SER John D. Perdue v. Nationwide Life Insurance Co. , 236 W. Va. 1 ( 2015 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
January 2015 Term FILED
_______________ June 16, 2015
released at 3:00 p.m.
RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
No. 14-0100 OF WEST VIRGINIA
_______________
STATE OF WEST VIRGINIA EX REL. JOHN D. PERDUE,
Plaintiff Below, Petitioner
v.
NATIONWIDE LIFE INSURANCE COMPANY, ET AL.,
Defendants Below, Respondents
____________________________________________________________
Appeal from the Circuit Court of Putnam County
The Honorable Joseph C. Reeder, Judge
Civil Action Nos. 12-C-287, 12-C-288, 12-C-289, 12-C-290, 12-C-291, 12-C-292,
12-C-293, 12-C-294, 12-C-295, 12-C-296, 12-C-322, 12-C-323, 12-C-324, 12-C-325,
12-C-327, 12-C-328, 12-C-329, 12-C-331, 12-C-355, 12-C-356, 12-C-357, 12-C-358,
12-C-359, 12-C-360, 12-C-361, 12-C-362, 12-C-363, 12-C-364, 12-C-372, 12-C-373,
12-C-374, 12-C-376, 12-C-377, 12-C-378, 12-C-380, 12-C-381, 12-C-419, 12-C-420,
12-C-421, 12-C-422, 12-C-423, 12-C-424, 12-C-425, 12-C-426, 12-C-427, 12-C-429,
12-C-430, 12-C-431, 12-C-432, 12-C-433, 12-C-434, 12-C-435, 12-C-436, 12-C-437,
12-C-438, 12-C-440, 12-C-441, 12-C-442, 12-C-443, 12-C-444, 12-C-445, 12-C-446,
12-C-447
REVERSED AND REMANDED
____________________________________________________________
Submitted: April 8, 2015
Filed: June 16, 2015
Patrick Morrisey, Esq., Attorney General John H. Tinney, Jr., Esq.
Dan Greear, Esq., Chief Deputy Attorney James K. Tinney, Esq.
General John K. Cecil, Esq.
Jennifer Greenlief, Esq., Assistant Attorney The Tinney Law Firm, PLLC
General Charleston, West Virginia
Office of the West Virginia Attorney General Counsel for Respondents Nationwide Life
Charleston, West Virginia Insurance Company and Nationwide Life and
Annuity Insurance Company
Anthony J. Majestro, Esq.
Special Assistant Attorney General
Powell & Majestro, PLLC Alexander Macia, Esq.
Charleston, West Virginia Spilman Thomas & Battle, PLLC
Charleston, West Virginia
Timothy C. Bailey, Esq.
Special Assistant Attorney General Phillip E. Stano, Esq., Pro Hac Vice
Bucci Bailey & Javins LC Wilson G. Barmeyer, Esq., Pro Hac Vice
Charleston, West Virginia Brendan Ballard, Esq., Pro Hac Vice
Sutherland Asbill & Brennan LLP
Margaret M. Murray, Esq., Pro Hac Vice Washington, DC
Murray & Murray CO., L.P.A. Counsel for Respondents New York Life
Sandusky, Ohio Insurance Company; Lincoln National Life
Counsel for Petitioner Insurance Company; Erie Family Life
Insurance Company; New York Life
Insurance and Annuity Corporation; The
Sandra B. Harrah, Esq. Western and Southern Life Insurance
Hill, Peterson, Carper, Bee & Deitzler, PLLC Company; Western-Southern Life Assurance
Charleston, West Virginia Company; Primerica Life Insurance
Company; Ohio National Life Assurance
Robert P. Krenkowitz, Esq., Pro Hac Vice Corporation; Provident Life & Accident
Tucson, Arizona Insurance Company; Pacific Life Insurance
Counsel for Amicus Curiae Xerox State & Company; Colonial Life & Accident
Local Solutions, Inc., d/b/a Xerox Unclaimed Insurance Company; American Family Life
Property Clearinghouse Assurance Company of Columbus, GA; and
Lafayette Life Insurance Company
Jonathan R. Mani, Esq.
Mani Ellis & Layne, PLLC Terrence D. O’Hare, Esq., Pro Hac Vice
Charleston, West Virginia J. Scott Paul, Esq., Pro Hac Vice
McGrath North Mullin & Kratz PC LLO
Lynden Lyman, Esq., Pro Hac Vice Omaha, Nebraska
Concord, Massachusetts Counsel for Respondent Physicians Life
Counsel for Amicus Curiae National Insurance Company
Association of Unclaimed Property
Administrators
Steuart H. Thomsen, Esq., Pro Hac Vice
Wilson G. Barmeyer, Esq., Pro Hac Vice
Sutherland Asbill & Brennan LLP
Washington, DC
Counsel for Respondents Farm Family Life
Insurance Company; Reliastar Life Insurance
Company; and Horace Mann Life Insurance
Company
John M. Aerni, Esq., Pro Hac Vice
Adam J. Kaiser, Esq., Pro Hac Vice
Winston & Strawn LLP
New York, New York
Counsel for Respondents Bankers Life &
Casualty Company and Colonial Penn Life
Insurance Company
Loren E. Hayes, Esq.
