A lawsuit has been filed in California that could have a major impact on the efforts by states to have insurers turn over the proceeds of billions of dollars in life insurance policies.
The suit was filed July 26 in Superior Court in Sacramento by American National Insurance Company, Galveston, Texas.
It is a countersuit to a suit filed by California Controller John Chiang against American National in May. The suit demands that American National consent to an audit by an outside firm to ensure that it is complying with state unclaimed property statutes, that is, making a substantive effort to determine if a policyholder has died, or, in the alternative, turn the money over to the state.
American National's lawsuit argues that proof of death, and not merely a death, is the criteria state insurance law requires an insurer to use before paying off on a life insurance policy.
Moreover, the suit argues that California does not have the authority to have outside auditors use proprietary software to scan their books to see if they are complying with the state's unclaimed property law.
The lawsuit also contends that the state lacks the "authority to enforce any obligation on the part of life insurers to affirmatively ascertain whether an insured is deceased by searching the Social Security Administration's Death Master File (DMF) or any similar database."
Other critical claims made in the lawsuit allege that state comptroller John Chiang "has no authority to challenge the status or change the company records and contractual relationships with its insureds as part of their audit under the state unclaimed property law" and that "death is not the triggering event for property to become due and payable for purposes of the unclaimed property law."
