A few years ago, Sharon Likins learned about the state government's bounty of unclaimed money turned over by banks, insurance companies and other businesses.
So the Florida retiree went on the state's "treasure hunt" website and discovered $300 in her late mother's name — a small bonus from a life insurance policy that she presumably had with Prudential.
The discovery was a pleasant surprise, but it raised a question: What happened to the original policy, which Likins had no idea existed?
"She never mentioned anything about owning a life insurance policy," said Likins, 69, who resides in the same Palm Coast home where her mother, Wilmuth Likins, had lived until her death in 1997. "I contacted Prudential and they said they didn't have any record of the policy.''
Likins' late mother was among hundreds of thousands of Florida residents from Miami to Jacksonville who took out life insurance policies worth potentially billions, but whose unwitting heirs have never received the proceeds. That's because Prudential and other major insurers have neither found the survivors nor turned over their unclaimed benefits to the state.
Four years ago, Florida regulators started cracking down on the industry. The state reached settlement deals in 2011 and 2012 with the big three: John Hancock, Prudential and MetLife. The agreements required the insurers to improve their methods for tracking when policyholders have died, and to turn over their benefits to the state if beneficiaries cannot be located.
But in a recently unsealed lawsuit, a company that specializes in recovering assets maintains the state's settlements were deeply flawed. Lawyers for Total Asset Recovery Services say the agreements amount to a "windfall" for the insurers and a "disservice" to retiree-rich Florida. They are asking a Tallahassee judge for the opportunity to prove it.
The suit asserts that Total Asset's auditors "uncovered a massive fraud upon the state" by the life insurance companies, accusing them of "knowingly failing to report" at least 9,000 unclaimed life insurance policies — including that of Likins' mother.
On the state's unclaimed property database, Total Asset found those 9,000 accounts reflected only small profit-sharing bonuses that the insurers turned over to Florida about a decade ago — not the policyholders' actual life insurance proceeds. And those accounts, which represent a snapshot taken by Total Asset's auditors, suggest that potentially hundreds of millions, if not billions, of dollars in life insurance benefits have not been paid out in Florida.
"We know this is the tip of the iceberg," said lawyer Jeffrey Sloman, the former U.S. attorney in Miami now with The Ferraro Law Firm, which is representing Michigan-based Total Asset Recovery. "We know there are a lot more out there.
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"It appears as though there's a systemic practice by the insurance industry to keep their heads in the sand and pretend these people are still alive," Sloman added.
Total Asset Recovery has asked a Circuit Court judge in Leon County to hold a hearing to determine the "fairness and reasonableness" of the state's settlements with the insurers. In March, Judge John Cooper put that question on hold while he considers motions by Prudential and MetLife to dismiss the suit this spring. (A third insurer, John Hancock, was dropped as a defendant because it settled so early with Florida regulators.)
Industry representatives sharply disputed Total Asset's accusations, saying they strive to pay out life insurance claims owed to all policy beneficiaries.
"We've been cooperating (with the state) from the very beginning," said Newark, N.J.-based Prudential's chief communications officer, Bob DeFillippo, who declined to comment on the litigation. "Our aim has always been to pay people what we owe them."
Industry representatives say that when they confirm a policyholder has died and they find beneficiaries, payments are issued.
But that two-pronged process is not as simple as it sounds — and has had a built-in disincentive that works in favor of the insurers, according to Florida regulators. That's because if insurers cannot verify a death, they can refrain from paying life insurance benefits.
The controversy over the alleged failure of major life insurance companies to pay off the beneficiaries of deceased policyholders has been escalating since 2009.
Regulators in Florida, New York, California and other states discovered that life insurers were using data called the Social Security Death Master File to determine when annuity owners had died so they could stop making payments to them. At the same time, the insurers were not regularly reviewing that same list to verify when life insurance policyholders had died, so their beneficiaries could be compensated.
Under Florida's settlements with the insurers, they are required to monitor for policyholders' deaths by regularly checking Social Security's list. They have up to five years to confirm any deaths and find beneficiaries through a last-known address. If the insurers cannot locate any beneficiaries, the proceeds must be turned over to the state.
