Court says insurers must turn over abandoned policies to state

CHARLESTON – The West Virginia Supreme Court of Appeals, in a ruling Tuesday, revived more than 60 lawsuits filed by state Treasurer John Perdue against life insurance companies, saying the companies must turn over abandoned policies to the state.

The high court said under state law that insurers, first, must determine whether the policy holder is living.

“Each insurer is free to determine how it will investigate and discover whether its insureds are yet living,” Justice Brent Benjamin wrote for a unanimous court. “Depending on the insurer’s resources and the volume of business done in West Virginia, it may find, for instance, that contacting its insureds directly or farming the task out to its agents may produce the desired results in the most economical and reliable fashion.

“On the other hand, an insurer may well choose to review the (U.S. Department of Commerce’s Death Master File) as the best or most efficient way to perform its duties under the (West Virginia Uniform Unclaimed Property) Act.”

The justices said once it is determined that a policy holder is dead, his or her policy must be turned over to the state’s unclaimed property fund.

The court noted that state law makes it clear that those insurers who fail to report, pay or deliver property within the time prescribed are liable to the treasurer’s office for interest.

For each day the report, payment or delivery is withheld, companies face a civil penalty of $200 a day, to a maximum of $5,000.

The penalties for a willful violation rise to $1,000 a day, to a maximum of $25,000 plus 25 percent of the value of any property that should have been but was not reported.

The court’s decision overturns a 2013 ruling by Putnam County Circuit Judge Joseph Reeder.

The judge, in his Dec. 27, 2013 order, dismissed with prejudice 63 complaints Perdue filed separately against insurance companies doing business in the state.

As treasurer, Perdue is responsible for overseeing the state’s operating funds and monitoring the state’s debt. He also is the administrator of the state’s unclaimed property program.

Perdue’s complaints alleged, inter alia, that the insurers have unlawfully retained life insurance proceeds unclaimed by state residents.

“The circuit court adopted the contrary view that the insurers’ obligations under the Act are defined not by its clear and unequivocal provisions, but instead by the contractual terms of the life insurance policies taken out by the insureds,” Benjamin wrote in the 19-page opinion.

“Because the circuit court’s interpretation failed to give force and effect to the plain meaning of the words used in the Act, thereby frustrating clear legislative intent, we reverse the dismissal order and remand these matters for further proceedings.”

Perdue thanked the justices for siding with residents and clarifying state law. He called it a “victory for all West Virginians.”

“For years, insurance companies argued they were exempt from the law and had no duty to turn over certain types of unclaimed property in a timely manner,” he said in a statement Wednesday. “I have stood up against them to say this is simply not the case, and now the West Virginia Supreme Court of Appeals affirms this position.

“As Justice (Menis) Ketchum wrote in his concurring opinion, ‘It is estimated that there is over one billion dollars in death benefits held by insurance companies that are unclaimed by the beneficiaries of deceased policyholders.’”

Perdue noted the importance of the ruling, saying the decision could have implications for unclaimed property holders “throughout the country.”