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$32.4 million settlement proposed in Western-Southern Life lawsuit

Editor's note: The proposed $32.4 million settlement was approved in the Erie County Court of Common Pleas in Sandusky, Ohio, after the fairness hearing on Oct. 23, 2001.

The six-year-old lawsuit alleging misleading sales practices conducted by Western-Southern Life Assurance Co. may finally be brought to an end if a $32.4 million proposed settlement is approved.

In the suit, Western-Southern stands accused of virtually every common misleading salespitch.

The suit started in 1995 when two Western-Southern policyholders sued the insurer alleging that they had been the victims of misleading sales practices when they bought life insurance policies. The suit was then broadened to include all current and former Western-Southern policyholders, alleging a pattern of "misrepresentations and omissions of fact" and other misconduct between 1981 and 1998.

In the suit, Western-Southern stands accused of virtually every common misleading salespitch.

Insurance agents allegedly "churned" policies by persuading the policyholders to use the cash value of their whole life policies to buy new policies, getting the agent an additional commission but erasing any cash value in the policyholders' original life insurance policies.

Other Western-Southern agents allegedly sold policies by misrepresenting that premiums would "vanish" and be paid by the performance of the cash value; by misleading buyers into believing that their life insurance policies were actually college savings, investment, retirement, or pension plans; and by convincing policyholders that dividends and interest rates illustrated at the time of sale were not subject to change.

According to the settlement, Western-Southern denies the allegations of wrongdoing and says "nothing related to the settlement is an admission of fault or liability by Western-Southern."

Western-Southern policyholders have three options, says Patrick Warner, and attorney with Murray & Murray, the law firm handling the class action.

They can do nothing and receive an additional death benefit for their life insurance policies for the next year, and an additional accidental death benefit the year after, as well as the option to buy "enhanced value products" from the insurer — something for nothing for the policyholders that weren't harmed by Western-Southern, says Warner.

Second, those policyholders who believe they were harmed or misled by Western-Southern sales practices, and can document their claims, can submit to a Claims Evaluation Program (CEP). Third, they can opt-out of the class action to pursue their own cases against the insurer.

In the CEP, an arbitrator paid for by Western-Southern, but selected by Murray & Murray, will determine how much compensation to award to the policyholder out of the $20 million set aside by the insurer for these claims. The arbitrator's decision will be final and binding, even if no damages are awarded.

A hearing on whether or not to approve the settlement, and to hear policyholder objections, will be held in the Erie County Court of Common Pleas in Sandusky, Ohio, Oct. 23, 2001.

In addition to the $20 million set aside for policyholders, the settlement also calls for $12.4 million in attorneys' fees and expenses to be paid to the lawyers representing Western-Southern policyholders.

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