If you chose alternative dispute resolution (ADR)

Policyholders who were defrauded and wanted more than the basic claim relief were given the opportunity to request alternative dispute resolution (ADR). One of the most common complaints from policyholders and critics is that the forms that Prudential sent to claimants were difficult to understand. The multiple-page claim form was especially hard for an older person to complete, and the skill level required to fill out the ADR claim was unreasonable, according to critics.

The class action settlement used a point system to determine how much restitution customers may receive through ADR. No points means no relief. One point entitles a customer only to token "basic relief"; two points meant the customer gets back some of the lost cash value of their policies, plus interest; three points means all the lost value will be restored, plus interest.

Another wrinkle: The state of Texas negotiated for reduced burden-of-proof requirements in its separate settlement with Prudential, but thanks to a clause in that agreement, consumers in all 50 states will enjoy reduced burden-of-proof requirements.

The settlement agreement required consumers to produce evidence that they were misled. Prudential, however, acknowledged destruction of documents in some of its offices -- documents that could have supported ADR claims.

ADR forms from Prudential asked customers to explain how they were misled. Absent strong evidence to the contrary, a customer's word is accepted. Consumers are not longer required to produce other documentation (possibly now nonexistent) to prove deception.

ADR claims are being reviewed on a case-by-case basis, but information on how many ADR claims have been paid is hard to come by. Prudential spokeswoman Laurita Warner says the company started paying claims earlier this year. Malakoff's appeal of the class action suit, however, will not affect the ADR claims process.

If the class action settlement is overturned on appeal, the number of individual victims who will opt out of the Prudential settlement is unknown, but those who sought basic claim relief will again be able to select ADR. (Editor's note: Prudential's class action settlement was upheld on July 23, 1998. Here's the story.) Many of those who originally opted out were concerned by the fact that ADR claimants were required to submit the claim to an arbitration panel consisting of Prudential employees. Those who choose ADR will have to document their churned policy, will waive the right to a jury trial, and will waive the right to recover punitive damages.

Continue to: If you opted out