State Treasurer John Perdue expressed outrage Thursday over legislation intended to reverse a 2015 state Supreme Court ruling that concluded life insurance companies have an obligation to verify if a policyholder has died, and to turn over proceeds to the state Unclaimed Property Fund if no beneficiaries have come forward.
“Now, they're trying to find ways around the law so they can keep that money. It's their gain and the family's loss,” Perdue said of the bill (HB 4473), which would require insurance companies to pay life insurance benefits only after a claim is made, and proof of death is provided to the insurer.
Perdue said that puts many beneficiaries in the impossible position of having to file claims for life insurance policies that they don't know exist.
“It happens all the time in the state,” he said. “They may not know that the life insurance policy is in a safe deposit box or a cigar box somewhere.”
With the Supreme Court's decision, insurance companies have to submit those abandoned policies to Unclaimed Property, allowing the treasurer's office to begin efforts to track down beneficiaries.
The court decision came after Perdue sued dozens of insurance companies over the matter. Putnam Circuit Judge Joseph Reeder ruled for the insurance companies, but the Supreme Court unanimously overturned his verdict. One justice, Menis Ketchum, said the insurance companies should be forced to go even farther and have to search Social Security records for deceased policy holders.
In 2015, Perdue said, the Unclaimed Property office was able to find beneficiaries for 1,092 abandoned life insurance policies, with payments totaling nearly $1 million. He said life insurance policies account for about 10 percent of Unclaimed Property's awards.
Under the bill, which advanced from the House Banking and Insurance Committee Wednesday evening and is pending in House Judiciary, life insurance policies would not be considered abandoned until the insured reaches the age of 103.
Attorney Tim Bailey said among the problems with that standard is the likelihood that the beneficiaries would also have died by the time the policies go to Unclaimed Property.
“I don't think the Legislature should be passing any legislation to give special treatment to any company to keep assets of unclaimed property,” Perdue said. “We hope the Legislature will look at the Supreme Court decision, the unanimous decision and bipartisan decision, and act to take care of the people of this state.”
The lead sponsor of the bill, Delegate Steve Westfall, R-Jackson, could not be reached for comment Thursday. Westfall is a State Farm insurance agent.
Two of the bill's four co-sponsors — Delegates Brad White, R-Kanawha, and William Hartman, D-Randolph — are also insurance agents. Other co-sponsors are Delegates Cindy Frich, R-Monongalia, and Danny Hamrick, R-Harrison.
A statement from the American Council of Life Insurers said the bill “merely inserts insurance laws that already exist into the unclaimed property law. The bill will re-establish the rule of law and legislative intent and provide clarity for insurance providers and policy holders.”
Reach Phil Kabler at philk@wvgazettemail.com, 304-348-1220, or follow @PhilKabler on Twitter.