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The Prudential gauntlet runners: Settlement claimants receive more forms

Fill out forms. Wait. Fill out forms. Wait. This scenario is playing out across the country for Prudential Insurance Co. policyholders entitled to a piece of the 1997 class action settlement. Their experience trying to get settlement money may seem like an agonizing rewind of the same events over and over. Those who made it through the first round of forms recently found themselves facing new letters with more options — options some say they don't understand.

In these new "Policyholder Remediation Plan" forms, many mailed in late January 1999, Prudential informed policyholders who chose to go through the alternative dispute resolution (ADR) process of their "award" level. ADR was a way for policyholders to get more out of Prudential than those who chose the bottom-level "basic claims relief." ADR claimants had to demonstrate their financial loss by submitting documention to show that their policies were "churned" by Prudential agents, and the court-approved settlement agreement holds out the hope that ADR claimants will be compensated for their proven losses.

Policyholders are again required to make choices about compensation.

Prudential's recent mailing informed ADR claimants of their award outcomes: they are "eligible to receive the highest level of relief available," they "are not being offered the highest level of relief possible," or Prudential has "determined that no award of relief can be made."

In cases where relief has been awarded, policyholders are again required to make choices about compensation — choices they thought they already made: policy cancellation and refund, policy adjustment, or, particularly infuriating to claimants, basic claim relief (one of the original options along with ADR and opting out). One policyholder points out that an "option explanation" will often have its own page and title, but no content.

Alternatively, claimants can appeal their ADR award level through an Appeals Committee (APCOM) Reviewer. According to Prudential's mailings, "The APCOM Reviewer is independent of Prudential, and is part of the ADR Process accepted by the insurance department of your state and by the federal court in a nationwide class action settlement." According to letters from Prudential obtained by Insure.com, Prudential gauntlet runners had deadlines in the week of March 15 (or earlier) to make their selections.

Robert DeFillippo, spokesperson for Prudential, says that all 645,000 ADR claimants should have received their award letters by now, and the majority of letters went out in the last four months. Everyone had 90 days to make their compensation choices, and DeFillippo says, "We're anticipating that all the appeals will be completed by the end of the year." All checks, too, are scheduled to be sent by year's end, says DeFillippo.

Lee Bell, a retired policyholder in Texas, says, "This Pru mess is terrible. I tried to have my agent talk to me but he won't even come out and discuss anything until this is over. By the way, I am going to go the mediator route. Why? Because I couldn't understand the other choices."

Ring a bell? Prudential met with heavy criticism for making its first round of forms overly complicated (opt-out forms were sent around November 1996, and the first claims-relief choice form in March 1997). Eric Walter Camil Sr., an investigator in the Prudential case for the Florida Attorney General's Office, said in a deposition in August 1998 that Prudential knew through its own focus groups that people could not understand the original information packets sent out explaining their options for relief, but mailed them out anyway.

Who's overseeing the payback?

The judge who approved the settlement says of policyholder confusion: "So?"

Insure.com contacted Judge Alfred M. Wolin of the U. S. District Court for the District of New Jersey — the judge who approved the Prudential settlement and later sealed records that show Prudential's progress in processing the claims. We told Judge Wolin we were receiving numerous e-mails from readers having trouble understanding the new forms. Wolin responded: "So?"

When pressed further, Wolin said, "It's my policy never to comment on a case that I'm involved with. There are lawyers who represent the class, lawyers who represent Prudential, and regulatory oversight people."

Paul DeAngelo, who is assistant commissioner for the New Jersey Department of Banking and Insurance, is one of those regulatory oversight people.

"There are a lot of people in charge," DeAngelo assures. "This program is a result of a settlement among the regulators, class counsel, The Pru, and the court. It is Prudential's responsibility to see that the settlement is done in accordance with the orders that were filed by the court and that the court approved. Prudential is there for them to contact. On every decision letter that goes out, there is a toll-free number."

  Prudential's Customer Liaison Group hotline is (800) 778-5659 and is open Monday through Friday, 6 a.m. to 11 p.m.

EST.

Insure.com, however, has heard from claimants that calls to the 800-number Customer Liaison Group go unreturned. DeFillippo of Prudential acknowledges that "there are some people who have been frustrated, but the vast majority have gotten the answers that they want." He notes that the hotline is staffed by a third-party vendor — not Prudential employees — and that hotline staffers are not allowed, by law, to advise policyholders on which compensation option to choose.

For people who complain about not receiving return calls from the hotline, DeFillippo says, "If they made a call to the 800 number, I encourage them to try back again, to explain their frustration. I've heard those concerns and frustrations, but the company has also received letters from policyholders who were grateful for the help they received, and who felt it was fair and equitable. The vast majority are satisfied."

DeAngelo of the New Jersey department of insurance says, "They can always call their local insurance regulator and ask for assistance. We get calls from people who have gotten decision letters, and we help walk them though them. Sometimes someone will call and say 'I don't understand what this letter says' — I will ask them what they think it says, and they do understand. They're looking for confirmation. We do that."

DeAngelo says that those who choose an APCOM Reviewer appeal can get free legal counsel and, if they appealed because they didn't understand something, they may not want to go forward with the appeal. If they do wish to proceed, "then these legal representatives will represent them before the independent decision maker [an arbitrator supplied by the American Arbitration Association]."

Where to get help

How to contact your state insurance department

Visit Insure.com's

state gateway and choose your state from the top menu. Your State page will have contact information for your insurance

department.

If you are a member of the Prudential settlement class, your state department of insurance or insurance commissioner's office should be able to help you fill out the forms to get your piece of the settlement. The degree of help you get, however, may depend on how aggressive your state insurance department was back in the beginning of the public rumble with Prudential.

