Jury: Allianz used deceptive materials to market its two-tiered EIAs

A federal jury in Minnesota ruled last week that Allianz Life Insurance Company of North America used deceptive materials to market its two-tiered equity-indexed annuities, but declined to assess damages against the company, saying that the plaintiffs suffered no harm.

The class action was originally filed in 2006 in the U.S. District Court for the District of Minnesota on behalf of named plaintiff Linda L. Mooney, a 65-year-old retiree.

COMPLAINT

In the complaint, Ms. Mooney said that she paid $216,189 in premiums for an Allianz MasterDex 10 equity-indexed annuity. She claimed that she bought the product because Allianz had promised to pay her an upfront 10% premium bonus of about $21,600.

Ms. Mooney claimed that the company’s marketing materials were filled with industry jargon that made it difficult for her to understand the product fully. She claimed the documents clearly stated that she would receive this bonus.

Traditional indexed annuities don’t require annuitization in order to receive the indexed gains and premium bonuses. However, a two-tiered annuity — such as the one Ms. Mooney had — requires annuitization, and the policyholder can take the premium bonus and indexed gains only if the product is annuitized for a stated term after a specific deferral period.

In its ruling, the jury concluded that Allianz had used a misrepresentation or deceptive practice in selling its two-tiered annuities and that it had intended that others would rely on its misrepresentation or deceptive practice, according to the -verdict.

However, the jury also concluded that the plaintiffs weren’t adversely affected as a result of these practices, and assessed no damages against the company.

REACTION

“We are very pleased that the jury concluded that no harm came to our policyholders,” Allianz Life president and chief executive Gary C. Bhojwani said in a statement.

“The jury made its decision, but hopefully we’ll be able to get an injunction based on the findings that they used deceptive practices,” said plaintiff’s attorney Karl L. Cambronne of Chestnut & Cambronne PA. “People will have a newfound level of understanding when they buy these products in the future.”

The class action covered products that were purchased between Feb. 9, 2000, and May 10, 2007.

In 2007, in a related matter, Minnesota Attorney General Lori Swanson took Allianz to court, accusing it of selling unsuitable annuities to seniors and alleging that the company failed to disclose adequately that the clients’ savings and bonuses could be tied up for as long as 15 years.

However, Allianz settled later that year, paying the state $500,000 in fees and expenses, offering Minnesota seniors a chance to get their money back without penalties, and tightening its underwriting and suitability processes.

E-mail Darla Mercado at [email protected].