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Contingencies | 6 Months Ended
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Jun. 30, 2013
Commitments and Contingencies Disclosure [Abstract] |
Contingencies | Note 13 - Contingencies In the ordinary course of its businesses, the Company is involved in legal proceedings, including lawsuits, regulatory examinations and inquiries. Except with regard to the matter discussed below, based on currently available information, the Company does not believe that it is reasonably possible that any of its pending legal proceedings will have a material effect on the Company’s financial statements. Certain state insurance regulators, legislators and treasurers are involved in an array of initiatives that could result in significant changes to unclaimed property laws and claims handling practices with respect to life insurance policies. These initiatives seek, in various ways, to impose a new duty on the part of life insurance companies to proactively search for deaths of their insureds prior to the submission of death claims by the insureds’ beneficiaries as required under standard life insurance policy forms. Legislation enacted in Kentucky, Maryland, Montana, Nevada, New York, North Dakota and Vermont, with varying effective dates between January 1, 2013 and July 1, 2014 require life insurance companies to compare their in-force policy records on a regular basis against the database of reported deaths maintained by the Social Security Administration or a similar database or resource (a “Death Master File”). Legislation of this type has also been introduced and is pending in Massachusetts. One state, New Mexico, has enacted legislation that also requires in-force policy record comparisons, but exempts life insurance companies, like the Company, that have not previously utilized a Death Master File, and instead only requires that such companies conduct Death Master File comparisons for life insurance policies and contracts issued and delivered in New Mexico after the legislation’s July 1, 2013 effective date. Alabama, which had previously enacted a statute similar to those enacted in the first seven states referenced above, recently amended its statute to limit the policies required to be compared against a Death Master File only to policies issued on or after January 1, 2016. The Company cannot predict whether or when other states will introduce or enact legislation of the types described above, or the exact form or approach that such legislation might take. In November 2012, the Company filed a declaratory judgment action in state court in Kentucky asking the court to construe the Kentucky Unclaimed Life Insurance Benefit Act (the “Kentucky Act,” one of the enacted statutes referenced above) such that it would only apply prospectively - i.e., only with respect to those life insurance policies issued on or after the effective date of the Kentucky Act, - consistent with what the Company believes are the requirements of applicable Kentucky statutory law and Kentucky and federal constitutional provisions. On April 1, 2013, the trial court denied the Company’s motion for summary judgment and held that the requirements of the Kentucky Act apply to life insurance policies issued before the Kentucky Act’s January 1, 2013 effective date. The Company believes that the court did not correctly apply governing law and has appealed the trial court’s decision to the Kentucky Court of Appeals, which has issued a stay of enforcement of the Kentucky Act against the Company pending the appeal. The Company does not expect the outcome of this appeal to be known before the second half of 2014. In July 2013, the Company filed a declaratory judgment action in state court in Maryland, asking the court to construe a Maryland statute, known as “An Act Concerning Life Insurance and Annuities, Unfair Claim Settlement Practices, Failure to Search the Death Master File,” to apply only to policies issued in Maryland after the effective date of that statute for essentially the same reasons asserted in the Kentucky proceeding. The case is in the early stages, and the State of Maryland defendants have not yet filed any responsive pleadings. Kemper’s life insurance companies are currently the subject of an unclaimed property compliance audit (the “Unclaimed Property Audit”) by a private audit firm retained by the treasurers of thirty-eight states (the “Audit Firm”). On July 17, 2013, the Company was informed that the California State Controller (the “CA Controller”) had filed a complaint for injunctive relief in the Superior Court of Sacramento County against Kemper and its life insurance companies, alleging a failure on the part of such companies to produce information requested by the Audit Firm on behalf of the CA Controller as a part of the Unclaimed Property Audit. The Company has not yet been served with the complaint but, based upon a preliminary review of a copy of the complaint that accompanied a public announcement of the litigation by the CA Controller, Kemper believes that the suit is without merit and intends to defend its position vigorously. The results of the Unclaimed Property Audit and the related California litigation cannot be predicted at the time of filing of this Form 10-Q. Kemper's life insurance companies have for more than a year been the subject of a market conduct examination by one state insurance regulator regarding their claim settlement and policy administration practices and specifically regarding compliance with such state's unclaimed property statute. During the second quarter of 2013, five other states joined this examination (the “Multi-State Exam”), and Kemper's life insurance companies subsequently received requests for the production of a significant volume of additional information. Such companies are assessing these developments and the results of the Multi-State Exam cannot be predicted at the time of filing of this Form 10-Q. Note 13 - Contingencies (continued) The Company continues to maintain that states lack authority to establish new requirements that have the effect of changing the terms of existing life insurance policies in the ways described above. If state officials are successful in applying such new requirements retroactively to existing life insurance policies, it will fundamentally alter the responsibilities of the parties to such policies by effectively eliminating contract terms that condition claim settlement and payment on the receipt of “due proof of death” of an insured. The outcome of the various state initiatives could have a significant effect on, including acceleration of, the payment and/or escheatment of policy benefits and significantly increase claims handling costs. The Company cannot reasonably estimate the amount of loss, if any, that the Company would recognize if it were subjected to such requirements on a retroactive basis.

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