A group of MetLife Inc. investors will ask Delaware’s top court to revive oversight claims over the insurer’s practice of downplaying its liabilities by counting pensioners as dead if they didn’t respond to its letters, instead of consulting official records.

The lawsuit, dismissed by a Chancery Court judge in August, concerned MetLife’s “pension risk transfer” operations, a long-running business line that involves managing pension obligations for employers.

The insurer for decades based its annuity payments on letters sent to beneficiaries around their 65th and 70th birthdays notifying them of their eligibility. If a pensioner failed to respond, the company marked them as dead, avoided the payment, and released the money into its general earnings.

That method of determining pension liability persisted even after more accurate tools became available, such as the Social Security Administration’s “master death file.” The company ultimately acknowledged the errors in December 2017, adjusting its cash reserves downward by more than $500 million.

The suit accused MetLife’s board of ignoring red flags by looking the other way despite mounting audits and investigations.

‘Lack of Imagination’

Vice Chancellor Sam Glasscock III tossed those claims Aug. 17, saying the suit relied on “too many attenuated inferences to traverse from regulatory guidance and settlements on the part of the company, to bad faith on the part of any director.”

The shareholder plaintiffs failed to establish that conflicts of interest stemming from the board’s legal exposure would have made it futile for the plaintiffs to demand an internal investigation before bringing their derivative claims, Glasscock found.

He referred to the “oft-repeated” axiom that board oversight claims are “among the hardest to plead and prove” under the Delaware Supreme Court’s landmark ruling in In re Caremark. Caremark requires a plaintiff to show that a majority of directors consciously disregarded known risks to the company in bad faith. At most, the allegations showed “failure of prudence” or “a lack of imagination,” Glasscock said.

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