A MassMutual Life Insurance policyholder has asked a Massachusetts federal court for preliminary approval of a $37.5 million settlement of her putative proposed class action. The Plaintiff, Karen Bacchi, alleged that the insurance company shorted policyholders on dividends. The settlement was reached after the Plaintiff and the company entered mediation last year while awaiting the outcome of a statute of limitations-based dismissal motion. The motion stated:

Through that intensely adversarial process, the parties reached an agreement to settle the action on a class-wide basis through a non-reversionary common fund payment by MassMutual of $37.5 million, to be distributed to current and former participating MassMutual policyholders through a plan of allocation to be approved by the court

The class potentially includes 2.9 million policyholders nationwide. Ms. Bacchi sued MassMutual in July 2012, alleging it had retained profits that it should have distributed to participating policyholders as dividends. The suit includes claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. Ms. Bacchi’s policy was issued in 1975 by Connecticut Mutual Life Insurance Co. After Connecticut Mutual merged with MassMutual in 1996, it became a MassMutual policy. Under Massachusetts law, a mutual insurer’s safety fund consists of:

an amount not in excess of [12] percent of [the company’s] reserve for such business … and, in addition thereto, any surplus that may have been contributed by the holders of the guaranty stock of the company, or which has been accumulated for the retirement of said guaranty stock and the margin of the market value of its securities over their book value.

Ms. Bacchi alleges at least five different accounting errors she believes MassMutual made in calculating its safety fund. Among other things, she says, the insurer shouldn’t have included the margin of market value over book value in its calculations because statutorily mandated accounting practices no longer consider that margin “surplus.”

Ms. Bacchi is represented by Jason B. Adkins and John Peter Zavez of Adkins Kelston & Zavez PC, Andrew S. Friedman and Francis J. Balint of Bonnett Fairbourn Friedman & Balint PC, and Mark A. Chavez of Chavez & Gertler LLP. The case is Karen L. Bacchi v. Massachusetts Mutual Life Insurance Co. (case number 1:12-cv-11280) in the U.S. District Court for the District of Massachusetts.

Source: Law360.com

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