Allianz Life Insurance Co. of North America has reached a $251 million settlement to end two racketeering class actions alleging it lured 230,000 seniors into buying poorly performing deferred annuities with harsh surrender policies. Plaintiffs in the suits have asked the court for final approval of the settlement, which had been preliminarily approved in August. The Plaintiffs accused Allianz of conspiring through a racketeering enterprise with a network of field marketing organizations to induce class members to buy deferred annuities through misleading statements and omissions about the annuities’ value. The suits claimed the Plaintiffs suffered $489 million in damages.
Class members will receive a variety of benefits based on the status and intended use of their accounts, ranging from a five percent annual increase to the amount of funds they can withdraw without penalty to a nine percent increase in their cash surrender value. The settlement also provides up to $13.3 million for Plaintiffs with misrepresentation claims, $11.9 million for those with lack of suitability claims and $9.8 million for those who can establish financial need when they surrendered their annuity.
U.S. District Judge Christina A. Snyder denied Allianz’s motion for summary judgment last March, ruling that federal racketeering claims are not barred by reverse preemption and refusing to dismiss claims under the California Elder Abuse Act. That California law allows Plaintiffs to pursue additional damages for acts that inflict physical or financial abuse against a person aged 65 or older. Judge Snyder ruled that class members in at least 16 states were not barred from bringing RICO (Racketeer Influenced and Corrupt Organizations) Act claims under the McCarran-Ferguson Act, which reverse-preempts federal claims that interfere with state insurance statutes.
In this case, Judge Snyder said that RICO claims actually advanced states’ interest in fighting insurance fraud. The judge added that the act was not designed to preclude federal regulation merely because that regulation imposes stiffer liability than state law. The class actions were filed in 2005 by the two Plaintiffs, who said that Allianz conspired with a network of field marketing organizations to falsely market an “immediate” 10 percent bonus and claim that its annuities would pay full value even though there would be a 10 percent charge on premiums received, a reduced rate of interest and no bonus if the annuity remained in deferral for less than five years.