Reed Smith In-depth

As unclaimed property professionals prepare for the fall season of reporting, they should take note of certain material changes that occurred over this year. Aside from the usual expansion of unclaimed property laws to evolving property types or tinkering with dormancy periods, some recent developments increase the likelihood that even property that is not “abandoned” or “unclaimed” must be transferred to the state, remove safeguards for companies seeking to comply with the law, and subject large volumes of private information to risk.

1. Ohio Limits Holder Indemnification

As part of a 6,000 + page appropriations bill passed on July 4 (Am. Sub. H. B. 33), Ohio adopted changes to the state unclaimed property act which place significant substantive and procedural limits on the state’s obligation to indemnify holders against claims for property reported and remitted to the state. Under the revised legislation, a holder that is sued for property that has been escheated to Ohio must notify the Director of Commerce of that lawsuit “not later than fourteen days after the date process is served on the holder.” Failure to give such notice “absolves the state from any liability the state may otherwise have with regard to the unclaimed funds, beyond the value of the unclaimed funds paid by the holder to the director.”

Further limiting the state’s obligations, the new law provides that a holder is entitled to indemnification only when the property has been reported in “good faith” (as is in the case in most states) and “in compliance with this chapter.” In other words, if a holder honestly (but mistakenly) believes that property is reportable to Ohio, the state could disclaim any obligation to indemnify that holder for reporting the property to the state.