Spilman Thomas & Battle, PLLC
Charleston, West Virginia
Counsel for Respondent United of Omaha
Life Ins. Co.
Bruce M. Jacobs, Esq.
Spilman Thomas & Battle, PLLC
Charleston, West Virginia
Markham R. Leventhal, Esq., Pro Hac Vice
Irma Reboso Solares, Esq., Pro Hac Vice
Jorden Burt LLP
Miami, Florida
Counsel for Respondents Monumental Life
Insurance Company and Transamerica Life
Insurance Company
Angela D. Herdman, Esq.
Mary Jane Pickens, Esq.
Andrew S. Dornbos, Esq.
Spilman Thomas & Battle, PLLC
Charleston, West Virginia
Edwin G. Schallert, Esq., Pro Hac Vice
DeBevoise & Plimpton LLP
New York, New York
Counsel for Respondents Prudential
Insurance Company of America and Pruco
Life Insurance Company
Maeve O’Connor, Esq., Pro Hac Vice
DeBevoise & Plimpton LLP
New York, New York
Counsel for Respondents Teachers Insurance
& Annuity Association of America and
Principal Life Insurance Company
Timothy J. O’Driscoll, Esq., Pro Hac Vice
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Counsel for Respondent Gerber Life
Insurance Company
Jason P. Gosselin, Esq., Pro Hac Vice
Laura M. Zulick, Esq., Pro Hac Vice
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Counsel for Respondents Allstate Life
Insurance Company; Lincoln Benefit Life
Company; and Penn Mutual Life Insurance
Company
Douglas A. Scullion, Esq., Pro Hac Vice
Laura Leigh Geist, Esq., Pro Hac Vice
Dentons US LLP
San Francisco, California
Counsel for Respondent Lincoln Heritage
Life Insurance Company
Thomas F. A. Hetherington, Esq., Pro Hac
Vice
Blaire Bruns Johnson, Esq., Pro Hac Vice
Edison, McDowell & Hetherington LLP
Houston, Texas
Counsel for Respondent Boston Mutual Life
Insurance Company
Jeffrey M. Wakefield, Esq.
Danielle Waltz Swann, Esq.
Flaherty Sensabaugh Bonasso PLLC
Charleston, West Virginia
Counsel for Protective Life Ins. Co., West
Coast Life Ins. Co., Sun Life Assurance Co.
of Canada, Riversource Life Ins. Co.
Thomas J. Butler, Esq., Pro Hac Vice
Jeffrey M. Grantham, Esq., Pro Hac Vice
Maynard Cooper & Gale PC
Birmingham, Alabama
Counsel for Respondent Riversource Life
Insurance Co., and American General Life &
Accident Ins. Co.
Jeffrey M. Wakefield, Esq.
Danielle Waltz Swann, Esq.
Flaherty Sensabaugh Bonasso PLLC
Charleston, West Virginia
Jeffrey M. Grantham, Esq., Pro Hac Vice
Maynard Cooper & Gale PC
Birmingham, Alabama
Counsel for Respondent Sun Life Assurance
Company of Canada and Riversource Life
Ins. Co.
Katharine A. Weber, Esq. Pro Hac Vice
Maynard Cooper & Gale PC
Birmingham, Alabama
Counsel for Respondents Protective Life
Insurance Company and West Coast Life
Insurance Company
Jared M. Tully, Esq.
Frost Brown Todd LLC
Charleston, West Virginia
Counsel for Respondents Metropolitan Life
Insurance Company; Metlife Investors USA
Insurance Company; New England Life
Insurance Company; Liberty Life Insurance
Company; Metlife Insurance Company of
Connecticut; General American Life
Insurance Company; and The State Life
Insurance Company
Frank E. Simmerman, Jr., Esq.
Chad L. Taylor, Esq.
Simmerman Law Office, PLLC
Clarksburg, West Virginia
Counsel for Respondents Genworth Life and
Annuity Insurance Company; Combined
Insurance Company of America; Genworth
Life Insurance Company; and North
American Company for Life and Health
Insurance
Thomas J. Hurney, Jr., Esq.
Michael M. Fisher, Esq.
Jackson Kelly PLLC
Charleston, West Virginia
Stephen M. LaCagnin, Esq.
Seth P. Hayes, Esq.
Jackson Kelly PLLC
Charleston, West Virginia
Ellen M. Dunn, Esq., Pro Hac Vice
Sutherland Asbill & Brennan LLP
New York, New York
Counsel for Respondent AXA Equitable Life
Insurance Company
Lee Murray Hall, Esq.
Jenkins Fenstermaker, PLLC
Huntington, West Virginia
Counsel for Respondent Hartford Life and
Annuity Insurance Company
Ancil G. Ramey, Esq.
Steptoe & Johnson, PLLC
Huntington, West Virginia
William E. Galeota, Esq.
Steptoe & Johnson, PLLC
Morgantown, West Virginia
Counsel for Respondent Massachusetts
Mutual Life Insurance Company
Carrie Goodwin Fenwick, Esq.
Goodwin & Goodwin, LLP
Charleston, West Virginia
Counsel for Respondent Guardian Life
Insurance Company of America
Robert L. Massie, Esq.
