Florida firms balk at searching old death files to pay out life insurance policies

TALLAHASSEE — The Florida Supreme Court on Wednesday waded into a battle about the constitutionality of a 2016 state law that put new requirements on life-insurance companies to determine whether policyholders have died.
Four insurers are fighting a requirement that they retroactively search what is known as the “Death Master File” to determine whether policyholders have died. The Death Master File is a database run by the federal Social Security Administration.
While the insurers — United Insurance Company of America, The Reliable Life Insurance Company, Mutual Savings Life Insurance Company and Reserve National Insurance Company — do not challenge the requirements for new policies, they argue that their rights are violated by having to conduct retroactive searches.
A divided 1st District Court of Appeal last year upheld the law, spurring the insurers to go to the Supreme Court.
“What this statute does is (it) imposes upon us a huge obligation that is going to have to be carried out manually in a lot of cases,” Robert Hochman, an attorney for the insurers, said during Supreme Court arguments Wednesday. “You are talking about policies going back decades.”
But at least some justices appeared skeptical of the insurers’ arguments. Justice Carlos Muniz, for example, said the law does not change the relationship between policyholders and insurers, who are required to pay claims.
After Hochman said the law affects insurers’ actuarial calculations and “flow of payments,” Muniz questioned whether insurers “essentially planned for ignorance, as to whether people are alive or not.”
The Supreme Court typically takes months before ruling in such cases.
The law requires life insurers to use the Death Master File to conduct searches for policies dating back to 1992. If they find matches between policyholders and people in the Death Master File, they are required to try to find beneficiaries. If beneficiaries cannot be found, insurers are supposed to remit the money to the state as unclaimed property.
Then-Leon County Circuit Judge Terry Lewis in 2018 sided with the insurers, finding that the law violated their constitutional due-process rights. But in a 2-1 decision, a panel of the 1st District Court of Appeal said insurers’ “selective use” of the Death Master File spawned investigations and lawsuits.
Companies were accused of routinely using the Death Master File to identify people whose deaths would end annuity payments, while not as promptly identifying people whose deaths would require payouts of insurance policies.