• Idaho Unclaimed Property Rule: Insurers Must Confirm Whether Insureds Have Died
  • July 8, 2014 | Authors: Thomas W. Curvin; Ellen M. Dunn; Phillip E. Stano; Steuart H. Thomsen; Mary Jane Wilson-Bilik
  • Law Firms: Sutherland Asbill & Brennan LLP - Atlanta Office ; Sutherland Asbill & Brennan LLP - New York Office ; Sutherland Asbill & Brennan LLP - Washington Office
  • In a recently issued notice of rulemaking, the Idaho State Treasurer’s Office has proposed a temporary rule that, if permanently adopted, would alter two key definitional provisions in the state’s unclaimed property laws relating to life insurance policies and annuity contracts. The proposed temporary rule, which became effective June 15, 2014, modifies the presumed period of abandonment in the context of life insurance proceeds. The proposed rule also addresses when an insurer would be deemed to have “knowledge” of an insured’s death, and imposes an affirmative obligation on insurers to confirm an insured’s death upon receiving notice that the insured may have died. Click here for a copy of the notice and proposed rule.

    Subsection 1 of the proposed rule relates to the dormancy period for unclaimed funds in the context of life policy and annuity contract proceeds. Under the proposed rule, an insurance policy or contract would be mature and therefore payable to the Treasurer as unclaimed property either:

    (1) On the death of the insured, but only if the policy or contract itself says it is payable on the death of the insured, or

    (2) If the policy is “terminated by any cause or event other than those set forth” elsewhere in the rule, on the date of such cause or event.

    A literal reading of this provision could potentially allow for life policy proceeds to be presumed abandoned—and thus payable to the state—if that policy were terminated for non-payment of policy premiums or for other reasons unrelated to an insured’s death.

    Under Subsection 02 of the proposed rule relating to “knowledge of death,” an insurer shall be deemed to know of an insured’s death if either “[t]he insurance company receives notice in the regular course of its business that the insured or annuitant may have died and the insurance company has confirmed such death,” or “the State Treasurer or its agent has notified the insurance company that the insured or annuitant may have died and the insurance company has confirmed such death.” The proposed rule would also place an affirmative duty on an insurer, “upon receipt of notice that an insured or annuitant may have died,” to make a good faith effort to confirm the death within 90 days of receipt of such notice. Idaho currently lacks any statute or other legal authority requiring insurers to perform such confirmation.

    As justification for the rule’s adoption, the State Treasurer noted that “[s]everal life insurance and annuity companies have taken the position that they do not have to transfer unclaimed policy and contract benefits under the Idaho unclaimed property laws because they do not know of the policy holder’s death until they receive certification of death or because the time period for abandonment does not run until they receive such certification.” Meanwhile, the Treasurer asserts, without citation to any source, that insurers are acting “contrary to the public policy on which the unclaimed property laws are based,” because they “hold and invest the policy benefits for their own account and do not take any action to locate a beneficiary.”

    In the Treasurer’s view, “[t]he temporary rule is a compromise position between the proposal of the Uniform Law Commission requiring insurers check the Social Security Administration Master Death File and the insurer’s position that they can hold and invest the policy benefits for their own account until they receive a death certificate.”

    Written comments regarding the Treasurer’s proposed changes to the Idaho Unclaimed Property Administrative Rules may be made until August 27. A public hearing may also be scheduled, if one is requested in writing by 25 people, or a political subdivision or an agency, no later than August 20.