Appeals court says insurance company did not breach contracts

Life insurance companies such as John Hancock Life Insurance Company often have proceeds from life insurance policies that do not get claimed. In June 2011, Hancock and several states -- including Illinois -- came to an agreement as to how those unclaimed proceeds would be handled by the company. Subsequently, a federal class action lawsuit was filed by a man claiming that Hancock breached contracts with beneficiaries because the regulatory agreement with the states created new obligations on the part of the insurance company with regard to beneficiaries of those unclaimed proceeds.

The lawsuit alleged that Hancock is responsible for researching whether an insured has passed away and tracking down beneficiaries of the policy. The federal district court did not agree and dismissed the case. An appeal was filed with the First Circuit Court of Appeals.

The district court could not find a cause of action under either Massachusetts or Illinois law to substantiate the filing of the lawsuit. The appeals court agreed and denied the other arguments presented in the appeal. The court determined that Hancock does not owe any duty to the beneficiary who filed the suit because he has no standing under the agreement Hancock signed with the states.

Many companies are obligated to comply with state and federal regulatory contracts. As is illustrated in the case of Hancock, doing so does not necessarily create a fiduciary relationship between the company and anyone else. A thorough review of any regulatory requirements a company is subject to may be beneficial. This may ensure that the company knows exactly what is expected of it and whether any additional relationships are created to which the company owes a duty.

Source:, "First Circuit rules John Hancock Life Insurance doesn't have to discover deaths, notify beneficiaries", , June 6, 2014

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