By Jason P. Gosselin and Laura M. Zulick
Florida’s First District Court of Appeal filed an opinion yesterday in Thrivent Financial for Lutheran’s appeal from a declaratory statement issued by the Florida Department of Financial Services interpreting Florida’s Unclaimed Property Laws. The Court found the Department’s interpretation of section 717.107 as “clearly erroneous” because it ignored the plain language of the statute.
For the last several years, the Florida Department of Financial Services has taken aggressive positions with life insurers over so-called unclaimed property. The Department has demanded that life insurers search public databases for potential claims, and it has also taken the position that the dormancy period under Florida’s unclaimed property statute begins on the date of death. Yesterday, Florida’s First District Court of Appeal ruled that the Department’s positions are “clearly erroneous.”
In July of 2013, Thrivent Financial for Lutherans petitioned the Department for a declaratory statement that life insurance contracts become “due and payable” under Florida’s unclaimed property statute upon a life insurance company’s receipt of proof of death and a claim for benefits. The Department declined to issue such a statement and instead maintained that a life insurance policy “becomes a claim upon the death of the insured” and that claim is “due and payable” for purposes of the unclaimed property statute upon the death of the insured.
Thrivent appealed to the First District Court of Appeal in February of 2014. Thrivent argued that the unclaimed property statute specifies three dormancy triggers: when a life insurance policy has “matured or terminated”; when “the company knows that the insured or annuitant has died”; and when “the insured has attained, or would have attained if he or she was living, the limiting age” under the applicable mortality table. Thrivent argued that the Department was ignoring these three explicit triggers and instead rewriting the statute to create a new trigger. Thrivent also challenged the Department’s position that life insurers should search the Social Security Administration’s Death Master File to determine whether insureds have died.
The American Council of Life Insurers submitted an amicus brief in support of Thrivent’s appeal. The ACLI argued that Florida’s unclaimed property law must be read in harmony with Florida’s statutory proof of death requirement, and that there is no legal support for the Department’s position that dormancy begins upon the death of the insured. The ACLI also noted that legislatures around the country are actively seeking modifications to existing unclaimed property laws, and that the Department was encroaching upon the policy making function of the legislature.
The First District held oral argument on July 15, 2014, and the court appeared skeptical of the Department’s interpretation of the statute. The court appeared particularly troubled by the Department’s claim that general “due diligence” obligations required life insurers to search the DMF for potential claims. One member of the court responded to the Department’s argument with the following: “So you’re suggesting that a life insurance company should continually troll Google and LexisNexis, obituaries.com, and any source that’s available to them to determine whether an insured has died? Is that your position?”
On August 5, 2014, the First District issued an opinion finding the Department’s interpretation of Florida’s unclaimed property law “contrary to the plain language of the statute and therefore,  clearly erroneous.” Accordingly, the court reversed the declaratory statement. The court cited the plain language of subsection 717.107(1), which states that life insurance funds “become due and payable as established from the records of the insurance company.” The court read this section in conjunction with section 627.461 of the insurance code, which states that payment shall be made upon “receipt of due proof of death and surrender of the policy.” The court reasoned that the records of the insurance company do not establish funds as due and payable under subsection 717.107(1) until the insurer receives proof of death and surrender of the policy. The court then noted the alternative methods by which contracts “not matured by actual proof of death” are “deemed matured and the proceeds due and payable”: if the insured either “knows that the insured … has died” or if the insured “has attained, or would have attained if he or she were living, the limiting age.”