Prudential Insurance Sued Over Veterans’ Benefits
July 29, 2010, 7:25 PM EDTBy Joel Rosenblatt
(Updates with lawsuit claims in first paragraph.)
July 29 (Bloomberg) -- Prudential Insurance Co. of America was sued over claims it earns interest of more than 5.69 percent on veterans’ life-insurance policies and pays beneficiaries only 1 percent.
The insurer, a unit of Prudential Financial Inc. “paid to beneficiaries on the accrued claims only one percent interest on the accrued monies as of the day of death or traumatic injury of the insured,” according to the lawsuit, filed today in federal court in Springfield, Massachusetts.
The suit seeks class action, or group, status. It was brought by Kevin and Joyce Lucey, the beneficiaries of a $250,000 life insurance policy for their son, Jeffrey Lucey, a former member of the armed forces who died in 2004, according to the suit.
The U.S. Department of Veterans Affairs said yesterday it is investigating life insurance companies’ practice of putting veterans’ death benefits in corporate accounts and keeping most of the investment profits instead of paying the survivors.
The Luceys were paid $53,000 in 2004, and the balance of the policy, or $197,000, in 2009, and an added one percent annual interest rate when the funds were distributed, according to the complaint.
The suit cites Department of Veterans Affairs reports showing that Prudential Insurance, as the administrator of the veterans’ policies, collected $982.8 million in veterans’ policy premiums in 2009, $144.1 million in investment income and held reserves of more than $2.5 billion, “indicating earnings exceeding 5.69 percent per year,” according to the complaint.
‘Doesn’t Belong’
The interest accrued during the delay “is money that doesn’t belong to Prudential,” Cristobal Bonifaz, a lawyer representing plaintiffs, said in a phone interview. “If you delay the payment, you better turn that money over.”
Bob DeFillippo, a spokesman for Newark, New Jersey-based Prudential Insurance, the second-largest U.S. life insurer, said the company hasn’t seen the lawsuit and declined to comment.
Prudential Financial said today it’s in talks with the Department of Veterans Affairs over the concerns raised by the agency.
“It is important that the beneficiaries of our fallen service men and women are treated with dignity and respect during a very difficult time,” Prudential Chairman and Chief Executive Officer John Strangfeld said in a statement. “Given the questions raised over the life insurance program we administer for the Department of Veterans Affairs, we welcome an opportunity to address the concerns and to set the record straight.”
The case is Lucey v. Prudential Insurance Co. of America, 10-30163, U.S. District Court, District of Massachusetts (Springfield).
--Editors: Peter Blumberg, Steve Farr
To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
