As long anticipated, the New York Attorney General began issuing subpoenas on Tuesday to various life insurers concerning their use of the Social Security Death Master File (“DMF”) and compliance with New York’s abandoned property laws.

The New York Attorney General’s efforts are part of a larger national investigation by many other state insurance regulators, comptrollers, and attorneys general regarding life insurance claims settlement practices on unpaid death benefits. As noted in our prior advisories, a number of companies have come under scrutiny for a purported practice of failing to use the DMF to identify deceased policyholders while at the same time using the DMF to identify deceased annuity payment beneficiaries. The states claim that if life carriers had used the DMF to identify deceased policyholders not only would policy beneficiaries have benefitted, but at least one billion dollars in unclaimed property would have been escheated to the states as unclaimed property. Allegations of unfair claims settlement practices and trade practices as well as violations of state unclaimed/abandoned property laws have been asserted.

The National Association of Insurance Commissioners (“NAIC”) has formed a task force to help coordinate and facilitate a formal examination of these purported practices. The task force includes insurance commissioners from California, Florida (chair), Illinois, Iowa, Louisiana, New Hampshire, New Jersey, North Dakota, Pennsylvania and West Virginia.

The New York Attorney General’s subpoena was issued pursuant to New York Executive Law § 63(12), General Business Law § 352, Finance Law §§ 187 et seq., and N.Y.C.R.R. tit. 13 § 400.2, Abandoned Property Law 700 et seq., and CPLR Article 23 and indicates that it has been issued in furtherance of “an investigation and inquiry undertaken in the public interest.”

The subpoena broadly seeks documentation and information, including:

  • All documents and communications concerning the insurers’ policies and procedures for determining when to cease making payment of benefits on any type of insurance product where such benefits may be affected by the death of a measuring life;
  • All documents and communications concerning the insurers’ policies and procedures for locating, notifying, or otherwise contacting the policyholders, insureds, or beneficiaries of matured life insurance policies;
  • All documents and communications concerning the insurers’ access to, purchasing or licensing of any death records database.

As noted in our prior advisories, it is likely that the NAIC, or individual states, may propose regulations to clarify this issue. In fact, The National Conference of Insurance Legislators (“NCOIL”) has recently proposed amendments to the Beneficiaries’ Bill of Rights Model Act relating to payment of life insurance proceeds to beneficiaries. We will continue to monitor developments in this ongoing investigation and provide updates as necessary.