A MetLife shareholder has filed an investor class action lawsuit over the way the insurance company handles unclaimed death benefits. The lawsuit alleges that MetLife used the U.S. Social Security Administration’s “Death Master File” database to stop making annuity payments to deceased policy holders, but ignored the database when it informed the insurer that it must start paying on a policy.
According to the lawsuit, which was filed in U.S. District Court for the Southern District of New York, in an August filing with the U.S. Securities and Exchange Commision (SEC), MetLife disclosed that regulatory investigations into its death benefits practices could result in substantial costs to the company. Then in October, MetLife disclosed in another SEC filing that it would take at least a $115 million charge in relation to those investigations.
The Social Security Death Master file lists all Americans who die. Insurance companies are supposed to pay death benefits once they learn a policy holder has died. If they are unable to find a beneficiary, most states require that benefits be turned over to their unclaimed property funds. State investigators believe life insurance companies are aware of the death of policy holders when they check the Death Master database, but knowingly suppress their awareness. However, they have no problem using Death Master information to their benefit, such when as stopping payments to deceased annuitants.
Over the summer, New York regulators ordered 172 companies, including MetLife, to start using the Social Security Administration data to determine when death payments are due. In December, the New York Department of Financial Services announced that since the issuance of that letter, companies had paid $52.6 million in unpaid death benefits. Claims processing has been initiated for almost 28,000 other beneficiaries, the departments. The earliest year of death for which a benefit payment has been made thus far is 1970, and the largest benefit payment made thus far is $673,485.
“As a result of MetLife’s unfair and wrongful practices, the company is now the subject of numerous investigations by state regulators,” the MetLife shareholder lawsuit states. “Additionally, MetLife’s stock price has declined after it was forced to take charges to increase its reserves in connection with the use of the DMF (Death Master file).”
The complaint further alleges that MetLife directors “knew, or were reckless in not knowing that the company was wrongfully and unfairly using the SSA’s DMF to determine whether its annuity policyholders had died so that MetLife could stop making payments, but ignored the SSA’s DMF to determine whether death benefit payments were due under life insurance policies.”
The lawsuit seeks damages for breach of fiduciary duty, gross mismanagement, contribution and indemnification, abuse of control and waste of corporate assets.