By Ross Todd, LAW.COM
May 5, 2020
A federal judge in Los Angeles has given preliminary approval to a deal that Transamerica Life Insurance Co. reached with certain policyholders who claim the company improperly increased monthly charges withdrawn from their “universal life” policies.
As part of the proposed deal approved Monday by U.S. District Judge Christina Snyder of the Central District of California, Transamerica agreed to establish a fund of up to $88 million to compensate about 7,800 policyholders who owned its “TransUltra 115 98/99” or “TransSurvivor 115 97/98/99” universal life insurance policies.
Many class members bought their policies, which included a savings component, in past decades when interest rates were high in the United States. Plaintiffs claimed that Transamerica increased monthly cost-of-insurance charges on the policies to a level that exceeded the interest amounts many policyholders used to pay for the policies. The suit claimed the company did so in a way that violated the express contractual term in policies prohibiting increases to recoup past losses, rather than to pay for future expected costs.
The deal Snyder gave preliminary sign off to Monday marks the second such deal that Transamerica has reached with policyholders. The company previously reached a $195 million deal with 70,000 universal life policies that were enacted in 2015 and 2016.
A Transamerica representative noted Tuesday that the universal life insurance policies at question in the lawsuit have adjustable rates, unlike term life insurance policies, which have fixed rates. “Transamerica set the monthly deduction rates for these policies in accordance with contractual terms and was prepared to defend its actions through trial, but decided it was in the best interest of both Transamerica and its policyowners to resolve the litigation on mutually agreeable terms,” the company representative said in a prepared email.
Under the terms of the deal, Transamerica will deposit the settlement payments to current policyholders’ current insurance accounts. Owners of terminated policies will receive payment automatically by check.
Plaintiffs were represented by co-lead counsel Andrew S. Friedman of Bonnett Fairbourn Friedman & Balint in Phoenix, Harvey Rosenfield of Consumer Watchdog in Los Angeles, and Adam M. Moskowitz of The Moskowitz Law Firm in Coral Gables, Florida.
In a press release touting the deal when settlement papers were filed in April, Friedman said that the increased charges “caused tremendous surprise and stress for the affected policyholder, many of whom are now senior citizens, and some of whom are quite elderly and on fixed incomes.”
“Our number one goal was to get as much money as we could back to these policyholders as quickly as possible,” he said. “We have accomplished our goal.”
Ross Todd is bureau chief of The Recorder in San Francisco. He writes about litigation in the Bay Area and around California. Contact Ross at [email protected]. On Twitter: @Ross_Todd.