Philadelphia partner Jason Gosselin was quoted in a Law360 article, titled, “Despite Kemper’s Rebellion, Death Benefits Changes in Store.” The article discussed how three Kemper Corp. life insurers have the odds in their favor in recent lawsuits over whether carriers must proactively search the Death Master File (DMF) to pay out benefits. Victories in the cases may end up escalating the movement toward making such searches mandatory.
Regulators are claiming that life insurers have improperly used the DMF to halt payments to annuity holders but not taken advantage of the database to track down deceased policyholders and pay out death benefits.
The Kemper companies argue that neither state laws nor their contracts with policy holders require them to proactively pay out death benefits.
Jason noted that “courts in Ohio, Massachusetts and Florida have held in lawsuits brought by individual policyholders that life insurers have no duty to search the DMF. So far, the insurers have done very well in defending those lawsuits. If courts are issuing decisions that say there’s no duty to search the DMF, it’s actually harder for the regulator to take that position.”
Jason also explained that life insurers searched the DMF as a fraud prevention tool to stop payments to people who were not entitled to annuity benefits, but that there were less of a need to do that on the life insurance side because the typical claims process – where beneficiaries submit a claim and a proof of death before receiving benefits – works in the cast majority of cases.
He continued, “The idea that we’re going to turn the claim process upside down and change something that’s worked almost perfectly for almost 100 years is overkill.”
Jason also said he expects there will be more lawsuits against regulators, especially as smaller and mid-size life insurers that never did DMF searches for the sake of halting annuity payments begin to come under fire. Still, many life insurers have already accepted that DMF searches will be the new normal.
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