MetLife Inc. has agreed to pay $84 million to settle an eight-year-old class-action lawsuit filed by shareholders who claim the insurer underreported its liabilities via claims to deceased policyholders.
Plaintiffs claim that MetLife failed to include data from the Social Security Administration’s “Death Master File” in tabulating its Incurred But Not Reported reserves. The SSA database includes all known deaths and is used by insurers to distribute benefits.
By failing to include SSA death data, and associated pending payouts, plaintiffs claim MetLife presented an inaccurate financial picture during quarterly reports to shareholders.
MetLife also failed to disclose regulatory investigations into its misuse of the SSA death database, plaintiffs allege in court documents.
“Lead Plaintiff alleges that when the true facts concerning the nature, scope and financial impact of these alleged misrepresentations and omissions were revealed, the Company’s stock price declined and Members of the Classes suffered damages,” settlement documents say.
MetLife admits to no wrongdoing in the settlement documents.
“For Defendants, the principal reason for entering into the Settlement is to eliminate the uncertainty, risk, costs, and burdens inherent in any litigation, especially in complex cases such as this Litigation,” settlement documents say. “Defendants have concluded that further conduct of this Litigation could be expensive, protracted and distracting.”
The settlement was filed in Manhattan federal court and requires approval by U.S. District Judge Lewis Kaplan.
The original lawsuit was filed on Jan. 12, 2012 by the City of Westland Police and Fire Retirement System as a class action. In that filing, plaintiffs claim MetLife relied on the Master Death File to quit annuity payments to deceased policyholders.
“The Company did not, however, regularly use the (DMF) to determine whether death benefit payments were due under life insurance policies or the Retained Asset Account, which would subject the company to immediate liabilities,” the lawsuit said.
Plaintiffs and regulators have pursued dozens of actions against virtually every major insurer regarding the failure to use the death master file to pay claims. The past decade has seen dozens of life insurers settle with state regulators over the use of the DMF.
Former California insurance commissioner Dave Jones compiled a report at the end of 2018 estimating that regulators have collected about $10 billion from insurers over widespread failures to use the DMF.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.
© Entire contents copyright 2019 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.