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Prudential

A spokesperson for Prudential Insurance Co. of America says the company is on track to meet the deadline for paying claims that stem from the company's 1997 class action settlement.

Robert DeFillippo, a Prudential spokesperson, says the company is complying with an order in the settlement that stipulates claims must be paid to settlement participants by Dec. 31. "We're extremely close to being done, if not done already," he says.

Up-to-date figures about how much money has been paid out and how many customers have received payments is unavailable. The most recent figures have not been released by U.S. District Court Judge Alfred Wolin, who is overseeing the class action settlement. As of April 1999, the company had paid out about $1 billion to about 250,000 policyholders.

Separately, Prudential still faces about 40 individual lawsuits brought by current and former employees in a Minnesota Alternative Dispute Resolution (ADR) claims-handling office. These employees allege pervasive age, gender, and race discrimination in the company. Further, as previously reported by Insure.com, these employees are telling of alarming mishandling of settlement claims. You can read more about their allegations in Prudential employees tell of settlement-claim abuses and discrimination.

In November 1999, Wolin ordered an investigation into these allegations to be completed by Dec. 22. No results from that investigation have been released.

The settlement
In 1997, Prudential agreed to a 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 accumulated. Agents "churn" customers because they receive a commission on every new policy sold.

One settlement participant, for example, told Insure.com that he received four award letters within a 30-day span — and the award offered swung $10,000 downward between the first letter and the fourth. His story corroborates the employee complaints in Minnesota. Recently there was a failed push by the state of Florida to be included in Wolin's investigation because of similar stories from the Florida Prudential office.

So far, the only recourse for policyholders who feel they received an unfair settlement payment for their ADR claim is to appeal the award through an outside arbitrator, the American Arbitration Association (AAA). You must make your appeal within 45 days of the date of the letter informing you of your award amount. You appeal by sending a form back to Prudential, which places you in touch with the AAA. The association will review the evidence presented in the original ADR claim and make a final decision on the claim amount. So far, between 40,000 and 60,000 Prudential policyholders have filed for ADR arbitration, says Brad Friedman, an attorney for the plaintiffs with the law firm of Milberg Weiss Bershad Hynes & Lerach in New York. Prudential must pay for all attorneys' bills in arbitration.

Although policyholders may pursue arbitration if they feel their award was too small, there is no recourse for policyholders who suspect their ADR claim was affected by alleged wrongdoings in Minnesota and Florida.

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