Suit: Prudential made $500M off vets’ death-benefit money
Lawsuit claims insurer profited mightily off retained-asset accounts; lump-sum payment or not?
A lawsuit accusing Prudential Insurance Co. of America of improperly collecting interest on unpaid veterans’ life-insurance benefits was expanded to include claims of fraud.
The plaintiffs, seeking to have the case certified as a class action on behalf of 60,000 beneficiaries of military life insurance policies, filed an amended complaint today adding the fraud claims and additional claimants. The case was originally filed July 29 in federal court in Springfield, Massachusetts.
The suit claims Prudential fails to pay beneficiaries in a lump sum as required by U.S. law and the language of the policies, instead encouraging them to leave the money in accounts with the company, which pays them a small amount of interest.
“The amount Prudential has made through this misconduct is believed to be half a billion dollars or more,” the amended complaint said.
The plaintiffs, who are the beneficiaries of eight military life insurance policies, said Prudential puts death benefits into “Alliance Accounts,” which pay only 0.5 percent to 1.5 percent interest. The company invests the money at a higher rate of return and keeps the difference, according to the suit.
Bob DeFillippo, a spokesman for Newark, New Jersey-based Prudential Financial Inc., declined to comment on the suit. He said the company informs death-benefit beneficiaries of their payment options and that they can immediately withdraw all the money from their Alliance Accounts and invest it wherever they choose.
‘Lump-Sum’
The beneficiaries said Prudential “fraudulently informs beneficiaries that this Alliance Account scheme constitutes a ‘lump-sum’ payment as required by law.” Instead, the company keeps the money in its general account, paying only when the beneficiaries write drafts on the account, they claim.
More than 100 insurance carriers earn investment income on $28 billion owed to life insurance beneficiaries, Bloomberg Markets magazine reported last month.
The case is Lucey v. Prudential Insurance Co. of America, 10-30163, U.S. District Court, District of Massachusetts (Springfield).
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