FRANKFORT (AP) — Kentucky House Democrats advanced a bill to strengthen the reach of a life insurance law that suffered a setback when Republican Gov. Matt Bevin’s administration dropped its defense of the statute in a court case.
Supporters said Wednesday the bill could help people collect benefits owed them from life insurance policies they didn’t even know existed by requiring insurers to make “good faith efforts” to locate them.
The measure cleared the House Banking and Insurance Committee with solid support from Democrats. A couple of Republican members voted for it, but most GOP lawmakers abstained from voting.
The legislation seeks to amend the state’s 2012 Unclaimed Life Insurance Benefits Act to clarify that it applies to life insurance policies written before the law took effect.
Democratic Rep. Chris Harris, the bill’s lead sponsor, said the measure adheres to the intent of the original law that its provision apply retroactively to life insurance policies.
“This bill will not require insurance companies to pay one red cent more than their contract requires them to pay,” he said. “It does … require them to make a concerted effort to pay what they actually owe.”
The 2012 law requires insurers to check public death records to determine whether policyholders have died and to make “good faith efforts” to try to find beneficiaries owed life insurance proceeds.
Several life insurance companies sued, saying the law could not be applied to policies written before the law was passed. A circuit judge ruled in the state’s favor, but the state Court of Appeals reversed the decision.
Arguments were scheduled recently before the state Supreme Court, but the Kentucky Department of Insurance asked to dismiss the case. Bevin said at the time that after a “thorough analysis” of the appeals court ruling, he believed it was illegal to apply the law retroactively.
Attorney General Andy Beshear, a Democrat, said he was outraged by the Bevin administration’s decision and has asked the Supreme Court to substitute his office for the governor so the lawsuit can continue.
At Wednesday’s committee hearing, Rep. Sannie Overly of Paris said it was “truly disturbing” that the governor and the state insurance commissioner would “withdraw their defense for the consumers of Kentucky.” Overly is also chairwoman of the state Democratic Party.
The insurers challenging the law wrote thousands of life insurance policies in Kentucky, Harris said. Many of them have relatively low payouts, intended to help with funeral expenses, he said.
Rep. Brad Montell of Shelbyville, was among the Republicans abstaining.
His concern, he said, was how much work smaller insurers would have to do to meet the “good faith effort” requirement to track down far-flung beneficiaries of polices that might be decades old.
“I want to enforce payment to beneficiaries. I just don’t want it to be unreasonable on this retroactive part of the law,” Montell said.
The legislation is House Bill 408.