State efforts to collect on unclaimed property held by insurers has mushroomed into private action lawsuits filed in Illinois, Ohio and New York against Prudential and MetLife.
The lawsuits are coming to light against the background of a hearing Thursday on inaccuracies related to the Death Master File mainted by the Social Security Administration.
The DMF is the primary research tool being used to allege that insurers did not follow applicable state law on unclaimed property, either by not being aggressive enough in seeking to find beneficiaries of life insurance policies, or, in the alternative, turn the money over to the state.
In a suit filed in Chicago, Total Asset Recovery Services, based in Auburn Hills, Mich., alleges it discovered a "massive fraud" by Metropolitan Life Insurance and Prudential Financial.
The suit alleges that the two firms kept more than $524 million in unclaimed life insurance money that should have been turned over to Illinois.
And, a class action suit alleging securities fraud was filed in Manhattan Jan. 12 against Metlife by the City of Westland Police and Fire Retirement System, Westland, Mich.
The suit alleges MetLife made “false and misleading statements” regarding its financial statements because it took a charge in the third quarter of 2011 related to a determination that it owed money by either not paying off policies to proper beneficiaries or turned the money over to the appropriate states under escheat laws.
And, an Ohio state court based in Cleveland Tuesday dismissed a complaint against Nationwide Insurance Company in which a life insurance policyholder who is 71 years-old filed suit.
The plaintiff said he filed suit out of concern that his death is imminent and he is fearful that because Nationwide allegedly “has failed and continue to fail to make reasonable attempts to determine when the beneficiaries of a life insurance policy are entitled to death benefits.”
The plaintiffs fear … “that as their deaths are impending they fear that that their life insurance policies will not be honored.”
The suit asked that Nationwide be required to make at least annual DMF searches for insureds with more than a 70% chance of having died.
The court dismissed the suit, on the grounds that (a) plaintiffs lacked standing because their alleged injury was too speculative and (b) the duty plaintiffs sought to impose was foreclosed by the terms of their policies.
The plaintiffs have appealed to the Ohio Court of Appeals.
The Illinois case was filed almost a year ago but only unsealed earlier this month.
It is a so-called “qui tam,” or whistleblower complaint in Cook County Court.
The suit said MetLife and Prudential "filed false records omitting these unclaimed funds."
It says the insurers should be fined more than $1.5 billion under the Illinois False Claims Whistleblower Reward and Protection Act.
Tom Prescott, equity-owner and spokesperson for Total Asset Recovery Services LLC, said that with regard to the suit, the Illinois attorney-general’s office has said that it will soon submit for the court's consideration a motion to intervene and simultaneously dismiss the suit because it is negotiating a settlement with MetLife and Pru.
Prescott complained that it is likely that Illinois will settle “for pennies on the dollar.”
He said that, “We think this is incredulous and unfair to the citizens of Illinois compared with what they should receive given the companies' documented fraudulent activities in this area) after having utilized our data findings and supporting documentation to extract the relevant monetary and policy concessions.”
John Calagna, a spokesman for MetLife, denied that a settlement would be unfair.
“The figures in the complaint are based on unreliable assumptions and wildly overstated insurance amounts,” Calagna said. He said it is based on the fact that the American Council of Life Insurers (ACLI) believes the average insurance policy is $110,000.
But, Calagana said, that figure “is irrelevant to the demutualization policies that are the subject of the complaint because more than 75% of the policyowners whom MetLife could not locate at the time of the company's demutualization owned industrial life policies.
“The maximum face amount of Industrial policies at the time of issue was $1,000,” Calagna concluded.
Robert DeFillippo, chief spokesman for Prudential, added, “The case is Illinois contains inaccurate allegations and is without merit.”