Maryland Federal District Court Judge Richard D. Bennett has approved a $38.2 million settlement with named Plaintiffs in two class actions. He has also approved a settlement class consisting of more than 10,750 universal life insurance policyholders. Banner Life Insurance Co. and William Penn Life Insurance Co. were Defendants in the class actions.
Cost of Insurance Complaints
Plaintiffs filed the action because of alleged cost of insurance overcharges. They claim the companies implemented these charges to benefit shareholders and clear their near-term liabilities.
“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 Life Insurance and William Penn. Complaints allege the companies unfairly increased the COI charges on certain universal life products in 2015. These COI increases affected nearly 7,631 universal life policyholders. The settlement class includes these policyholders. Another 4,482 universal life policies were considered by Banner and William Penn for future COI rate increases. Policyholders that currently own such policies are also included in the settlement class.
The settlement agreement reached with Banner Life Insurance and William Penn Life Insurance provides the class members with several valuable benefits.
- Banner Life Insurance and William Penn Life Insurance will create a common settlement fund in the amount of about $20 million. The settlement will disperse these funds to 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; the class will pay terminated policyholders their share by check.
- The settlement provides that Banner Life Insurance and William Penn Life Insurance 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 guaranteed 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 Life Insurance and William Penn Life Insurance 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 Life Insurance and William Penn Life Insurance will provide class members with a free illustration upon request. This illustration depicts the impact of the settlement benefits on the anticipated future performance of their policies.
In total, the value of the settlement benefits amounts to roughly $40 million. The ~$20 million Common Settlement Fund as well as further relief worth $18.2 million comprises this total value. Formal and informal discovery, as well as valuations by Defendants’ and independent actuaries, support this value. Plaintiffs’ experts confirmed the actuaries’ valuations.
Plaintiffs and the settlement class are represented by:
- Beasley Allen lawyers
- W. Daniel “Dee” Miles, III, head of the firm’s Consumer Fraud Section. Dee served as co-lead counsel for the case.
- Rachel Nichole Minder
- Paul Evans
- Wally Walker of Boles, Holmes, Parkman and White and Geoff McDonald & Associates PC served as co-lead counsel
- Christopher T. Nace of Paulson & Nace, PLLC served as local counsel.
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). The court consolidated these cases for purposes of settlement approval.
Attorneys filed the consolidated claims in the U.S. District Court for the District of Maryland, Northern Division, case number 1:16-cv-00192-RDB.
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