Monday, December 15, 2014

Another Audit-Related Delaware Lawsuit

Earlier this summer Temple-Inland commenced a lawsuit against the State of Delaware, challenging the findings of a Kelmar-initiated unclaimed property audit, especially as to how estimated liabilities are calculated.  In particular, Temple-Inland alleges that Delaware made an audit demand in excess of $1 million for estimated historical unclaimed property liabilities after having identified only about $150 in actual liability.  Delaware promptly moved to dismiss that litigation, and that motion is still pending in a Delaware federal court.

Now, it looks like Delaware has another lawsuit on its hands.  Late last week, Osram Sylvania, filed suit against Delaware in the same federal court arising out of another Kelmar audit.  This time, according to the allegations of the complaint, Delaware seeks in excess of $2.2 million on an actual liability of less than $22,000.  As in the Temple-Inland case, Osram alleges that Delaware's audit and liability estimation methods violate holders' due process rights and the Supreme Court's holding in Texas v. New Jersey as to both the mechanics and the retroactive nature of that process.

One notable item in the filing is an allegation as to the fees Kelmar earns from auditing holders.  According to the complaint, Delaware earned in excess of $53 million from Delaware from unclaimed property.  Since most audits are conducted on a "contingent fee" basis - that is, the auditor's fee is a portion of property collected.  That's a lot of (presumably, other peoples') money.

Friday, December 12, 2014

Friday Lost + Found: Inside the Vaults in the Land of Enchantment, Another DMF Settlement

Video on New Mexico's Unclaimed Property -- 'Tis the season for unclaimed safe deposit boxes.  Albuquerque's KOAT (ABC) has a short video about the $132 million in cash and property that New Mexico's unclaimed property regulators have collected from abandoned safe deposit boxes.  The New Mexico Department of Revenue and Taxation suggests that now is the time to determine if some of that property is yours.

Another Life Insurer Settles Unpaid Benefits Claims -- InsuranceNewsNet has the story of another life insurance death master file settlement.  See here for a primer.  The article states that regulators are "turning away from investigations and settlements, and instead focusing on writing legislation that clearly establishes their authority to conduct the settlement."  Perhaps 2015 will bring such legislation.

Wednesday, December 3, 2014

South Dakota Finds Out That Unclaimed Property Changes Bring Only Temporary Revenue Relief

At the beginning of this year, South Dakota's legislature and Governor were trying to figure out how to spend an "extra" $33 million in unclaimed property revenue, collected as a result of shortening dormancy periods, additional holders moving into the state, and reduced outreach efforts.  As we've warned repeatedly, however, such measures are only a temporary fix for state budgets -- shortening a dormancy period from 5 years to 3 years, for example, means that three years' worth of property gets collected in the first year after the legislation passes.  After that bump in year one, unclaimed property collections return back to normal.

According to a story in the Argus Leader, South Dakota is finding that out this year.  After record collections last year, unclaimed property revenues are down significantly this year and 80% under the amounts projected by the state.  While South Dakota has apparently been able to adjust other revenues and spending to account for the shortfall, this serves as a reminder to other states that unclaimed property revenue -- especially when that revenue is artificially increased by legislative activity -- can't be relied upon to take the place of prudent planning.

Monday, December 1, 2014

Life Insurers Under Le Microscope

We recently mentioned yet another settlement between a life insurance company and the states concerning efforts to search for beneficiaries of unclaimed life insurance policies.  U.S. insurance regulators are not alone in focusing on this area.  Recent news suggests that regulators across the Atlantic are likewise taking steps to insure that those beneficiary searches are conducted.

As a result of legislation passed in 2007 (Law 2007-1775) French life insurers have an obligation to search for the beneficiaries of unclaimed life insurance policies.  According to a Reuters article, French life insurance company CNP Assurances was fined $50 million by the French Prudential Supervisory Authority for failing to take necessary steps to locate beneficiaries.  The regulator estimates that there are unclaimed life insurance policies in France worth in excess of 2.7B euros.