Nelson Mullins Riley & Scarborough LLP
Huntington, West Virginia
Counsel for Respondent USAA Life
Insurance Company
JUSTICE BENJAMIN delivered the Opinion of the Court.
JUSTICE KETCHUM concurs and reserves the right to file a concurring opinion.
SYLLABUS BY THE COURT
1. With respect to the presumptively abandoned proceeds of a life
insurance policy, the plain language of section 2(e) of the West Virginia Uniform
Unclaimed Property Act, West Virginia Code § 36-8-2(e) (1997), demonstrates the
Legislature’s intent to affirmatively separate the insurer’s obligation to account for and
pay those proceeds to the Treasurer from the filing of any claim for benefits required by
the policy terms. The insurer’s obligation to account for and pay those proceeds is tied
instead to the death of the insured (or the insured’s attainment of the limiting age),
maturing three years thereafter.
2. The West Virginia Uniform Unclaimed Property Act imposes no
specific duty on insurers to search the Department of Commerce’s Death Master File or
any comparable data source. Rather, the Act simply requires insurers generally, as
holders of property presumed abandoned, to account for and turn over that property to the
Treasurer.
i
Benjamin, Justice:
The West Virginia State Treasurer, John D. Perdue, appeals the order
entered by the Circuit Court of Putnam County on December 27, 2013, that dismissed
with prejudice sixty-three complaints he filed separately against insurance companies
doing business in West Virginia. The complaints alleged, inter alia, that the insurers have
unlawfully retained life insurance proceeds unclaimed by State residents, in
contravention of the West Virginia Uniform Unclaimed Property Act of 1997, W. Va.
Code §§ 36-8-1 to -32 (the “Act”). The Act, according to the Treasurer, manifestly
designates him the legal custodian of such proceeds. The circuit court adopted the
contrary view that the insurers’ obligations under the Act are defined not by its clear and
unequivocal provisions, but instead by the contractual terms of the life insurance policies
taken out by the insureds. Because the circuit court’s interpretation failed to give force
and effect to the plain meaning of the words used in the Act, thereby frustrating clear
legislative intent, we reverse the dismissal order and remand these matters for further
proceedings.
I. FACTUAL AND PROCEDURAL BACKGROUND
The Act designates the Treasurer as its administrator. See W. Va. Code
§ 36-8-1(1) (1997). In his role as administrator, the Treasurer is entitled to take custody
of property presumed to have been abandoned if, inter alia, the apparent owner’s last
known address is in West Virginia. See id. §§ 36-8-4, -4(1). An “apparent owner” under
1
the Act is “a person whose name appears on the records of a holder as the person entitled
to property held, issued or owing by the holder.” Id. § 36-8-1(2). A holder, in turn, is “a
person obligated to hold for the account of, or deliver or pay to, the owner” any property
subject to the Act. Id. § 36-8-1(6). The insurance companies do not dispute their status
as holders for purposes of this appeal.
Whether specific property may be presumed abandoned is determined by
resort to the Act. In the context of the dispute before us, section 2 of the Act provides:
(a) Property is presumed abandoned if it is unclaimed
by the apparent owner during the time set forth below for the
particular property:
....
(8) Amount owed by an insurer on a life or
endowment insurance policy or an annuity that has matured
or terminated, three years after the obligation to pay arose or,
in the case of a policy or annuity payable upon proof of death,
three years after the insured has attained, or would have
attained if living, the limiting age under the mortality table on
which the reserve is based[.]
Id. § 36-8-2(a), -2(a)(8) (1997) (emphasis added). With respect to the foregoing
provision, the Treasurer’s position is easily understood: an insurer’s obligation to pay the
beneficiary of a life insurance policy arises when the insured dies.1
1
The quoted portion of the Act specifies that policy proceeds are alternatively
payable if the insured survives to the limiting age, which, we are advised, is typically
around age ninety-five. In light of the relative infrequency of the alternative triggering
event, we make scant reference to it herein.
2
An insurer in possession of presumptively abandoned life insurance
proceeds—like any holder of comparable property—must annually file a verified report
with the Treasurer, which, inter alia, describes the property and provides the identity and
last known address of the apparent owner. See W. Va. Code §§ 36-8-7 (1997). Within
sixty to one hundred twenty days prior to filing the report, the insurer is required in most
cases to attempt to notify the apparent owner in writing that he or she should claim the
proceeds. See id. § 36-8-7(e). If the notification effort proves unsuccessful, the insurer
shall (with certain exceptions not applicable here) turn over the proceeds to the Treasurer,
see id. § 36-8-8(a), who then deposits them in the Unclaimed Property Fund, see id. § 36­
8-13(b).
Between September 20, 2012, and December 28, 2012, the Treasurer filed
sixty-nine substantially similar complaints in the circuit court against insurance
companies, seeking to enforce the insurers’ obligations under the Act to file reports and
transfer presumptively abandoned life insurance proceeds. In those complaints, the
Treasurer pertinently alleged that the United States Department of Commerce maintains a
computerized database, known as the Death Master File (“DMF”), compiled from social
security records.2 Where the insurers have issued an annuity contract payable only
2
For the purposes of this appeal of the circuit court’s dismissal of the Treasurers’
complaints pursuant to West Virginia Rule of Civil Procedure 12(b)(6), we accept as true
the factual allegations of those complaints. See infra Part II.
