It’s shameful that the Bevin administration is refusing to defend thousands of Kentuckians who bought small life-insurance policies from being ripped off by insurance companies.
Attorney General Andy Beshear should step up and defend the model consumer-protection law unanimously enacted by the General Assembly in 2012.
The law, which is being challenged by the St. Louis-based Kemper Corp., requires insurers to use readily available public records to identify and pay beneficiaries after a policy holder dies. (As the Herald-Leader’s John Cheves reported, the industry already uses these records to alert itself when it can stop sending annuity payments because a customer has passed away.)
Kemper has sold more than 9,000 life insurance policies in Kentucky, mostly burial plans, with an average value of $4,800, by sending its sales force door-to-door in low-income neighborhoods, according to legal briefs in the case.
The company claims the legislature intended for the law to apply only to policies sold after the 2012 law took effect.
But common sense, common decency, the law’s sponsor and a circuit court judge all say that the legislature intended the law to apply to existing policies.
Franklin Circuit Court Judge Phillip Shepherd upheld the statute, writing that “for insurance companies to attempt to keep the money through willful ignorance of the death of the insured amounts to unjust enrichment at the expense of some of the least privileged citizens in this state.”
But in 2014 the Court of Appeals ruled that, because the law did not specify that it was retroactive, the industry should remain free to keep other people’s money on policies sold before the new law took effect. The three-judge panel said the law unfairly shifted the notification burden from consumers to the industry.
The Insurance Department appealed to the Supreme Court, which had scheduled oral arguments for Friday. Both sides have submitted their briefs. The high court obviously thinks the appeal has merit.
But on Monday, the Insurance Department, now under the control of a former insurance industry executive, withdrew its defense.
The stage is set for the new attorney general to step up and fulfill his consumer protection duties by defending the law which also is endorsed by the National Conference of Insurance Legislators.
Surviving beneficiaries often don’t know such policies exist or have a difficult time collecting the benefits. The sponsor of the 2012 law, former Rep. Bob Damron of Nicholasville, said that before Kentucky and at least 14 other states began enacting such laws, the life insurance industry was sitting on more than $1 billion in unclaimed benefits — some owed to the families of Kentuckians who paid $16 a month to cover the cost of their funerals.
For the Bevin administration to abandon those Kentuckians in favor of an insurance company is unconscionable.