On June 3, 2020, in the case of Patronis v. United Insurance Co. of America, et al., the Florida Court of Appeals ruled in favor of the state’s unclaimed property program, upholding provisions that ensure benefits from unclaimed life insurance policies go to rightful owners. The unanimous decision by the three-judge panel overturned a 2018 decision by a Florida trial court that had ruled in favor of subsidiaries of Kemper Corporation.

In this article, we’ll take a closer look at the Unclaimed Life Insurance Benefits Law, how it affects Florida’s unclaimed property program, and the arguments for and against the law by the state and the life insurance industry.

What is Florida’s unclaimed life insurance benefits law?

The Unclaimed Life Insurance Benefits Law (Florida Statutes Annotated, Chapter 717.131) was sponsored by Chief Financial Officer Jimmy Patronis, and was unanimously adopted by the Florida Legislature in 2016. The law requires insurance companies to take specific reasonable steps to locate and notify policyholders and beneficiaries of the status of their policies when a life insurance policy matures, is about to lapse, and/or has been inactive for two years.

The law also stipulates that if the insurer is unable to locate the policyholder or beneficiary, then the unclaimed benefits must be remitted to the state’s unclaimed property program. The insurance companies must also provide a list of the missing policyholders and beneficiaries to the state’s Chief Financial Officer, who then uses various public databases in an effort to locate them.

The law was designed to address a problem that had long plagued Florida’s unclaimed property program: millions of dollars in unclaimed life insurance benefits were being turned over to the state each year because insurers were not required to take any proactive measures to find policyholders or beneficiaries when a policy became inactive.

How does the Unclaimed Life Insurance Benefits law affect Florida’s unclaimed property program?

The Unclaimed Life Insurance Benefits Law applies to all life insurance policies issued in Florida, including both individual and group policies. It doesn’t apply to annuities, however, or to life insurance policies that have been surrendered or assigned to a third party.

When a life insurance policy becomes inactive, the insurer must take reasonable steps to locate the policyholder or beneficiary. This includes looking for the policyholder or beneficiary’s name, address, and Social Security number in public records and using a variety of search methods, such as mailing a notice to the last known address, publishing a notice in a newspaper, and contacting the insured’s family and friends.

If the insurer is unable to locate the policyholder or beneficiary within a specified amount of time, the insurance company must remit the unclaimed benefits to the state’s unclaimed property program. Florida’s unclaimed property program currently holds over $3 billion in unclaimed life insurance benefits alone.

Arguments for and against Florida’s Unclaimed Life Insurance Benefits Law

The life insurance industry has long opposed Florida’s Unclaimed Life Insurance Benefits Law – subsidiaries of Kemper Corporation challenged the 2016 law immediately after its enactment. But even after a 2018 decision that ruled in favor of the insurance companies, the state stood its ground and saw that the decision was overturned in 2020 by a Florida appeals court.

National Association of Insurance Commissioners et al. v. State of Florida (2018)

In the case of National Association of Insurance Commissioners et al. v. State of Florida, the industry argued that the law violates the Commerce Clause because it imposes burdens on interstate commerce, claiming that it places an undue burden on insurers, constituted an unconstitutional taking of their property and that the proactive measures to locate policyholders and beneficiaries that are required by the law are unnecessary and costly.

In addition, the industry argues that most life insurance policies are paid out without any problem. In fact, data from the National Association of Insurance Commissioners shows that less than one percent of life insurance claims are denied. In 2018, the trial court agreed with the Kemper subsidiaries and struck down the law.

Patronis v. United Insurance Co. of America, et al. (2020)

But Florida’s First District Court of Appeal overturned that ruling on June 3, 2020, rejecting the industry’s arguments and upholding the 2016 law as a valid exercise of the state’s police powers.

The state explained that the law is not a regulation of insurance, but rather a consumer protection measure that helps ensure that life insurance benefits are properly paid to beneficiaries, arguing that the law is necessary to protect policyholders and beneficiaries and ensure that unclaimed benefits are returned to their rightful owners.

The state notes that there are more than $1 billion in unclaimed life insurance benefits currently held by insurers, which suggests that many policyholders and beneficiaries are not aware of their policies or have lost contact with their insurers.

The court found that the insurance companies were unable to demonstrate any unconstitutional taking of their property as a result of the law, and ruled that the law is not in violation of the U.S. Constitution’s Commerce Clause, as it does not discriminate against out-of-state insurers or impose an undue burden on interstate commerce.

What’s next for Florida’s Unclaimed Life Insurance Benefits Law?

Although The 2020 appeals court decision overturned the 2018 Florida trial court decision, the life insurance industry will likely continue to oppose the law and the case will be sent back to the trial court for further proceedings.

In the meantime, this ruling is a sign that Florida’s unclaimed property program is working as intended to benefit Floridians. It is a victory for the State of Florida, Florida policyholders, taxpayers, and all consumers who benefit from Florida’s unclaimed property program, as it will now be easier for them to locate and claim those benefits. The unclaimed property program is self-funded, meaning that there is no cost to taxpayers, and it returns millions of dollars to Floridians every year.

Unclaimed life insurance benefits are often the last thing on someone’s mind when a policyholder dies, so the Unclaimed Life Insurance Benefits Law will help ensure that insurance companies take appropriate measures to locate policyholders and beneficiaries, that life insurance benefits are properly paid to those who are entitled to benefits, and that the unclaimed property program continues to be a valuable resource for reuniting policyholders and heirs with their unclaimed benefits.

If you believe you may be entitled to unclaimed life insurance benefits, we encourage you to search Florida’s database of unclaimed property. You can also contact the Florida Office of Financial Regulation’s Division of Consumer Services for assistance.