarding the issuer's remaining claims, and dismissed the case.  Thus, absent further proceedings the Kentucky law will stand.

Separately, the Supreme Court of the United States denied American Express's request that the court review the New Jersey law.  Thus, the district court's decision upholding the shortened dormancy period will be allowed to stand.

Monday, October 1, 2012

West Virginia Treasurer Sues 10 Insurance Companies Over Unclaimed Property Compliance

When we last left the "Death Master File" controversy intersecting life insurance policies and the unclaimed property laws, it looked like things were winding down.  A variety of companies announced settlements, Congress got involved, and state insurance regulators were issuing revised standards for compliance.

Despite those settlements, West Virginia Treasurer John Purdue has now filed suit against many of the same insurance companies alleging that they failed to deliver unclaimed insurance policies to that state in accordance with the West Virginia Unclaimed Property Act.  

In most situations, either an heir or the administrator of the deceased's estate will notify the insurer that the policy has become triggered, and often there is no issue.  These lawsuits center upon what, if anything, the insurance companies are required to do to determine whether or not an insured has died in the absence of such notification.  According to the Charleston Gazette, the lawsuits allege that "a reasonable exercise in good faith and fair dealing statutorily imposed upon defendant includes an annual examination of life insurance policy holders to determine if they are deceased or three years past the applicable limiting age."  Again, because this topic may come up in our professional capacity, we are not going to analyze this question in any great detail except to say that the unclaimed property laws are generally silent as to how (or whether) the insurer has such an obligation. 

In any event, it seems the story isn't quite over.