West Virginia files 69 unclaimed property suits

West Virginia is throwing the book at 69 life insurance companies for alleged violation of state unclaimed property laws.

The suits are somewhat different than actions pursued against insurers in other states, such as California, because it demands payment of penalties and punitive interest if an insurer has been found to not have complied with the West Virginia escheat statue.

It also is different in that it says that the state will seek to apply civil fraud statutes if its scrutiny of the insurer’s records determines that is warranted.

One suit, against Great Western Insurance Co., Ogden, Utah, has already been dismissed with prejudice. Great Western was dismissed from the West Virginia unclaimed property litigation because they had transacted no business with residents of West Virginia, according to an official familiar with the case.

Amongst the insurers cited in the litigation are American General Life and Accident, AXA Equitable Life, Hartford Life and Annuity, Lincoln National Life Insurance, Massachusetts Mutual Life, Metropolitan Life, Monumental Life, Nationwide Life, New York Life, and Prudential Life.

The suits were filed by John D. Perdue, state treasurer. Diana Stout, general counsel for the state treasurer, was traveling and not available for comment.

The suits were filed in Putnam County, West Virginia Circuit Court.

He contends in the lawsuit that the insurers violated the West Virginia unclaimed property statute by failing to report and escheat insurance proceeds wherein the beneficiary could not be located by the insurance firm.

The suits were filed based on insurers’ market share. Insurers with market share in West Virginia as low as 0.51 percent were sued, according to several firms which are monitoring the issue on behalf of the industry.

West Virginia requires that insurers turn over unclaimed property to the state if there has been no claim for three years.

The suit asks each insurer to pay attorney’s fees, fees to have outside auditors examine their books, and a “penalty of 12 percent annual interest on the value of the life insurance proceeds accruing from the date the proceeds first became reportable and payable.”

Moreover, the suit asks the court to impose civil penalties for “willful failure” to comply with the statute, if applicable.

Those penalties “should be in the amount of $1,000 a day per unclaimed life insurance policy from the date each such unclaimed life insurance policy became reportable and payable up to a maximum of $25,000, plus 25 percent of the value of the each unclaimed policy,” the lawsuit said.

Phillip Stano, a partner at Sutherland, Asbill & Brennan, Washington, represents 13 of the insurers involved, and, combined with other Sutherland lawyers, the firm represents approximately one-third of all the insurers that have been sued.

Stano said that on behalf of his clients and others represented by Sutherland, he is arguing in a motion to dismiss that West Virginia is contending that the insurers violated a duty that does not exist.

As of this date, no hearing has been set on the motion to dismiss. The court has also set no date for the state to respond to the insurer’s motions.