3
during the lifetime of the annuitant, the Treasurer asserts that the DMF is regularly
consulted to determine whether the annuitant has died and the contractual obligation has
ended. With respect to the life insurance policies they issue, however, the Treasurer
contends that the insurers do not avail themselves of the DMF or of any alternative data
source to determine whether the insured has died with no claim to the proceeds having
yet been filed by a beneficiary. Moreover, the Treasurer alleges that, in certain cases
where premiums on whole life products are no longer remitted (or due) because the
policyholder has died, the insurers, in the absence of a claim, siphon to exhaustion the
underlying cash value in satisfaction of the phantom premiums on the fiction that the
policyholder is perhaps alive and would not want the policy to lapse.
According to the Treasurer, because the insurance companies have declined
to use the DMF to learn of the deaths of their insureds, they have “failed to truthfully
report abandoned or unclaimed property,” and have “paid into the Unclaimed Property
Fund amounts less than actually due the State under the Act.” The complaints thus
demand a statutory audit, see West Virginia Code § 36-8-20(b) (1997), interest and civil
penalties on proceeds thereby discovered to have been improperly withheld, see id. § 36­
8-24, and injunctive relief compelling the insurers to implement policies and procedures
to assist in facilitating their future compliance with the Act. The Treasurer also pursues
an award of attorney fees. See id. § 36-8-22.
4
In sixty-three of the proceedings, the defendant insurance company moved
for dismissal on the ground that the complaint failed to state a claim upon which relief
could be granted. See W. Va. R. Civ. P. 12(b)(6). The circuit court conducted a hearing
on the motions on September 6, 2013, and, on December 27, 2013, it entered an order
granting them. In so ruling, the circuit court concluded that the Act should be construed
in pari materia with the provisions of Article 13 of the Insurance Code, West Virginia
Code §§ 33-13-1 to -48, and specifically Code section 33-13-14, which requires all life
insurance policies delivered in the state to include “a provision that when a policy shall
become a claim by the death of the insured[,] settlement shall be made upon receipt of
due proof of death.”
The circuit court thus reasoned that, until proof of an insured’s death had
been submitted to the insurer, no “obligation to pay” the proceeds of the insured’s life
insurance policy could arise within the meaning of the Act. Consequently, the insurer
should be permitted to retain those proceeds until someone having a contractually derived
interest makes a formal claim in accordance with the policy. On January 24, 2014, the
Treasurer timely noticed his appeal of the circuit court’s order.3
3
The questions presented for resolution are the same with respect to all sixty-three
named respondents, twenty-two of which have joined one of three representative briefs
on appeal. Lead respondent Nationwide Life Insurance Company jointly submitted a
(continued . . .)
5
II. STANDARD OF REVIEW
We review de novo the circuit court’s grant of the respondents’ motions to
dismiss the complaints pursuant to Rule 12(b)(6) of the West Virginia Rules of Civil
Procedure. See syl. pt. 2, State ex rel. McGraw v. Scott Runyan Pontiac-Buick, Inc., 194
W. Va. 770, 461 S.E.2d 516 (1995). In conducting our review, we construe the
complaints in the light most favorable to the non-moving party, meaning that we accept
as true the well-pleaded factual allegations therein and draw all reasonable inferences
therefrom to the Treasurer’s advantage. See Conrad v. ARA Szabo, 198 W. Va. 362, 369­
70, 480 S.E.2d 801, 808-09 (1996) (citing Murphy v. Smallridge, 196 W. Va. 35, 36, 468
S.E.2d 167, 168 (1996)). We are not bound, however, to accept any party’s posited
brief with Nationwide Life and Annuity Insurance Company. Monumental Life
Insurance Company and Transamerica Life Insurance Company submitted their own joint
brief. The third brief was submitted jointly on behalf of eighteen respondents, including
New York Life Insurance Company; Lincoln National Life Insurance Company; Erie
Family Life Insurance Company; New York Life Insurance and Annuity Corporation;
The Western and Southern Life Insurance Company; Western-Southern Life Assurance
Company; Primerica Life Insurance Company; Farm Family Life Insurance Company;
Employees Life Company (Mutual); Ohio National Life Assurance Corporation;
ReliaStar Life Insurance Company; Physicians Life Insurance Company; Horace Mann
Life Insurance Company; Provident Life & Accident Insurance Company; Pacific Life
Insurance Company; Colonial Life & Accident Insurance Company; American Family
Life Insurance Company of Columbus, GA; and The Lafayette Life Insurance Company.
In support of the Treasurer, two amici curiae have filed briefs. We acknowledge
the individual contributions of Xerox State & Local Solutions, Inc., d/b/a Xerox
Unclaimed Property Clearinghouse, and of National Association of Unclaimed Property
Administrators, each of which we thank for its assistance.
