[quote=http://www.law.com/sites/articles/2014/ ... -benefits/]
Prudential to Settle Class Action Over Veterans' Death Benefits
Prudential Insurance Co. has agreed to donate more than $20 million to veterans’ charities, and pay $8 million to survivors of veterans and service members who died, to settle a class action that alleged the insurance giant profited by not paying lump sum death benefits to the families.
On Aug. 5, U.S. District Judge Michael Ponsor of the District of Massachusetts approved the preliminary settlement in the hotly contested consolidated case In Re: Prudential, which also includes awards of about $10 million for plaintiffs’ attorneys and $10,000 each for 10 class representatives. Each primary beneficiary would receive about $125, the order estimates.
At issue were “Alliance Accounts,”? called retained asset accounts by the insurance industry, which Prudential encouraged the beneficiaries of Servicemembers Group Life Insurance (SGLI) and Veterans Group Life Insurance (VGLI) policies to use to park the tax-free, six-figure benefits most of the families receive.
Instead of a lump sum, Prudential gave survivors a checkbook that could be used to draw down the funds from the interest-bearing account at any time. Prudential contends the accounts—which are not federally insured, but may be by state guaranty funds—give the survivors breathing space while making decisions on what to do with the money.
But plaintiffs see a more malign motive: Prudential can invest the money for a higher return than the company pays in interest for the cash in the accounts. The families contend in their complaint that the alliance accounts earned about 0.5 percent to 1.5 percent interest, while Prudential has reaped as much as 6 percent, for a total of $850 million or more profit by playing the spread.
The complaint, which counts more than 60,000 military life insurance beneficiaries as potential class members, alleges Prudential engaged in fraud, breach of fiduciary duty and unjust enrichment. Originally filed in 2011, it seeks restitution of foregone interest, monetary damages and a piece of Prudential’s profits.
Prudential contends not only that its conduct was lawful and authorized by the Department of Veterans Affairs, but also that the beneficiaries suffered no damages because they always had full access to their funds and thus were not harmed in any way.
Judge Ponsor agreed. In a Nov. 22, 2013 order, he announced his intention to grant most of Prudential’s motion for summary judgment, finding the plaintiffs had suffered no actual injury and were not entitled to recover monetary damages. That ruling spurred settlement discussions.
In his Aug. 5 order, the judge let the class members know they would be lucky to get the $125 award, which pales next to the millions the deal would provide for charities and plaintiffs’ counsel.
“Cash relief of $125 per beneficiary is undeniably an excellent result in a case in which the court itself questioned whether the SGLI beneficiaries sustained any damages at all,”? Ponsor wrote.
Goodwin Procter LLP, Choate Hall & Stewart LLP and Debevoise & Plimpton represent Prudential. The plaintiffs are represented by The Daniel D. King Law Firm, PLLC; Law Offices Of Cristobal Bonifaz; Bonnett Fairbourn, Friedman & Balint, P.C.; Scott & Scott LLP; Kerr & Wagstaffe LLP; and Archuleta, Alsaffar & Higginbotham.[/quote]
I would use the check as toilet paper and mail it to Prudential. Is that considered a terrorist activity these days?
