Maryland Federal District Court Judge Richard D. Bennett has approved a $38.2 million settlement with the named Plaintiffs in two class actions and a settlement class consisting of more than 10,750 policyholders of Banner Life Insurance Co. and William Penn Life Insurance Co. universal life insurance policies.
Plaintiffs filed the action because of the alleged cost of insurance overcharges, which they allege were implemented to benefit shareholders and clear the companies’ near-term liabilities. Plaintiffs and the settlement class are represented by Beasley Allen lawyers W. Daniel “Dee” Miles, III, who is head of the firm’s Consumer Fraud Section and served as co-lead counsel for the case, Rachel Boyd and Paul Evans, along with the other co-lead counsel, Wally Walker of Boles, Holmes, Parkman and White and Geoff McDonald & Associates PC, as well as local counsel Christopher T. Nace of Paulson & Nace, PLLC.
The settlement relates to class action complaints filed in Dickman v. Banner, No. 1:16-cv-00192-RDB (D. Md. filed Jan. 19, 2016) and Rich v. William Penn Life Insurance Co. of New York, No. 1:17-cv-02026-GLR (D. Md. filed July 20, 2017), which were consolidated for purposes of settlement approval.
“We are pleased we were able to return these cost of insurance overcharges to the policyholders of Banner Life and William Penn,” Miles said. “Many life insurance companies have committed similar actions regarding improper cost of insurance (COI) increases, and we will continue to make every effort to recoup those costs for consumers and penalize the insurance companies.”
Plaintiffs’ class action complaints asserted claims for breach of contract and fraud against Banner and William Penn, alleging the companies unjustifiably increased the COI charges on certain universal life products in 2015. These COI increases in 2015 affected approximately 7,631 universal life policyholders, who are included in the settlement class. Another 4,482 universal life policies were considered by Banner and William Penn for future COI rate increases, and the policyholders that currently own such policies are also included in the settlement class.
The settlement agreement reached with Banner and William Penn provides the class members with several valuable benefits.
- Banner and William Penn will create a common settlement fund in the amount of approximately $20 million. This fund will be distributed to settlement class members, pro rata, based on the proportion of COI collected for each Class Policy after the 2015 cost of insurance rate increases. The distributions will go to in-force policyholders by an increase to the account value of each in-force policy owned by the Settlement Class Member; terminated policyholders will be paid their share by check.
- The settlement provides that Banner and William Penn agrees not to impose any COI rate increases on policies of class members for five years unless ordered to do so by a state regulatory body.
- Policies that received cost of insurance rate increases to the guarantee maximums set forth in their policies will be provided with an additional forty-five days added to the length of their grace period after the guarantee period ends if their policy is subject to lapse.
- Banner and William Penn agree to not seek to void, rescind, cancel, have declared void, or otherwise deny coverage or death claims submitted by settlement class members based on any alleged lack of insurable interest or misrepresentations made in connection with the original application process.
- Banner and William Penn will provide class members with a free illustration upon request depicting the impact of the settlement benefits on the anticipated future performance of their policies.
In total, the collective value of the settlement benefits amounts to roughly $40 million. This total value is comprised of approximately $20 million Common Settlement Fund and the valuation of the other relief detailed above at $18.2 million, which is supported by formal and informal discovery as well as valuations by Defendants’ and independent actuaries that were confirmed by Plaintiffs’ experts.
The consolidated claims were filed in the U.S. District Court for the District of Maryland, Northern Division, case number 1:16-cv-00192-RDB.