State challenges ruling on life insurance law


TALLAHASSEE, Fla. – The state is challenging a ruling by a Leon County circuit judge that part of a 2016 law imposing new requirements on life insurers is unconstitutional.

State Chief Financial Officer Jimmy Patronis and the Florida Department of Financial Services filed a notice this week in the 1st District Court of Appeal that they will fight the ruling by Circuit Judge Terry Lewis in a case brought by four life-insurance companies.

The case stems from a 2016 law that, in part, placed new requirements on insurers to try to determine if policyholders had died and to contact beneficiaries. The law was designed to spur insurers to pay benefits or to turn over unclaimed money to the state.

But Lewis ruled that part of the law requiring insurers to apply the changes retroactively to policies dating back as far as 1992 violated the companies’ constitutional due-process rights. In a seven-page order April 20, Lewis issued an injunction against applying the changes retroactively.

The notice of appeal this week, as is common, does not detail arguments the state will make at the Tallahassee-based appeals court. But in a document filed in January in circuit court, attorneys for the state contended that applying the changes to old policies is constitutional because it did not violate “vested rights.”

“For years, insurance companies ignored or avoided knowledge of the deaths of their insureds and failed to pay billions of dollars to beneficiaries, many of whom were unaware that a policy even existed,” the attorneys for the state wrote. “Plaintiffs ask the court to bless these avoidances of their existing obligation to pay monies rightfully owed to policy beneficiaries, while the amendments (changes to law) promote the fulfillment of these contracts.”

But in a motion for summary judgment last year that led to Lewis’ ruling, attorneys for the insurance companies argued it was unconstitutional to apply the changes to old policies, including policies that might have ceased for various reasons. The insurers filing the case were United Insurance Company of America, The Reliable Life Insurance Company, Mutual Savings Life Insurance Company and Reserve National Insurance Company.

“The parties do not dispute the state’s power to enforce these new rules against new life insurance policies issued after the statute’s effective date,” the motion said. “However, the state does not have the constitutional authority to enforce these substantive changes in the law retroactively against life insurance policies issued before the statute’s effective date --- particularly against insurance policies that already lapsed, terminated, paid or escheated (the process of turning over unclaimed property to the state) during the last 25 years.”

Lawmakers approved the changes in 2016 after years of similar efforts by former state Insurance Commissioner Kevin McCarty. Multistate investigations, led at least in part by McCarty, resulted in Florida reaching 31 settlement agreements with life-insurance companies, including major players in the industry, according to the court document filed in January by the state’s attorneys.

The law made a series of changes, including imposing a requirement that insurers search what is known as the “Death Master File” or another comparable database annually to determine which policyholders have died, Lewis wrote. The Death Master File is a database of deaths reported to the federal Social Security Administration.

If matches are found in the searches, the law created a “presumption” of death and placed requirements on insurers to try to confirm the deaths and review policies, Lewis wrote. Among other things, the law included new requirements on insurers to contact beneficiaries after the deaths of policyholders and to inform them of benefits.

Traditionally, life insurers paid benefits only after receiving claims and proof of death, attorneys for the insurance companies wrote in the motion for summary judgment, adding that millions of “Florida residents complied with these policy requirements to claim billions of dollars in death benefits.”