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CIGNA sued by retired FBI agents over group life policies

Editor's note: This lawsuit, which had been granted class action status, was settled for $3.2 million on April 23, 2001. The settlement against the Life Insurance Co. of America, a subsidiary of CIGNA, will provide premium refunds and increased death benefits for the 1,184 FBI agents who retired after Jan. 1, 1999.

CIGNA Corp. has been sued by three retired FBI agents who allege the company increased premiums and reduced coverage amounts on their group life insurances policies after they retired, despite assurances that the rates would remain the same until the policies canceled at age 70.

"[These agents] are now trapped into either paying double the premiums or canceling their policies and looking for new insurance at higher rates."

The suit, filed in U.S. District Court in Tampa on April 5 by the law firm of James, Hoyer, Newcomer & Smiljanich of Tampa, is seeking class action status. Those eligible for the class are all current and former agents who have been members of the Special Agents Trust for Insurance (SATI), the trust that owns the policies that insures agents, since Jan. 1, 1982.

Gloria Barone, a spokesperson for CIGNA, based in Philadelphia, declined to comment on the suit.

The suit, filed on behalf of retired FBI agents Michael Lunsford and Robert Ulmer, both of Pinellas County, Florida, and Donald Yingling, of Bronson, Mich., alleges that in 1996, CIGNA told all FBI agents that if they continued to keep their group term life insurance policies with the company when they retired at 65, their premiums would stay the same. The group life contract said that when they turned 55, the coverage would gradually decrease each year until it was finally reduced by 50 percent at age 65. The coverage would stay at the same level until age 70, and the policy would then be canceled.

According to the suit, in November 1998, retired FBI agents received a notice from Wright & Co., a Maryland insurance broker that sold the policies to SATI, which said that for the past three and a half years, for every dollar collected in premiums by members over age 50, $2.71 was paid out in claims.

Based on those figures, premium rates doubled and death benefits were cut by 20 percent, the suit says. For example, Ulmer's premium payments when he retired from the FBI were in September 1996 were $65 per quarter. But in January 1999, his premiums doubled to $130 per quarter.

The suit says the former agents are now in an "untenable" position because they are faced with obtaining life insurance coverage at an older age without the benefits of a group program. "[These agents] are now trapped into either paying double the premiums or canceling their policies and looking for new insurance at higher rates," says Terry Smiljanich, an attorney for the plaintiffs.

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