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New lawsuit filed as judge OKs race-based pricing settlement

Another legal action against an ING subsidiary has been filed in a Georgia court just as a federal judge has approved a $51 million settlement between ING subsidiaries and the Georgia Department of Insurance to compensate victims nationwide for the companies' race-based life insurance pricing practices.

Filed in Georgia's Fulton County State Court, the new lawsuit alleges that Life Insurance Co. of Georgia earned millions of dollars over many decades by charging higher premiums for black policyholders than for white customers. The lawsuit, which seeks class action status, accuses the insurer of bad faith, breach of contract, theft by deception, and violating the state's Racketeer Influenced and Corrupt Organizations Act.

The lawsuit accuses the insurer of bad faith, breach of contract, theft by deception, and violating the state's Racketeer Influenced and Corrupt Organizations Act.

In February 2002, Life Insurance Co. of Georgia, the largest life insurance company based in Georgia, and Southland Life Insurance Co. agreed to compensate an estimated 2.5 million policyholders and beneficiaries nationwide with $51 million and pay an additional $4 million in fines to state insurance regulators to settle complaints they overcharged black policyholders in the past.

There is some question of whether the settlement precludes any class actions subsequently filed against the company. The latest lawsuit was filed after Judge Rita Stotts approved the settlement on Aug. 6, 2002. However, Mathis & Adams, attorneys for the plantiffs, say the lawsuit will proceed, but it is unclear whether it will proceed with the same plaintiffs, some of whom did not "opt out" of the settlement. The attorneys say they will argue that the settlement should not be honored because it does not fairly compensate the victims.

Affected consumers with policies still in force from these companies can choose to either increase the death benefit on their policies to the level a white person would have for the same premiums or receive a cash award for the difference. Beneficiaries of policies that have already paid out will receive the difference between the original death benefit and one that could have been purchased by a white consumer.

The settlement covers nonwhite policyholders or their beneficiaries who purchased "substandard" Industrial Life and President's Thrift Series policies sold by Life of Georgia or written by companies acquired by Southland Life, and holders of policies sold by Life of Georgia in which premiums paid exceed the death benefit.

Life of Georgia says that it deeply regrets basing premiums on race and that such practices are "completely inconsistent" with the current values and standards of the company. "Life of Georgia and ING have zero tolerance for any form of race discrimination," say the insurers.

Not the first time

In June 2000, American General Life Insurance & Annuity Co. settled a class action lawsuit for $206 million — the largest to date — over allegations that companies it had acquired charged blacks higher premiums and overcharged people of all races for burial policies.

Some insurers — including Life of Georgia — continued to collect the higher premiums on already-existing policies.

A number of other insurers, including Prudential Life Insurance Co., still face class action lawsuits or regulatory actions stemming from their alleged use of race in setting life insurance premiums.

Industrial life policies were primarily marketed to low-income individuals who purchased them to cover funeral expenses. Also known as "burial policies," industrial life policies were often sold door to door with premiums payable weekly.

When the practice started, it was common for insurance companies to charge blacks higher premiums than whites, but although most insurers stopped charging premiums based on race for new policies when the practice was banned by antidiscrimination laws, some — including Life of Georgia — continued to collect the higher premiums on already-existing policies.

The two insurers are required by the settlement to contact policyholders or their beneficiaries to inform them of the terms and what actions they must take to participate in the settlement. The total value of the settlement may increase if additional policyholders are located.

Individuals or states that are unhappy with the terms of the settlement have the choice to opt out of the settlement and sue either of the insurers on their own.

Those with questions about the settlement can call Life of Georgia at (877) 477-0960 or contact the Georgia Insurance and Safety Fire Consumer Services Division.

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