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Insurers sue Jeff Atwater over death-benefits bill

Life insurers are now suing over a new law requiring them to track down insurance beneficiaries.

Four companies filed in Leon County Circuit Civil court earlier this month. The measure (SB 966) was a priority of Chief Financial Officer Jeff Atwater and was featured on CBS’ “60 Minutes.”

His spokeswoman responded to the suit Tuesday, calling it “outrageous” and saying “the industry appears willing to modify its practices only when changes suit them.”

The law, which is retroactive, requires life insurance companies to check every year on which policyholders have died, then they must track down the beneficiaries.

If the beneficiaries can’t be found, the insurance proceeds must be turned over to the state as unclaimed property. The bill passed both chambers of the Legislature unanimously and was signed by Gov. Rick Scott last month.

The plaintiffs — United Insurance Co. of America, Reliable Life Insurance Co., Mutual Savings Life Insurance Co. and Reserve National Insurance Co. — say that’s unfair and want the retroactivity provision struck down. They all write policies in Florida.

Their suit is against Atwater as chief financial officer and his Department of Financial Services.

Among other things, the firms say they’ll have to “search more than 89 million death records in the Social Security Administration’s electronic Death Master File or another database,” then “locate beneficiaries and provide them information on how to submit a claim for benefits,” the suit says.

That’s an onerous amount of work, they say, the cost of which they’re not allowed to pass on to insureds or beneficiaries under the law.

They fear “significant monetary loss from increased administrative costs … and reduced cash flow” from having to surrender any proceeds. Atwater has complained insurers hoard that money so they can invest it and continue to profit from it.

The companies also say the law breaks the deal made in existing policies. That deal is that beneficiaries assume the responsibility of informing insurers when an insured person dies, according to the suit.

Only “that triggers the (companies’) obligation to investigate and pay a claim,” the suit says.

“For years, the life insurance industry has built its business around practices that intentionally and drastically reduce the number of life insurance policies that are properly — and timely — paid out,” Atwater spokeswoman Ashley Carr said in an email. “By resisting pro-consumer changes across the country, the industry has earned millions in interest on unpaid policies.

“It is outrageous to tell the policy-holding public that fulfilling the promises that were made to consumers is an undue financial burden,” she added. “We fought, with the unanimous approval of the Legislature, to ensure that all policies are paid out properly — not just the ones the industry sees fit. We’re prepared to defend what we believe is a commonsense, consumer-friendly policy.”

The plaintiffs are represented by Tallahassee attorney Barry Richard of the Greenberg Traurig law firm.

Written By

Jim Rosica is the Tallahassee-based Senior Editor for Florida Politics. He previously was the Tampa Tribune’s statehouse reporter. Before that, he covered three legislative sessions in Florida for The Associated Press. Jim graduated from law school in 2009 after spending nearly a decade covering courts for the Tallahassee Democrat, including reporting on the 2000 presidential recount. He can be reached at jim@floridapolitics.com.

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