Policyholders seek Prudential documents
Other records show company was told about deceptive sales practices in 1982
Prudential Insurance Co. of America is fighting to keep a box of company documents away from a group of policyholders who opted out of the class-action settlement with the company.
The policyholders say the documents, sent anonymously to Florida's insurance department, show that the insurance giant knew more than it let on about its deceptive sales practices.
In March, a federal judge in New Jersey approved the class-action settlement, which will cost Prudential between $410 million and $2 billion.
Prudential has filed suit in Florida and New Jersey to keep company documents out of the hands of lawyers for thousands of policyholders who objected to the settlement. Company officials have said the documents are protected by attorney-client privilege, and were stolen by a former lawyer.
The 65 documents in the hands of Florida insurance officials led the insurance department to levy a $15 million fine for deceptive sales practices against Prudential earlier this year. In all, the company agreed to pay $35 million to 45 states and the District of Columbia, and another $35 million to California, Florida, Massachusetts, Texas and Virginia.
A Florida judge issued a temporary injunction in March, preventing the public from getting a look at the documents. The ruling is being appealed by several lawyers.
Other documents reviewed by the Wall Street Journal in early August show company auditors told Prudential's board of directors about the deceptive sales practices as early as 1982. The company took some steps to correct the problem, but the practices continued.
Attorneys involved in the class-action settlement knew the auditors' documents existed, but never gained access to them. The documents include annual internal audit reports from 1982 to the mid '90s, internal audits in the early '90s of divisions and regional offices, and a 1994 report on all of the company's business units by Coopers & Lybrand.
Lawyers for policyholders who chose not to participate in the class-action settlement say the Florida documents and those reviewed by the Wall Street Journal will improve their chances of getting the settlement overturned and winning even bigger damages.
The New Jersey-based insurance company has admitted it deceived its customers about the costs of new life insurance products between 1982 and 1995, talking policyholders into using the cash value of older policies to pay for new ones.
Insurance regulators found that many policyholders weren't told that the cash value of their old policies was being used to pay for the new policies. After the cash value of the old policies dried up, customers were left to pay premiums they were told they'd never have to pay.