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J.C. Penney sued in alleged accidental death and dismemberment insurance scam

J.C. Penney, its telemarketing subsidiary, and Aegon, the Dutch family of companies that bought J.C. Penney Direct Marketing Services in 1998, all stand accused of fraud, gross negligence, and breach of contract according to a Texas lawsuit.

"We started with one aggrieved client, but quickly became aware that we were pulling on the thread of a larger tapestry."

According to the lawsuit, filed June 28, 2001, in Corpus Christi, Texas, J.C. Penney's telemarketers used "predatory" tactics to sell "virtually worthless" accidental death and dismemberment (AD&D) insurance policies by preying on the elderly and low-income minorities.

The complaint goes on to allege that consumers would find themselves enrolled in an insurance program without their knowledge under the guise of false statements telling them they have no obligation to buy the policy. They would then have monthly premiums billed to their credit cards after a grace period of 60 to 90 days. According to the suit, at some point after this period, the cardholder's invoice would show a "false or misleading entry to cover the AD&D insurance policy."

According to the complaint, J.C. Penney charged millions of consumers for insurance policies, either $7.95 or $9.95 per month, without their knowledge or permission and reaped "tremendous but unconscionable profits" from the wrongful and illegal activities.

Completing the "circle of fraud" alleged in the lawsuit, J.C. Penney is accused of going to "great lengths" to prevent their "victims" from discovering the fraudulent sale, and, in the event a consumer found out about, and tried to make a claim on, the AD&D policy, would deny claims by using "unlawfully restrictive coverage provisions."

The suit, filed by attorneys David H. Berg and Tamera L. Venzke, both of Houston, Texas, which seeks nationwide class action status, was sparked when Marguerite York discovered, after an accident in 1999, that she had been covered by, and charged for, one of these AD&D policies since 1993. According to the lawsuit, York's accident is "clearly covered by J.C. Penney's policy," but her claim for $75,000 was automatically denied without consideration.

"We started with one aggrieved client, but quickly became aware that we were pulling on the thread of a larger tapestry," says Berg. "In one case, the claim for a man who was run over by a bulldozer was denied because the bulldozer isn't considered a land vehicle," by the J.C. Penney insurance policy.

Representatives of J.C. Penney and Aegon declined to comment on the lawsuit.

The lawsuit seeks reparation for actual damages, costs of the suit, and exemplary damages in a unspecified amount.

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