6
statutory interpretations or proffered conclusions of law. See W. Va. Human Rights
Comm’n v. Garretson, 196 W. Va. 118, 123, 468 S.E.2d 733, 738 (1996). A complaint
should not be deemed insufficient under Rule 12(b)(6) and thereby dismissed “unless it
appears beyond doubt that the plaintiff can prove no set of facts in support of his claim
which would entitle him to relief.” Syl. pt. 3, Chapman v. Kane Transfer, Inc., 160 W.
Va. 530, 236 S.E.2d 207 (1977) (citation omitted).
III. ANALYSIS
As a threshold matter, courts may not regard separate and distinct statutes
in pari materia unless the Legislature’s intent is ambiguous with respect to the statute in
question. See State ex rel. Morrisey v. W. Va. Office of Disciplinary Counsel, 234 W. Va.
238, 764 S.E.2d 769, 780 (2014) (“‘[T]he rule that statutes which relate to the same
subject should be read and construed together is a rule of statutory construction and does
not apply to a statutory provision which is clear and unambiguous.’” (quoting syl. pt. 1,
State v. Epperly, 135 W. Va. 877, 65 S.E.2d 488 (1951))). Here, the circuit court
believed the Act to be ambiguous, thereby permitting it to look to Article 13 of the
Insurance Code to discern the Legislature’s intent in enacting the former. See syl. pt. 6,
Cmty. Antenna Serv., Inc. v. Charter Comm’ns VI, LLC, 227 W. Va. 595, 712 S.E.2d 504
(2011) (instructing that separate and distinct statutes “‘relat[ing] to the same persons or
things, or to the same class of persons or things, or statutes which have a common
purpose will be regarded in pari materia to assure recognition and implementation of the
7
legislative intent’” (quoting syl. pt. 5, Fruehauf Corp. v. Huntington Moving & Storage
Co., 159 W. Va. 14, 217 S.E.2d 907 (1975))). With respect to the insurers’ duties herein,
the circuit court’s construction of the Act in pari materia with the Insurance Code was
appropriate only if the Act’s relevant provisions are ambiguous. If, however, the Act’s
relevant provisions are not ambiguous, the circuit court’s resort to the Insurance Code
was unnecessary and improper.
To ensure that we interpret the Act to accurately ascertain the insurers’
duties in accordance with what the Legislature intended, we rely primarily on a crucial
component of section 2—subsection (e)— that precisely sets forth the parameters of
property presumed abandoned, confirming that such “[p]roperty is payable or
distributable . . . notwithstanding the owner’s failure to make demand or present an
instrument or document otherwise required to obtain payment.” W. Va. Code § 36-8­
2(e) (1997) (emphasis added). Section 2(e) is best understood as acknowledging and
codifying the United States Supreme Court’s decision in Connecticut Mutual Life
Insurance Co. v. Moore, 333 U.S. 541 (1948). At issue in Moore was New York’s
Abandoned Property Law, which, inter alia, required insurers to report and pay over to
the state the proceeds of life insurance policies on which no claim had been made within
seven years following the death of the insured. The Supreme Court rejected
constitutional challenges by a group of insurers that the required transfer to the state’s
abandoned property fund impaired their right to rely upon bargained-for claims
8
procedures set forth in their policies. The insurers argued that they had no obligation to
pay anyone unless a proper claim was made, and that due process required the state to
instead seek judicial authorization prior to any transfer of proceeds to the New York
fund. In ruling against the insurers, the Supreme Court observed that the state, in taking
custody of abandoned property, “is acting as a conservator, not as a party to a contract.”
Id. at 547. Thus, the Supreme Court reasoned, “it would be beyond a reasonable
requirement to compel the state to comply with conditions that may be quite proper as
between the contracting parties.” Id.
Our reading of section 2(e)’s provenance in Moore is consistent with that of
the drafters of the model Uniform Unclaimed Property Act. In the official commentary
to section 2(e) published in connection with the model statute’s 1995 iteration, which was
subsequently enacted in West Virginia, the drafters explained that
Subsection (e) [of section 2] is intended to make clear that
property is reportable notwithstanding that the owner, who
has lost or otherwise forgotten his or her entitlement to
property, fails to present to the holder evidence of ownership
or to make a demand for payment. See Connecticut Mutual
Life Insurance Co. v. Moore, 333 U.S. 541 (1948).
National Conference of Commissioners on Uniform State Laws, Uniform Unclaimed
Property Act, § 2 cmt. (1995). By this 1995 iteration, Moore’s general application to the
law of unclaimed property had already been firmly established for at least fourteen years,
that is, from the immediately preceding 1981 version of the model statute. The 1995
version of section 2(e) and its attendant commentary regarding Moore were reproduced
9
almost verbatim from the 1981 version. It is apparent that West Virginia’s Legislature
was fully aware of section 2(e)’s genesis in the Moore decision. Moreover, we note that
the first inclusion of section 2(e) in the model uniform statute in 1981 came just one year
after DMF records became publicly available.
The insurers would have us limit Moore to its facts. Indeed, insofar as the
Supreme Court’s review was confined solely to the constitutional validity of the New
York statute, the circuit court expressed doubt that the principles set forth in Moore apply
with equal force to matters of statutory construction decided exclusively pursuant to state
law. We harbor no similar doubt and conclude that Moore bears squarely on the state law
question we decide today. Moore applies necessarily through section 2(e) to any sort of
property that might be presumed abandoned, including beyond doubt the life insurance
proceeds at issue herein.
