Prudential Facing Some Class Claims in Life Insurance Battle

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By Jacklyn Wille

Life insurance recipients who sued Prudential Insurance Co. of America over its payment practices scored a partial win Jan. 29 when a federal judge allowed them to present some claims as a certified subclass.

The judge partially revised his 2016 opinion denying class status to more than 100,000 people receiving life insurance benefits through various Prudential plans. While it remained true that the Prudential plans included too many variations to justify certifying a 100,000-person class action, the judge said class status was warranted for about 1,000 people who receive benefits under two specific plans for employees of JPMorgan and Con-Way Inc.

The lawsuit, first filed in 2010 by the children of a deceased JPMorgan employee, contends that Prudential’s practice of paying life insurance benefits in a checkbook-style account—rather than a lump-sum payment—violates federal benefits law, because it allows Prudential to continue earning interest on policy proceeds that have been distributed to their rightful owners. In December 2017, the judge said Prudential was wrong to pay benefits through these accounts, because the relevant life insurance policies required that benefits be paid in “one sum.”

Retained asset accounts are a common method of paying life insurance benefits in which a beneficiary receives a checkbook that can be used to incrementally draw down the policy proceeds. Many cases involving retained asset accounts—including this one against Prudential—turn on the specific language of a given life insurance policy and whether the policy allows payments to be made in this way. A Georgia-based federal judge ruled in 2016 that MetLife’s use of retained asset accounts violated ERISA because the relevant policy required payments to be made in “one sum.” Other insurers, including UNUM, Sun Life, and Lincoln National, have relied on more permissive policy language to escape ERISA liability.

In September, Cigna Corp. became the latest insurer to face a proposed class action over its use of retained asset accounts.

In the Jan. 29 decision in Prudential’s case, the judge once again declined to certify a 100,000-person class of life insurance recipients across 2,200 different plans. However, the judge said a smaller class of about 1,000 people could be certified because it would require analyzing only two different plans.

Judge Joseph F. Leeson Jr. of the U.S. District Court for the Eastern District of Pennsylvania wrote the decision.

The life insurance recipients were represented by Flitter Milz PC, Bell & Brigham, Barrett Wylie LLC, and National Consumer Law Center. Prudential was represented by Stevens & Lee, Debevoise & Pimpton, Ballard Spahr LLP, and Goodwin Procter LLP.

The case is Huffman v. Prudential Ins. Co. of Am., 2018 BL 28906, E.D. Pa., No. 2:10-cv-05135, order granting partial class certification 1/29/18.

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