Prudential Pact Opposed by California : INSURANCE
California joined at least three other states Thursday in formally objecting to a proposed settlement of a lawsuit charging Prudential Insurance Co. with widespread fraud in the sale of life insurance.
The proposed settlement, state officials said, makes it too difficult for policyholders to get money back and won’t fully reimburse most customers for their losses.
The lawyers who reached the settlement with the giant insurer, said California Insurance Commissioner Chuck Quackenbush in an interview, “left a lot of money [for policyholders] on the table.”
California’s objections were filed in federal court in Newark, N.J., on the last possible day under federal rules. As the deadline loomed, state officials from Florida, Massachusetts and Texas also filed objections to the settlement plan, as did lawyers for numerous Prudential customers.
Prudential has defended the proposed settlement, worked out with private attorneys representing class-action plaintiffs. U.S. District Judge Alfred M. Wolin is due to rule on the fairness of the deal after a hearing Jan. 21.
Thousands of customers as well as regulators in several states have charged that Prudential sales agents systematically defrauded as many as 10 million purchasers of life insurance.
The proposed settlement requires customers seeking redress to fill out complicated forms and submit extensive documentation to a special panel of arbitrators. Customers found to have valid claims could have lapsed policies reinstated and receive refunds of money lost through fraudulent transactions.
Quackenbush’s filing Thursday was one of the few concrete actions California has taken on the Prudential matter. As many as 750,000 state residents are Prudential life insurance customers. The insurance department has received about 600 complaints from customers dating back to the late 1980s. But California policyholders have long contended that the agency took no action on their pleas for help, instead referring their complaints back to Prudential.
“We’re going to investigate everything and protect California’s consumers,” Quackenbush, who became insurance commissioner in 1995, said Thursday.
But in a separate interview, Dennis C. Ward, his enforcement chief, confirmed that California still hasn’t launched a full-scale investigation of Prudential. He said there are plans to form a special task force. But he added that it probably wouldn’t begin work at least until after Wolin rules on the settlement and might not be launched at all if Wolin rejects the deal and negotiators strive for better terms.
Quackenbush said his department didn’t begin an independent investigation earlier because it participated in a multi-state inquiry headed by the New Jersey Insurance Department, Prudential’s home state regulator. He said concerns that the multi-state investigation may not have been adequate surfaced only recently.
