A case was brought to the U.S. Court of Appeals in New York concerning whether some insurance providers can profit from investing and maintaining the proceeds of insurance policies distributed under employee-benefit plans. According to Bloomberg, a three-judge appellate panel must decide if New York-based life insurer MetLife owes a fiduciary duty to the recipients of retained asset accounts.
Bloomberg Markets magazine reported MetLife Inc. is one out of many U.S. insurers earning investment income on $28 billion owed to life insurance beneficiaries. Insurance carriers keep the money in so-called retained asset accounts and only pay the recipients when they review the account or write any drafts. Many beneficiaries claim they are entitled to the full amount that insurers make when they invest the retained assets.
Carol Faber, a beneficiary of a retained asset account created by MetLife, filed the lawsuit against the insurance company. After a lower court judge ruled in favor of MetLife, Faber’s NY estate planning attorney John Bell filed for an appeal. Bell alleged that the insurer violated its fiduciary responsibility to his client by retaining profit produced by the assets of her account.
Many insurers assert that recipients are only entitled to the amount specified under their contracts. MetLife’s lawyer argued the insurer did not owe a fiduciary duty to the owners of the retained asset accounts. U.S. Circuit Court Judge Richard Wesley agreed and stated the relationship between MetLife and it beneficiaries is more akin to a contractual rather than fiduciary relationship.
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