Total Asset Recovery Services LLC v. MetLife, Inc.

Summary

The Appellate Division, First Department reversed the dismissal of a qui tam action alleging that life insurers failed to escheat unclaimed life-insurance proceeds under New York’s Abandoned Property Law. The court held that insurers may have obligations to escheat such proceeds without notice or proof of death and that alleged false reports could support a New York False Claims Act reverse-false-claim theory. The court found the complaint insufficiently particular but granted leave to amend, while holding that the NYFCA’s 10-year limitations period barred claims based on reports filed more than ten years before the relevant complaints.

Holdings

1. The Abandoned Property Law requires life insurers to escheat unclaimed life-insurance proceeds even in the absence of notice and proof of the policyholder's death.
2. A life insurer's filing of a false report certifying that it has no abandoned property to escheat may support a New York False Claims Act reverse-false-claim action if the insurer had the requisite knowledge of the report's falsity, even without notice and proof of the policyholder's death.
3. The complaint adequately alleged the knowledge element by asserting facts supporting reckless disregard and actual knowledge, including deficient records and evidence that defendants knew particular policyholders were deceased.
4. The complaint failed to plead the alleged fraud with sufficient particularity because it attributed all alleged conduct to all defendants in general terms.
5. The NYFCA's ten-year statute of limitations bars claims based on allegedly false reports made more than ten years before commencement of the applicable action; the limitations period begins with the initial allegedly false report and is not restarted by a continuing duty to report.

Questions Presented

1. Whether New York's Abandoned Property Law required life insurers to escheat unclaimed life-insurance proceeds without prior notice and proof of the insured's death.
2. Whether the complaint adequately alleged that defendants knowingly filed false reports or statements that concealed or avoided an obligation to transmit property to the State under the New York False Claims Act.
3. Whether the complaint pleaded the alleged fraud with sufficient particularity.
4. Whether the New York False Claims Act's ten-year statute of limitations barred claims based on allegedly false reports filed more than ten years before the commencement of the relevant action.
5. Whether plaintiff should be granted leave to amend despite the pleading deficiencies.

Disposition

reversed_and_remanded