Insurance company demand for reimbursement

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Question:

We just learned our customer is deceased; he passed 4 months ago. It’s a sole-owner account. The account has a small balance, but we’ve been contacted by an insurance company saying that we have to return the last 3 payments because payments should have ceased when the customer died. Returning these will overdraw the account, and we likely will have to return funds for SSI payments too. Do we have to comply with the insurance company?

Answer:

The insurance company does not have the same reclamation rights as the federal government does for SSI. I suggest your legal department respond to the demand but your bank is not obligated to reimburse the insurance company for overpayments, especially when doing so would cause a loss to the bank.
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Learn more about Rayleen Pirnie webinar
Advanced ACH: Death Notification Entries and Reclamations: A Banks Responsibilities