A daily look at legal news and the business of law:
Prudential Profits from Dead Soldiers' Life Insurance
When a soldier dies, Prudential's (PRU) life insurance policies promise to give the family either a lump-sum payment or 36 equal monthly installments. So is it a lump sum payment if Prudential gives the grieving family a check book and says draw on it as often and as much as you like up to the amount of the policy? Sounds good -- the family has access to the whole amount. Sounds even better if you think all the money is sitting in an interest-bearing account for the family. But what if the money sits, until fully withdrawn, in a Prudential account that pays Prudential 5+% interest rather than an account that pays the family interest? Doesn't sound like a "payment" has been made then, does it? And worse -- those checks? They're not really checks drawn on an FDIC-insured account, reported Bloomberg. They're Prudential IOUs.
Prudential's "retained asset accounts" are the subject of investigations and lawsuits. Amazingly, the National Association of Insurance Commissioners' inquiry has focused on improving disclosure about these policies rather than working to prohibit them, at least in the consumer context. Why would a consumer knowingly let an insurer hold an account and make interest on it that he or she could be making? Seriously, any adequate disclosure -- something like, "If you choose this option the insurer will earn interest on your money that you would otherwise get," in 20-point bold type -- would result in everyone rejecting the accounts. Note: Prudential isn't the only company selling these policies; MetLife (MET) is also under investigation for similar policies.
The New York Times notes that Prudential has netted over a half billion dollars in the last 11 years by handling the benefits this way. Although this story isn't new -- Bloomberg broke it last month -- the Times notes that the lawsuit is being updated Monday, to add fraud charges against Prudential. And it's always worth reminding people that Prudential is profiting at the expense of the working and middle class. That's who military families are, after all.
9/11 Plaintiff Attorneys Must Eat $6 Million in Expenses
U.S. District Judge Alvin K. Hellerstein, who initially rejected the settlement between New York City and 9/11 workers in part because the workers didn't get enough money, continued his efforts to give the workers as much as possible by rejecting plaintiff attorneys' request for $6.1 million to cover interest on the loans they took out to finance the case, reports the New York Law Journal. That's after their fees were cut by several hundred million, again, to ensure the money went to the injured workers.
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