Challenge to Regulations on Required Use of Death Master File

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United Ins. Co. of Am. v. Boron
Cir. Ct.of Cook County, Illinois (Sept. 4, 2013)
Three life insurers have filed an action seeking declaratory and injunctive relief from the Illinois Department of Insurance Regulations that impose an obligation on life insurers to utilize the Social Security Death Master File to ascertain whether its insureds are deceased and benefits owed to their beneficiaries under policies issued in the State of Illinois.

The insurers claim that under the Insurance Code an insurer is required to settle and pay claims only after receipt of due proof of death and upon receipt of a claim by the insured’s estate or beneficiary. The policies issued by the insurers also contain language consistent with the Insurance Code in this respect. Therefore, the insurers argue that the new obligations put in place by the Regulations are unfounded in law and contradict the Insurance Code and the express terms of the policies.

The insurers argue that if no death claim is filed, the insurers have no affirmative obligation to search for proof of death or to take steps to pay benefits under the terms of the policies until the insured has reached the “mortality limiting age.” According to the NAIC approved mortality table incorporated into the insurer’s policy forms, that age is 99. Currently, if no claim is filed, benefits under the policy will be paid when the insured reaches the age of 99.

The state of Illinois has taken the lead in the mufti-state market conduct examination in this area joined by five other states (California, Florida, Pennsylvania, New Hampshire, and North Dakota). Recently, these investigations have resulted in multi-million dollar settlements for life insurers who have been found to affirmatively use the Death Master File for their benefit in terminating annuity payments, but also did not utilize the Death Master File to search for deceased policyholders whose beneficiaries were owed life insurance proceeds. The insurer’s in this action claim that they do not use the Death Master File for any purpose.