The plain wording of section 2(e), particularly in view of its heritage in
Moore, flatly rebuffs the insurers’ contention, accepted by the circuit court, that the
“obligation to pay” the proceeds of a life insurance policy to the Treasurer cannot arise
until a beneficiary perfects a claim thereupon. The insurers maintain that their
“obligation to pay” under the Act can only be fully understood by considering it in pari
materia with the Insurance Code’s regulation of their contractual relationship with the
policies’ insureds. Therefore, the argument goes, no beneficiary can enjoy the proceeds
10
to which he or she is entitled without first filing a claim. The mere requirement of a
claim in accordance with the Code, however, does not begin to address the wholly
different question, decided in Moore and present here, regarding duties imposed on the
insurers by a regulatory scheme separate and distinct from any obligation under an
insurance contract.4
With respect to the presumptively abandoned proceeds of a life insurance
policy, the plain language of section 2(e) of the West Virginia Uniform Unclaimed
Property Act, West Virginia Code § 36-8-2(e) (1997), demonstrates the Legislature’s
4
Section 2(e) also informs an accurate construction of the term “property,”
defined by the Act as, inter alia, “a fixed and certain interest in intangible personal
property that is held, issued or owed in the course of a holder’s business.” W. Va. Code
§ 36-8-1(13). The Act lists several examples of property, one of which is “[a]n amount
due and payable under the terms of an annuity or insurance policy, including policies
providing life insurance.” Id. § 36-8-1(13)(vi). Construing the above-quoted excerpts of
section 1(13) in pari materia with section 2(e) in order to ensure that each is given its
proper force and effect, we have no trouble concluding that, for purposes of the Act,
section 2(e) removes any doubt that a beneficiary’s interest in the proceeds of a life
insurance policy becomes sufficiently fixed and certain on the death of the insured and
not when a claim is subsequently perfected. We need not decide whether such proceeds
are also “due and payable” at death, inasmuch as the list of specific property in section
1(13) is merely illustrative and not intended to exclude unmentioned examples. See
Davis Mem’l Hosp. v. W. Va. State Tax Comm’r, 222 W. Va. 677, 684, 671 S.E.2d 682
(2008) (“[T]his Court has recognized that the term “includes” in a statute is to be dealt
with as a word of enlargement.” (citation, alterations, and internal quotation marks
omitted)). Put another way, if we assume for the sake of argument that no proceeds of
life insurance policies are ever due and payable until a claim is perfected, such
circumstance only confirms those proceeds’ status under the Act as “property.” It does
not necessarily follow, particularly in consideration of the enactment of section 2(e), that
such proceeds cannot sooner qualify as property subject to the Act.
11
intent to affirmatively separate the insurer’s obligation to account for and pay those
proceeds to the Treasurer from the filing of any claim for benefits required by the policy
terms. The insurer’s obligation to account for and pay those proceeds is tied instead to
the death of the insured (or the insured’s attainment of the limiting age), maturing three
years thereafter.
Our conclusion arises inexorably from the Legislature’s purposeful
bifurcation of the insurer’s obligations under the Act from those pursuant to the Code in
section 2(e) of the former, and it is the only plausible alternative to the claim-filing
trigger urged by the insurers. Because the Act in this regard admits of only one
interpretation, it is not ambiguous; it was therefore error for the circuit court to construe
the Act in pari materia with the inapposite provisions of the Insurance Code directed
solely at the contractual relationship between insurer and insured, and not purporting in
any manner to govern the conduct of the Treasurer in his role as conservator for the
citizenry. The circuit court’s ruling treating the provisions of the Insurance Code as
controlling deprived the Act of its full force and effect, contrary to our precedent.5
5
The circuit court’s misperception that the two statutes should be construed
together led it to conclude that the Legislature would have more specifically distanced the
“obligation to pay” trigger under the Act from the “due proof of death” required for
claims payment under the Insurance Code had it not intended for the latter to instruct as
to the former. To the contrary, the two enactments govern entirely different situations,
and we perceive the Act to be sufficiently specific and precise, particularly in view of the
enlightenment provided by section 2(e).
12
The circuit court referred to recent unpublished decisions in three other
states as consistent with its interpretation of West Virginia law. We do not find them
persuasive. In two of those cases, the court merely ruled that, in the absence of a claim as
required by contract, the defendant insurer had no independent duty to its insured or the
insured’s beneficiary to search the DMF. See Feingold v. John Hancock Life Ins. Co.
(USA), No. 13-10185, 2013 WL 4495126 (D. Mass. Aug. 19, 2013); Andrews v.
Nationwide Mut. Ins. Co., No. 97891, 2012 WL 5289946 (Ohio Ct. App. Oct. 25, 2012),
review denied 135 Ohio St. 3d 1415 (Ohio 2013). Neither opinion addressed the broader
obligation to state governments acting as conservators, established in Moore and codified
in the Act.
The third case, Total Asset Recovery Services, LLC v. MetLife, Inc., No.
