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Hundreds of arbitration cases still pending in Prudential settlement

Contrary to earlier predictions, Prudential Insurance Co. of America still has hundreds of claims to pay out to policyholders as part of a class action settlement announced more than four years ago. The process was supposed to be completed by Dec. 31, 1999.

Brad Friedman, a lawyer with Milberg Weiss Bershad Hynes & Lerach in New York, the lead law firm on the case, says there are a "few hundred" cases still pending in arbitration by policyholders who were dissatisfied with their relief award in the Alternative Dispute Resolution (ADR) process. Friedman says he cannot give a specific figure, but notes it's less than 500 cases. He estimates that between 40,000 and 60,000 policyholders filed for arbitration of their ADR awards.

In December 1999, Robert DeFillippo, a spokeperson for the Newark, N.J.-based insurer, estimated that all cases would be closed and checks would be mailed out by the Dec. 31 deadline or shortly thereafter. Prudential itself would not comment on how many cases are still open or how much money has been paid out.

Separately, Prudential is still facing about 40 individual lawsuits brought by current and former employees in a Minnesota ADR claims-handling office. These employees allege pervasive age, gender, and race discrimination in the company, as well as alarming mishandling of settlement claims. (For more on their allegations, read Prudential employees tell of settlement-claim abuses and discrimination.)

The settlement

In 1996, Prudential agreed to a $2 billion class action settlement to resolve allegations that the company routinely "churned" policyholders. Churning is an illegal practice in which agents encourage customers to use built up cash value in their whole life insurance policies to purchase new policies. This caused customers to lose their cash value and any other benefits they had accumulated. Agents "churn" customers because they receive a commission on every new policy sold.

In November 1999, U.S. District Court Judge Alfred M. Wolin, who is overseeing the class action settlement, ordered Milberg Weiss to lead an investigation into whether there indeed was any mishandling of claims in the ADR process. The investigation was originally to be completed by the end of December 1999, but Friedman estimates the investigation will not be done until mid- or late-March. In a Dec. 22, 1999, update to Wolin, Friedman wrote that depositions were taken from current and former Prudential employees in Minnesota during the investigation.

In November 1999, there was a push by the state of Florida to be included in Wolin's investigation because of similar stories from the Florida Prudential office. Florida was not allowed in the investigation, but Nina Botcher, a spokesperson for the Florida Department of Insurance (DOI), says lawyers from the DOI took testimony from former employees who worked in a Florida Prudential claim office and submitted it to Wolin.

The Prudential settlement customer service lines, as well as a "lawyer line" established for people who seek an attorney's help in the arbitration process, are still open. The Prudential class action line is (800) 778-5659 and the lawyer line is (888) 778-3444. For questions regarding taxes on your settlement award, Prudential also has a tax line at (800) 213-1988.

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