Guidance Does Not Equal Regulation- Implications for Unclaimed Property and Beyond

There are important implications for unclaimed property and potentially many other areas where guidance, rather than regulations/laws are relied upon and enforced.  In Superior Court Judge Harold Kahn’s ruling on Thrivent Financial for Lutherans vs. Betty Yee et al. he granted Thrivent Financial for Lutherans’ motion for summary judgement.  In his ruling, Judge Kahn stated, “Betty Yee (in her official capacity of California State Controller) and the Office of State Controller adopted two regulations the “External Database Regulation” and the “Dormancy Trigger Regulation”- without compliance with the procedural requirements of the California Administrative Procedure Act and are therefore invalid.”  California’s State Controller’s Office (SCO) is enjoined from both enforcing or threatening to enforce these.  The full ruling is available here: https://images.thinkadvisor.com/contrib/content/uploads/documents/415/302510/2018-7-23-thrivent-v-yee-SuperiorCourtSF.pdf.

Based on this ruling life insurers are not required to verify if insureds are deceased through the Death Master File.  Also, they are not required to use the date of death as the dormancy trigger; instead they can use the date of notice of death, according to their own records.  Further, all references to the guidance must either be removed from SCO’s materials or they must be “accompanied by a conspicuous disclaimer expressing these are merely SCO’s views and do not have any legal effect.”

The ruling outlined the injunction does not stop the California SCO to: 1) take the necessary steps to promulgate regulations encompassing these requirements; 2) argue this guidance should be considered by a court to be an accurate interpretation of CCP 1515; or 3) request the legislature amend existing law to include these provisions.

It is not known whether the SCO will appeal.