John Hancock Financial Services Inc., which recently settled government allegations that it didn’t work hard enough to pay life insurance benefits, now faces a potential class action in Boston making similar charges.
The lawsuit, filed in federal court, alleges that the Boston insurer routinely consulted the Social Security Administration’s master death list to check whether annuity holders had died so it could halt the payments immediately. But John Hancock failed to routinely use the same database to check if life insurance policy holders had died so the company could promptly pay beneficiaries.
In other words, the suit claimed, John Hancock and its subsidiaries used the data “solely for their own advantage.”
Regulators in several states have already charged John Hancock and many other life insurers of similar practices.
John Hancock, the nation’s seventh largest life insurer, agreed to settle the allegations with the states in November in exchange for $13.3 million and a promise to perform more thorough searches in the future. The settlement was initially reached with six states (California, Illinois, New Hampshire, North Dakota, Pennsylvania, and Michigan), but nearly all, including Massachusetts, have since signed on. New York and Minnesota are the only states that have not joined the settlement.
Several other insurers, including AIG, MetLife, and Prudential, have reached similar settlements with states. MetLife, for instance, agreed to pay $478 million in a deal with 34 states, including Massachusetts.
The class action is an indication that that government settlements won’t necessarily end the legal problems for insurers. The Boston lawsuit was filed about a month ago by Richard Feingold, who lives in Illinois.
Feingold’s mother died in 2006, but Feingold didn’t know anything about the life insurance, which was purchased in 1945, according to the lawsuit. Feingold first learned he might be owed money four years later when he checked the Illinois treasurer’s website for unclaimed property, which indicated the state was holding $459 in dividends from John Hancock for him.
Feingold contacted John Hancock to ask if there was a life insurance policy. Feingold was initially told no, but the company later discovered his mother had indeed purchased life insurance and sent him forms to claim the benefits.
Feingold received a check for $1,349.71 — but complained in the lawsuit the company refused to provide him with a copy of his mother’s policy or an explanation of the benefits he received.
Feingold’s attorney, Brian J. Wanca, said his client isn’t sure whether he received all the money owed to him. Wanca said he believes that many other life insurance beneficiaries are owed money, as well.
“We don’t believe this is an isolated situation,” said Wanca, a lawyer with Anderson & Wanca in Rolling Meadows, Ill. “We believe this is the tip of the iceberg.”
Wanca said he doesn’t know how many other people are affected or how much money they are owed — something he hopes to learn during discovery, the legal process of obtaining information from the opposing party. So far, the lawsuit only involves Feingold and has not been certified as a class action.
John Hancock asked the court to dismiss the suit on several grounds, including its contention that Massachusetts consumer protection laws do not apply to out-of-state residents like Feingold. A judge has yet to rule.
Hancock, a unit of Canada’s Manulife Financial, declined to comment specifically on the lawsuit, but said it was happy to have reached an accord with state regulators over the issue.
“The vast majority of our contract and policyholder benefits are paid in a timely manner,” the statement said. “We are pleased to further strengthen efforts to locate beneficiaries in those relatively small number of cases where claims are not submitted.”
Hancock said the issue mainly affected policies written before 1968 with benefits of less than $1,500 each. The company said it stopped collecting premiums on many small, older policies in 1985, so it lost track of many policyholders.
Hancock also recently added a feature on its website to help customers locate their policies.Todd Wallack can be reached at firstname.lastname@example.org. Follow him on Twitter @twallack.