Thompson Coburn negotiates $40 million settlement over unpaid MetLife insurance benefits

Thompson Coburn partner Joel Haber represented the Illinois Department of Insurance in a joint market conduct examination that led to a $40 million settlement from insurance giant MetLife.

The National Association of Insurance Commissioners designated six states to negotiate with MetLife on behalf of all U.S. insurance regulators — Illinois, Florida, New Hampshire, California, Pennsylvania and North Dakota. As a result of the examination, MetLife agreed to pay $40 million to the states, with a possible total payout of $437 million. It also agreed to more rigorously seek out possible beneficiaries of its life insurance policies going forward.

The settlement garnered front-page attention from the Wall Street Journal, which featured an above-the-fold article, “MetLife Vows to Track Deaths,” in its April 24 issue.

The examination was spurred by a life insurance industry practice where a life insurer reviewed the Social Security Death Master File (DMF) against its list of annuitants to determine if any individual receiving an annuity under a company-issued annuity contract had died.

If one were found (and there have been tens of thousands), the issuing company would terminate the annuity payments retroactive to the month that the death occurred. At the same time, the company would ignore the fact that the same individual also may have been insured under a life policy issued by the company. The life insurer would terminate its annuity obligations but not advise the insured’s family of the benefits under its issued life policy. In many situations, the life beneficiaries didn’t know about the existence of the life policy. Or, the life insurer didn’t know the whereabouts of the life beneficiaries as, more often than not, the beneficiaries never filed a claim for life insurance benefits. As a result, the life insurer retained funds it should have distributed to beneficiaries, or reported and remitted those funds to the state under the applicable unclaimed property laws.

With the assistance of the former general counsel for the Florida Office of Insurance, Thompson Coburn led the negotiation of a regulatory settlement agreement whereby MetLife agreed to match the Death Master List against all of its insureds on a monthly basis. When a match occurs, MetLife must attempt to search for beneficiaries and either pay out the benefits due under all contracts having the same insured, or report and remit the funds to the states within one year from the date of the match.

In addition, MetLife agreed to pay a $40 million regulatory payment to the six states and all other U.S. insurance regulatory jurisdictions (including a $1.77 million allocation for Illinois and a $730,000 allocation for Missouri). Metlife also agreed to early-endow a closed block of industrial insurance issued prior to 1940, which will result in a payout of $437 million, based on 709,000 life policies in force.

To be binding, the negotiated agreement must be signed by an additional 14 insurance regulators from U.S. states or possessions. Only those jurisdictions that agree to sign on to the legally-binding agreement will share in the $40 million settlement.