2010-CA-3719, 2013 WL 4586450 (Fla. Cir. Ct. Aug. 20, 2013), was a qui tam action
alleging fraud on the part of several defendant insurers, based primarily on their retention
of unclaimed policy proceeds that might have been payable had they cross-referenced
their insureds against the DMF. The court determined that it had no jurisdiction over the
dispute with respect to at least one insurer, as its liability had previously been
compromised through settlement with the state’s Department of Financial Services
(“DFS”). The court therefore dismissed the complaint with prejudice.
13
The court held in the alternative that dismissal was warranted inasmuch as
the insurer had not knowingly avoided any legal obligation, such obligation being a
prerequisite to liability under the Florida False Claims Act. No obligation had arisen,
according to the court, because the state’s unclaimed property law imposes no duty on
insurers to search the DMF or other external databases. The pronouncement of the
Circuit Court of Florida on that point was confirmed last year in Thrivent Financial for
Lutherans v. Department of Financial Services, 145 So. 3d 178 (Fla. Dist. Ct. App.
2014). In Thrivent, the court of appeals reversed the declaration of the DFS that the
state’s Disposition of Unclaimed Property Act rendered the proceeds of life insurance
policies due and payable on the death of the insured. Although the statute required that
proceeds be established “due and payable” exclusively by resort to the insurer’s records,
the DFS determined that the law imposed upon insurers the duty to supplement its
records by consulting sources such as the DMF. The Thrivent court disagreed, observing
that “nothing in the plain language of [the Florida Act] imposes an affirmative duty on
insurers to search these death records.” Id. at 182.
Likewise, the West Virginia Uniform Unclaimed Property Act imposes no
specific duty on insurers to search the Department of Commerce’s Death Master File or
any comparable data source. Rather, the Act simply requires insurers generally, as
holders of property presumed abandoned, to account for and turn over that property to the
Treasurer. We have determined that, in the case of life insurance policy proceeds, the
14
three-year dormancy period leading to the presumption of abandonment commences with
the death of the insured. Each insurer is free to determine how it will investigate and
discover whether its insureds are yet living. Depending on the insurer’s resources and the
volume of business done in West Virginia, it may find, for instance, that contacting its
insureds directly or farming the task out to its agents may produce the desired results in
the most economical and reliable fashion. On the other hand, an insurer may well choose
to review the DMF as the best or most efficient way to perform its duties under the Act.6
It is thus largely irrelevant that, as asserted by the insurers, “[f]ive of the 15
states adopting the 1995 Model UPA in some form have also recently enacted DMF
legislation,” explicitly imposing a duty to search that database. A similar enactment in
6
The insurers warn that the DMF is not infallible, in that “some deaths never show
up” in the file, “and living individuals have been listed as dead.” Nevertheless, if the
Treasurer’s complaints are to be believed, the insurers find the DMF reliable enough to
support their efforts to cease payments on lifetime annuities. Several other practical
considerations, according to the insurers, counsel against construing the Act in a manner
requiring them to account for life insurance proceeds in the absence of a claim. Among
those are worries that insurers will lose their right to contest payment in the event of
suicide or murder-for-hire, fraud in the application, or lack of an insurable interest. In
that vein, the insurers contend, a claim serves as notice to investigate and assess their
liability. We expect, however, that in many cases—particularly involving policies that
have been in force for years—the sudden cessation of premiums being paid will serve as
sufficient notice to the insurers that the insured may have died, such that they ought to
further investigate. The three years that must thereafter elapse prior to the required
remittance to the Treasurer provides sufficient opportunity for an insurer to satisfy itself
that the proceeds are properly payable. We imagine that, except for the sheer volume of
instances, these situations will prove analogous to those now confronted by the insurers
when an insured reaches the policy’s limiting age, triggering payment though no claim
has been filed.
15
West Virginia, as made evident by our holding today, would unnecessarily tread upon the
insurers’ prerogative to decide how they will comply with the Act. The insurers,
however, persuaded the circuit court to surmise that “[s]uch legislation would be
redundant or unnecessary if a duty to search already existed in the UPAs adopted by
these states.” Cf. United Ins. Co. of Am. v. Commw. Dep’t of Ins., No. 2013-CA-000612­
MR, 2014 WL 3973160 (Ky. Ct. App. Aug. 15, 2014) (holding that duty to search DMF
imposed by new model legislation applied only to policies issued after statute’s effective
date of January 1, 2013). Were we to assume, however, that the specific, nonexistent
“duty to search” could stand as a proxy for the general “duty to comply” unquestionably
extant in the Act, the circuit court’s rationale is faulty. See, e.g., Childers v. Parker’s,
Inc., 162 S.E.2d 481, 484 (N.C. 1968) (“Whereas it is logical to conclude that an
amendment to an unambiguous statute indicates the intent to change the law, no such
inference arises when the legislature amends an ambiguous provision.” (citing 1
Sutherland, Statutory Construction § 1930 (1968 Cum. Supp.))). It is apparent from the
nationwide legislative reaction to the proliferation of settlements emanating from the
insurers’ conduct, see infra note 9, that our sister states have perceived an ambiguity in
their own statutory schemes that they wish to clarify.
