It seems that the Prudential Insurance company hasn’t been treating the beneficiaries of America’s servicemen and women the way it should have been. The insurance company has been sending beneficiaries a checkbook of IOUs instead of paying out life insurance benefits. This week, a court ruled that this practice is unacceptable.
In general, a person who has a life insurance policy will select a beneficiary. When the person dies, the insurance company is supposed to pay a lump-sum of money to the beneficiary, in the form of a check. This moves those funds out of the accounts of the insurance company, and into the bank account of the beneficiary. From there, the beneficiary can use those funds in order to continue to pay the mortgage, other bills, or other expenses.
Instead of paying beneficiaries with a check, Prudential has been issuing the beneficiaries something that resembles a checkbook. Prudential was keeping the death benefit money in it’s own accounts, and continuing to draw interest from it. Beneficiaries were told to use the checkbook in order to withdraw funds as needed. Prudential was doing this to the beneficiaries of servicemen and women, but wasn’t doing this with the life insurance policies that were held by civilians.
There have been four separate class action lawsuits filed against Prudential last year. All are in regards to the way that Prudential has been handling military death benefits. Those cases have now been consolidated. Federal District Judge Michael A. Ponsor has denied Prudential’s motion to dismiss claims that it violated the federal statute and contract regarding how life insurance is supposed to be handled, and that it breached it’s fiduciary duty to the beneficiaries.
The judge upheld the plaintiff’s allegations that Prudential intentionally misrepresented key elements about the Alliance Account policies specifically to induce beneficiaries to keep the death benefit money in Prudential’s accounts. The judge feels that the plaintiffs do have sufficient information to file a claim of fraud against the insurance company. This means that the four court cases, which have now been combined into one case, will go forward.
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