Residents of seven Alabama counties will receive money from a $12.5 million settlement with Mutual of New York over so-called vanishing premium prices.
Montgomery attorney, Jere L. Beasley announced the settlement Wednesday. The settlement ends 47 suits Beasley had filed on behalf of residents of Montgomery, Barbour, Bullock, Coffee, Dale, Geneva and Henry counties.
“I can never confirm that there was a settlement. It involves less than 50 customers we have in Alabama. Beyond that, we have no other comment,” said Charles Wasilewski, spokesman for MONY.
The suits claimed that MONY replaced existing policies with new ones, telling the policyholders that the new policies would produce dividends that would cause the premiums to “vanish.”
Beasley said the policyholders were told they would have to pay premiums for only a set period of time, during which time the money would be invested. The dividends eventually would cover the cost of the premiums.
Dee Miles, an attorney at Beasley’s office said the policies were sold in the mid-1980’s.
The suits were filed in 1995 and 1996 after the policyholders discovered that the investment was not performing as they had been promised. They had to keep paying.
Mike Pennington, an attorney representing MONY, declined to comment Wednesday.
Beasley said it was learned that the decision to put this policy into operation was made at the top levels of MONY’s corporate management.
“This is a clever and widespread scheme by insurance companies,” Beasley said. “But all too often, people continue to become victims of ‘vanishing premiums.’
“In other states, insurance departments have taken major steps to correct the problem, including the levying of large fines. Thus far, the Alabama Insurance Department has not followed that lead and has failed to take action.”
Miles said the settlement was approved by retired Barbour County Circuit Judge William Robertson.
Robertson’s order said MONY has corrected many of the problems that the plaintiffs raised in the sales of whole life policies. Those problems ranged form misrepresentations by MONY agents to failure to take steps that would ensure the policies performed as promised.
“I hope this case makes people aware that this is going on out there every day,” Beasley said. “And I hop this settlement sends massage to others in the insurance industry that this practice won’t be tolerated.