Back then, a Multi-State Task Force was charged with the investigation of Prudential, but Prudential helped craft the task force meant to investigate it and wrote much of the investigative plan. Some state insurance departments were so disgruntled with the Multi-State Task Force that they proceeded outside of it, on their own, essentially "opting out" and holding out for a better deal for their residents.

Florida, with its large elderly population, was a flagship state for opting out of the Multi-State Task Force and dealing aggressively with Prudential on its own. Florida's independent efforts and investigation have led to a better deal for Prudential policyholders there. The state set up an elaborate outreach program that holds victims by the hand through the entire process. "[We] stayed on top of them," says Dan McLaughlin, press secretary for Florida's insurance commissioner, Bill Nelson. (Florida residents can call the special Florida hotline at 800-528-7094.)

"We made them give us a

mailing list and stayed on top of

them."

Florida gave Prudential a timeline for taking care of policyholders in that state. "We made them give us a mailing list and stayed on top of them," says McLaughlin. "We gave them a deadline of Feb. 15 [1999], by which they had to have sent a decision letter to all 49,000 plus a couple of hundred. The vast majority got [a rating of] 2 or 3. A 2 means they're in pretty good shape to get half back. With a 3, they're on the road to getting everything. About 86 perecnt of all the consumers were put in those two categories. They met our deadline. The president of Prudential called Commissioner Nelson and informed him of the results — they were only a couple hundred shy [of giving decision letters to everyone affected in Florida]."

"Florida had the ability to impose an additional penalty of up to $1 million a year if they didn't take care of it," McLaughlin says. "They did get an extension in the first year from Dec. 31 [1998] to Feb. 15 [1999]. Now we need to be vigilant in monitoring the settlement process. Our attorneys will be talking with Prudential and agreeing on other timetables to bring the process to an end. Dates haven't been agreed on yet."

Decisions, decisions

Attorney Melvyn Weiss, who won the original settlement for the class, and law partner Brad Friedman, both of Milberg, Weiss, Bershad, and Lerach of New York, summarized for Insure.com the three choices available to claimants:

A is basically intended to be a recision — to undo the deal and pretend it never happened.

B is intended to live up to Prudential's original promises — to get the deal you thought you were getting when you agreed to buy the insurance.

C is Basic Claim Relief. "Nobody should ever choose 'C' unless there's an unusual situation; for example, if you weren't going to get any significant relief under 'A' or 'B,'" the lawyers advise.

Enclosed with the recent award-decision letters are also statements about Prudential's impending demutualization (the process of converting from a mutal company to a publicly traded company) and forms called "Collateral Assignment."

Friedman says class members will lose no rights as a consequence of Prudential's demutualization, and explains that "collateral assignment" means that you have to keep the policy so it will perform as originally promised. But will policyholders understand this when they sign over their "collateral" to Prudential? Here's how Prudential's Collateral Assignment form explains the contract:

  • I/WE HEREBY ASSIGN, GRANT AND TRANSFER AS COLLATERAL TO THE PRUDENTIAL INSURANCE COMPANY OF AMERICA [emphasis theirs], 751 Broad Street, Newark, New Jersey, or its insurance subsidiaries, successors, and assigns ("Prudential"), a first lien priority interest in the following rights, benefits and privileges in the above Policy to secure and obtain repayment to Prudential of the full amount of premium otherwise payable on the policy that is adjusted, now and hereafter (the Premium Price Adjustment), as provided under the Award."

This means that some policyholders who want to keep their life insurance policies in force — in hopes of securing their full death benefit — may need to keep paying their premiums.

Claimants have also expressed concern about the amount of interest due to them. Prudential's recent mailing notes that the settlement interest rate changes periodically, and that the rate for 1998 was 4.35 percent. Friedman says that amount was negotiated as part of the settlement: "It will increase until they get their checks. They can't negotiate it. I think it's fair." (Whether Prudential will draw more interest on settlement money it is holding onto than it eventually pays to cheated policyholders is a question that no one has addressed.)

You can appeal anything you want.

Friedman notes that Prudential claimants "can ask for an extension of the deadline if they haven't gotten the information they need." He notes that not only can policyholders appeal their claim's rating, they will be able to appeal their offered amount.

"They can appeal anything they want," says Friedman.

Those who were awarded the "highest level of relief" were warned by Prudential that "If your Selection Form is not returned to us by [March date], 1999 you will waive your right to any relief in the ADR Process."

Friedman also notes that his law firm has sent dozens of its own lawyers to work at Prudential's hotline. Therefore, when policyholders get a call back from the hotline, they may be getting assistance directly from the class action lawyers.

Some checks have gone out

Since court documents about Prudential's payback progress are sealed, it's impossible to know how many class action settlement policyholders have received checks, and DeFillippo of Prudential declined to speculate. However, Insure.com has confirmed that some ADR claimants have received checks.

A policyholder in Georgia says: "We finally received our refund check approximately two weeks ago [from March 16]. Last week, I received a letter from them [Prudential] saying there was a discrepency in the amount of relief we were to receive. Knowing there is no point in calling, I wrote back with a copy of that letter saying that we had already cashed a relief check. I haven't heard back from them, so I don't know if this was a new problem or that they are just that screwed up that they don't know this!"

Waiting in the wings

About 20,000 Prudential policyholders opted out of the settlement in order to keep open the option of pursuing their own litigation. While not all 20,000 will actually file suits, there are still more cases pending against Prudential. How many is hard to say, as these cases are handled by private lawyers who may not publicize their efforts. Robert DeFillippo of Prudential says that it is against company policy to comment on pending litigation.

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