The state of Illinois has just unsealed a lawsuit filed by Total Asset Recovery Services LLC against the two massive carriers, alleging that the insurers owed the state some $524 million in unclaimed death benefit proceeds that should have been escheated to Illinois.
Further, TARS says the state whistleblower act entitled Illinois to collect treble damages for a total of $1.57 billion. The case is a qui tam suit, meaning it’s brought on the state’s behalf and Illinois’ attorney general can decide to join as a plaintiff.
News of the suit, which was filed last January, was first reported by The Wall Street Journal.
The case could give rise to class action suits filed by beneficiaries who haven’t received their death benefit proceeds.
It wouldn’t be a surprise if there were an angle for similar consumer-based class action suits that could piggyback on these state recovery laws, said Steven B. Davis, partner at Stradley Ronon Stevens & Young LLP.
The complaint, filed in the circuit court of Cook County, is the latest chapter in the unclaimed death benefits debacle.
Last spring, state treasury departments and controllers shed light on carriers’ use of the Social Security Administration’s Master Death File to terminate annuity payments on deceased individuals and the companies’ failure to use the list to identify dead individuals whose death benefits became payable to beneficiaries. In situations where beneficiaries couldn’t be located, the proceeds are to be submitted to the states under escheatment law.
The billion-dollar amount TARS is asking for dwarfs the amounts carriers have paid or have reserved in anticipation of future claims. Prudential, for instance, is reserving $99 million for claims tied to its financial services unit and about $40 million for its closed block of life insurance business. Meanwhile, MetLife is reserving $117 million.
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