Illinois Whistleblower Lawsuit Filed over MetLife, Prudential Unclaimed Life Insurance Benefits

A whistleblower lawsuit filed in an Illinois court claims insurers MetLife Inc. and Prudential Financial Inc. each knowingly committed “massive fraud” by failing to hand over unclaimed death benefits to the state’s abandoned property department.

The lawsuit is the latest to accuse life insurance companies of not completing due diligence in paying benefactors of a policy after the holder dies. Instead, the companies assume the policy holder has stopped making premiums payments for another reason, essentially defaulting on their policy. If a policy’s pay-out goes unclaimed, the insurance companies keep that money even though it should either go to benefactors or be turned over to abandoned property funds established in many states.

According to a Wall Street Journal report, Total Asset Recovery Services LLC has uncovered evidence that these two major life insurers have conspired since at least 1988 in failing to hand over payments on at least 4,766 life insurance policies to Illinois’ abandoned property fund. These policies are worth an estimated $524.3 million. The company, in its lawsuit, said MetLife and Prudential each “knew or should have known” these payments should have been made to the state.

Illinois’ Attorney General has informed Total Asset Recovery Services that it will join the civil lawsuit, as per the rules of whistleblower lawsuits, in order to seek a settlement on the abandoned claims with the insurers.

Life insurers stand behind a policy that requires the benefactors of a policy to notify the companies when a policy holder has died. The companies could just as easily check a Social Security Administration death database to see if one of their policy holders has died or just has stopped making payments.

This and other lawsuits and accusations made against life insurance companies claim these companies routinely check this database when they seek to stop retirement payments to policy holders.

Total Asset Recovery wants 30 percent of any unclaimed benefits as compensation for its “investigative work” if Illinois decides to stay out of the lawsuit. If the state does join the civil whistleblower lawsuit, the company seeks between 15 and 25 percent of the amount recovered.

An owner of the collection company told Wall Street Journal his company has lawsuits filed in several other state courts making similar claims against life insurers.

In California, the state recently announced that it, too, was investigating MetLife over unpaid death benefits. State law requires these payments be made within three years of a policy holder’s death. In New York, life insurance companies have paid $52 million in unpaid death benefits to beneficiaries of policies or the state since they were ordered to check that federal death database to see if a policy holder had died.

States believe life insurance companies are aware of the death of policy holders when they check the SSA death database but knowingly suppress their awareness, only using the information they get from those checks to stop payments to policy holders.

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