Federal Judge in California Stops Conseco From Raising Rates on Universal Life Policies
January 24, 2011 by Fran Matso Lysiak
LOS ANGELES January 21 (BestWire) — A California federal district court judge has prohibited Conseco Life Insurance Co. from raising rates on some universal life insurance policies that would have impacted 50,000 mostly elderly policyholders.
U.S. Judge A. Howard Matz of the Central District of California in Los Angeles granted summary judgment in favor of the policyholder plaintiffs in the certified class-action lawsuit against Conseco Life involving its Valuelife and Valuterm UL policies.
The cost of the insurance rate increases attempted by Conseco Life “is contrary to the plain language of the policies” and, if implemented, would breach the insurance contract with the policyholders, Matz ruled.
The planned increase, which Conseco Life allegedly adopted eight years ago without notifying the policyholders, would have tripled their rates after they were insured for 20-plus years, according to a statement from the Law Offices of Timothy P. Dillon and Bonnett, Fairbourn, Friedman & Balint, representing the plaintiffs.
One plaintiff attorney, Andrew S. Friedman, said in an e-mail the value of the overcharges that will be stopped is about $150 million.
The plaintiffs are “gratified that the court has blocked this onerous, illegal rate hike, thereby preserving life insurance coverage that elderly class members have been counting on,” Friedman said.
The case won’t proceed to trial, and the judge will enter a final judgment in favor of the plaintifffs, he said.
Tony Zehnder, a spokesman for CNO Financial Group Inc. (NYSE: CNO), parent of Conseco Life, said the company is disappointed with the judge’s ruling intends to appeal.
In 2007, the court approved a settlement in another class action requiring CNO and Conseco Life to provide benefits with a value of $425 million to Conseco Life policyholders owning Lifestyle and Lifetrend policies, the plaintiffs’ attorneys’ statement said. That suit involved similar allegations of an illegal rate increase on UL policies. Last summer, Conseco Life Insurance finalized a multistate settlement agreement concerning its administration of Lifetrend, another UL product. The agreement required the establishment of a $10 million fund for some Lifetrend product owners and payment of a $1 million assessment to participating jurisdictions (BestWire, July 2, 2010).
Conseco said that due to an “administrative platform issue,” some policyholders over a period of years paid lower premiums, or no premiums, because they didn’t receive notice that additional premiums were due (BestWire, Jan. 12, 2009).
Conseco Life Insurance Co. currently has a Best’s Financial Strength Rating of B- (Fair).
On the afternoon of Jan. 21, CNO Financial Group’s stock was trading at $6.51 a share, down 0.61% from the previous close.
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)BN-NJ-01-21-2011 1607 ET #