Potential beneficiaries can search the state's public database ( www.fltreasurehunt.org) to see if they are due benefits and then claim the proceeds. The state also actively looks for heirs — and has found some whom the insurers failed to locate.
Once the pot of unclaimed money reaches $15 million, the state transfers some of it into a fund for public education. But there is no time limit on making a claim; proceeds from life-insurance policies dating back to the '40s are still available for claiming.
As part of the state's settlements, the three insurers have turned over the names of about 10,000 deceased policyholders with unclaimed life insurance benefits: John Hancock (3,083); Prudential (1,590); and MetLife (5,227), records show. Of those, beneficiaries have received 378 John Hancock claims amounting to $1.9 million, 37 Prudential claims for $134,852, and just three MetLife claims for $994.
Also, the three insurers have made $7 million in payments for the cost of Florida's regulatory investigation and monitoring of the industry's compliance, according to state officials.
Anna Alexopoulos, a spokeswoman for the state Department of Financial Services, which manages the unclaimed property list, said the latest figures "represent the first of what will ultimately be numerous" benefits turned over by the three companies on accounts dating back potentially decades.
She said the state conducts its own record searches and sends out notices with claim forms to potential beneficiaries.
Among them: A Miami woman whose husband died in 2005. The woman, 66, who did not want to be identified, said her husband had a life insurance policy with John Hancock but she lost track of it in the turmoil after his death.
"They (Hancock) should have said something to the fact that we have this money for you," said the woman, who learned about the policy's $13,240 in unclaimed benefits from the state in a letter last year. "They should have been more like the state."
A Hollywood woman, 74, said she was also notified by the state last year of an unclaimed $7,640 John Hancock benefit owed to her. "With the technology they have today, you would think they (Hancock) could have found me," said the woman, who did not want to be identified. "But I'm not going to look a gift horse in the mouth."
Both women said their families had moved since the original policies were issued.
After the state settlements were reached with John Hancock, Prudential and MetLife, Florida regulators proudly proclaimed that the terms would correct the industry wrongs of the past and benefit policyholders' heirs in the future.
"This agreement sends a strong message that Florida will always stand up for its consumers," state Chief Financial Officer Jeff Atwater said in a news release about the MetLife deal a year ago. "This agreement represents another milestone … to change industry practices," added Insurance Commissioner Kevin McCarty.
Florida Attorney General Pam Bondi's office recently issued a statement defending the settlements as well. She pushed back against the plaintiffs in the pending lawsuit, who if they prevail would stand to get a cut of newly uncovered insurance benefits from at least Prudential and MetLife.
"The state will continue to resist any efforts on the part of (Total Asset) or any other entity that seeks to dilute the significant recoveries these agencies have obtained for the sole benefit of Florida life insurance beneficiaries," her office said.
Total Asset's lawyers said they are trying to strengthen the state's recovery effort by using enhanced technology to find more beneficiaries. Sloman noted that the results of the state's settlements so far are "nominal" and a "far cry from the tough talk of top state officials" after the deals were struck. The attorneys said while the state's settlements require insurers to do a better job matching unclaimed benefits with beneficiaries, the agreements still lack teeth.
For example, the terms allow the insurers to stop their search for deceased policyholders and keep the benefits if records show a discrepancy between someone's Social Security number and birth date in official files.
"The insurance companies don't use the very best information they have to make a match," said attorney Gregory Lynam of the Ferraro firm, who is working on the case with Sloman and Melissa Visconti, another former federal prosecutor.
Life insurers such as MetLife have asserted for years that only 1 percent of all life insurance policies are never claimed. MetLife said it paid out $12 billion nationwide in total claims in each of the past two years.
But even if that low non -payment rate is accurate, it still translates into a huge number of potential unpaid benefits totaling tens of millions of dollars a year, according to estimates. Total Asset believes the unclaimed rate could be as high as 30 percent, which could raise potential unpaid benefits to billions of dollars.
Both MetLife and Prudential have moved to dismiss Total Asset's suit, saying their dispute with Florida regulators was administratively resolved.
"We believe there is no basis for this complaint and we will vigorously contest it," said New York-based MetLife's spokesman John Calagna, who pointed out that similar actions by Total Asset's lawyers in Minnesota and Illinois were dismissed.