Prudential settlement languishes as lawyers fight on
Editor's note: Prudential's class action settlement was upheld on July 23, 1998. Here's the story.
Prudential policyholders and industry watchers who are waiting for Prudential to pay for its wrongs will have to keep waiting.
Prudential was taken to court on charges it had a companywide practice of making false sales claims that its life insurance policyholders could use the proceeds from old policies to pay for new, higher-value policies without paying new premiums. In fact, while these transactions provided large new sales commissions for agents and profits for Prudential, the original policies often failed to pay for the new policies.
Customers, many of whom were elderly and on fixed incomes, either had to pay new premiums or lose the entire value of their whole life policies when they failed to do so.
When these deceptive sales practices came to light, a class action suit formed and policyholders had three choices: seek basic claim relief, under which policyholders became part of the national class action suit; request an alternative dispute resolution (ADR); or choose to opt out, a decision that meant policyholders got no part of any basic claim-relief settlement and instead sought legal recourse on their own. The claims options affected approximately 10.5 million policyholders across the nation who purchased life insurance from Prudential between Jan. 1, 1982 and Dec. 31, 1995.
States that took part in the basic claim-relief process formed a Multistate Task Force and issued a report, which was roundly criticized as being too lenient on Prudential.