In the event that the insurer’s chosen methodology proves lacking, the Act
sets forth a comprehensive remedial scheme to encourage improvement. To begin with,
“[a] holder who fails to report, pay or deliver property within the time prescribed” is
16
liable to the Treasurer for interest on the property at twelve percent annually. W. Va.
Code § 36-8-24(a) (1997). In addition, “for each day the report, payment, or delivery is
withheld,” the Act prescribes a civil penalty of two hundred dollars per day, to a
maximum of five thousand dollars. Id. § 36-8-24(b). The penalties for a willful violation
of the Act rise to one thousand dollars per day, to a maximum of twenty-five thousand
dollars, “plus twenty-five percent of the value of any property that should have been but
was not reported.” Id. § 36-8-24(c). The Treasurer has the authority to waive interest
and penalties, and “shall waive penalties if the holder acted in good faith and without
negligence.” Id. § 36-8-24(e).7
7
The Treasurer also invites our attention to section 10 of the Act. That section
safeguards holders from transfers made in error, instructing that one “who pays or
delivers property to the administrator in good faith is relieved of all liability arising
thereafter with respect to the property.” W. Va. Code § 36-8-10(b) (1997). An insurer
acts in good faith for purposes of section 10 if its payment constituted a reasonable
attempt to comply with the Act, see id. § 36-8-10(a)(1), if it harbored a reasonable belief
that the property was abandoned and it was not otherwise in breach of a fiduciary
obligation owed the property owner, see id. § 36-8-10(a)(2), and if “[t]here is no showing
that the records under which the payment or delivery was made did not meet reasonable
commercial standards of practice,” id. § 36-8-10(a)(3). The Treasurer contends that the
good-faith and reasonableness requirements of section 10 should be extrapolated
generally to the Act to impose a duty upon the insurers to proactively use the DMF to
comply with their reporting and transfer obligations. We decline the Treasurer’s
invitation to interpret the Act in such a manner, as section 10 pointedly targets transfers
that have actually been made, in no way purporting to govern transfers that potentially
should be made. Moreover, as we have concluded supra, insurers are charged with no
specific duty under the Act to consult the DMF.
17
The insurers’ alleged failure to report, pay, and deliver property is at the
heart of the Treasurer’s complaints in this matter. On remand, after the insurers have
been afforded the opportunity to answer the complaints, the circuit court shall permit the
Treasurer to exercise his statutory right to examine the insurers’ records for compliance
with the Act. See W. Va. Code § 36-8-20(b).8 If, at the close of discovery and after any
dispositive motions, one or more genuine issues remain with respect to the insurers’
conduct, e.g., whether they have complied with the Act, and if not, whether such
noncompliance was willful or instead an inadvertent misstep taken in good faith and
without negligence, then we expect the circuit court to resolve those issues through
rigorously reasoned findings of fact and conclusions of law.9
8
The Treasurer need not institute litigation to exercise his right to the examination
provided for in section 20(b), such examination or audit being subject merely to
reasonable notice and conduct at a reasonable time. Given that the question arises in the
context of litigation, however, we should note that the bounds of discovery are not
necessarily the same as the Treasurer’s section 20(b) examination, and that the circuit
court may exercise its sound discretion to permit additional relevant discovery on the part
of any party, including the Treasurer. Because the circuit court’s dismissal order is
reversed and full discovery will be conducted on remand, we do not address the
Treasurer’s alternative argument that preliminary discovery was required before the
circuit court could properly dismiss the complaints.
9
There are, we suppose, myriad ways for a holder to show that it has acted in
good faith and without negligence. The circuit court may wish to consider, for instance,
whether the insurers have acted in accordance with standards of commercial
reasonableness. In the conduct of such an analysis, it may be relevant whether the
insurers, as alleged, have frequently resorted to the DMF to terminate their annuity
liabilities. Another item that may be worthy of evaluation is whether and when the
insurers have settled claims in other jurisdictions that have the same or similar unclaimed
property scheme as West Virginia. In that regard, we are under the impression that John
(continued . . .)
18
IV. CONCLUSION
Pursuant to the foregoing, we reverse the circuit court’s dismissal order of
December 27, 2013, and we remand these matters for further proceedings consistent with
this opinion.
Reversed and remanded.
Hancock entered into a Global Resolution Agreement in 2011 “with a list of states that
now totals at least thirty-five.” Devin Hartley, Note, A Billion Dollar Problem: The
Insurance Industry’s Widespread Failure to Escheat Unclaimed Death Benefits to the
States, 19 Conn. Ins. L.J. 363, 391 (2013). We are led to believe that Nationwide,
Prudential, MetLife, AIG, and Lincoln Financial executed like agreements with varying
numbers of states in 2012. See id. at 391-92. It is said that the aggregate of these
settlements totals hundreds of millions of dollars, and, if so, one may conclude from the
gross conspicuousness of the disputes and their resolution that the insurers have been on
notice for some time that similar, meritorious claims are likely present here in West
Virginia. Cf. Estate of Bailey, 554 N.Y.S. 791, 793 (N.Y. Surr. Ct. 1990) (observing that
executor of estate could not avail himself of good-faith defense to liability for recovery of
Medicaid benefits paid on behalf of decedent where executor took “ostrich approach to
the existence of creditors”).
19