In February 2016 California resident Gordon Feller and several others who had purchased universal life insurance policies from Transamerica Life Insurance Company filed a class action lawsuit against the company in a federal court in California. The case relates to large cost-of-insurance (COI) increases Transamerica imposed on owners of universal life policies. The case was assigned to Senior U.S. District Judge Christina A. Snyder. (See Feller v. Transamerica, U.S. District Court, Central District of California, Case No. 2:16-cv-1378.)
I wrote about the Feller case in No. 239 (October 23, 2017). Recently the plaintiffs filed a motion for preliminary approval of a proposed settlement of the case. Here I discuss the proposed settlement.
The Parties' Views
In No. 239, to provide a brief description of the plaintiffs' views, I showed four paragraphs from their second amended complaint. To provide a brief description of Transamerica's views, I showed nine paragraphs from the company's motion to transfer the case to the Northern District of Iowa, where the company is based. I also showed four paragraphs from Judge Snyder's denial of the motion.
Class Certification
In May 2016 the plaintiffs filed a motion for class certification. During discovery, Transamerica filed many documents under seal pursuant to protective orders. In December 2017 Judge Snyder granted the plaintiffs' motion for class certification. In March 2018 the Ninth Circuit granted Transamerica permission to appeal Judge Snyder's grant of the plaintiffs' motion for class certification. (See Feller v. Transamerica, U.S. Court of Appeals, Ninth Circuit, Case No. 18-55408.) In April 2018 the parties entered into mediation.
The Proposed Settlement
On October 4, 2018, the plaintiffs filed a motion for preliminary approval of a proposed settlement of the case, and a memorandum in support of the motion. The proposed settlement defines the class as "All persons or entities who own or owned a Policy encompassed by the MDR Increases during the Class Period," with certain exclusions. ("MDR" stands for "Monthly Deduction Rate.") The proposed settlement grew out of mediation overseen by David Geronemus of JAMS. (Originally JAMS stood for Judicial Arbitration and Mediation Services, Inc., but the firm now is JAMS Mediation, Arbitration and ADR Services.) Here are the key benefits to class members, as shown in the memorandum:
Feller and other COI cases with which I am familiar have led me to believe that universal life insurance policies are fundamentally defective unless they are managed with extreme care. The annual reports companies send to policyholders are so complex that the average policyholder—or even a sophisticated policyholder—will find it difficult to perform the management function adequately. A skilled and highly professional agent may be able to perform that function, but many policyholders do not have access to the services of such agents. I plan to write further on this in the near future. Meanwhile, I plan to continue following developments in the Feller case.
Available Material
I am offering a complimentary 58-page PDF consisting of the memorandum in support of the motion for preliminary approval of the proposed settlement (39 pages) and the proposed notice to be sent to class members (19 pages). Email jmbelth@gmail.com and ask for the October 2018 package relating to Feller v. Transamerica.
I wrote about the Feller case in No. 239 (October 23, 2017). Recently the plaintiffs filed a motion for preliminary approval of a proposed settlement of the case. Here I discuss the proposed settlement.
The Parties' Views
In No. 239, to provide a brief description of the plaintiffs' views, I showed four paragraphs from their second amended complaint. To provide a brief description of Transamerica's views, I showed nine paragraphs from the company's motion to transfer the case to the Northern District of Iowa, where the company is based. I also showed four paragraphs from Judge Snyder's denial of the motion.
Class Certification
In May 2016 the plaintiffs filed a motion for class certification. During discovery, Transamerica filed many documents under seal pursuant to protective orders. In December 2017 Judge Snyder granted the plaintiffs' motion for class certification. In March 2018 the Ninth Circuit granted Transamerica permission to appeal Judge Snyder's grant of the plaintiffs' motion for class certification. (See Feller v. Transamerica, U.S. Court of Appeals, Ninth Circuit, Case No. 18-55408.) In April 2018 the parties entered into mediation.
The Proposed Settlement
On October 4, 2018, the plaintiffs filed a motion for preliminary approval of a proposed settlement of the case, and a memorandum in support of the motion. The proposed settlement defines the class as "All persons or entities who own or owned a Policy encompassed by the MDR Increases during the Class Period," with certain exclusions. ("MDR" stands for "Monthly Deduction Rate.") The proposed settlement grew out of mediation overseen by David Geronemus of JAMS. (Originally JAMS stood for Judicial Arbitration and Mediation Services, Inc., but the firm now is JAMS Mediation, Arbitration and ADR Services.) Here are the key benefits to class members, as shown in the memorandum:
- The creation of a $195 million Settlement Common Fund benefiting both In-Force Policies and Terminated Policies owned by the Class Members, plus payment by Transamerica of the first $10 million in attorneys' fees approved and awarded by the Court.
- Transamerica's agreement that it will not impose any additional MDR increase(s) on any Class Policy within five (5) years of the Execution Date, unless ordered to do so by a state regulatory body (a development that is considered highly unlikely).
- Transamerica's agreement that any future MDR increase(s) on the Class Policies after the five-year freeze will be based only on the collective effect of the cost factors assumed when the Policies were originally priced and will not increase the expected future profitability of Policies within the same plan to a higher level than projected based on original policy pricing assumptions, which is intended to ensure that Transamerica does not recover past losses.
- Transamerica's agreement not to seek to void, rescind, cancel, have declared void, or otherwise deny coverage on death claims submitted by Settlement Class Members based on any alleged lack of insurable interest or misrepresentations made in connection with the original application process.
- Subject to applicable regulations, Transamerica has agreed to provide Settlement Class Members, upon request and at no cost to the Settlement Class Member, an illustration depicting the impact of the Settlement Relief on the anticipated future performance of their respective in-force Class Policies. Settlement Class Members may make such a request by contacting the Settlement Administrator.
- Settlement Class Members with in-force Settlement Class Policies will be paid their share of the Settlement Common Fund by deposit made by Transamerica directly into the accumulation value of each Policy.
- Settlement Class Members with a Terminated Policy will be paid their share of the Settlement Common Fund by check.
- No Settlement Class Member will receive a payment less than $100.
- Plaintiffs' Counsel will seek an award for Plaintiffs' attorneys' fees of up to 25% of the value of the Settlement Common Fund (after any reduction for the amount of Settlement benefits that would have been paid to policyholders who exclude their Policies from the Settlement). Plaintiffs' counsel will also seek reimbursement of the litigation expenses they have advanced on behalf of the Settlement Class over the course of the litigation not to exceed $__________, to be paid out of the Settlement Common Fund. However as an additional important Settlement benefit, Transamerica has agreed to pay Plaintiffs' Counsel the first $10 million of the attorneys' fees and expenses awarded by the Court, separate and apart from the Settlement Common Fund.
Feller and other COI cases with which I am familiar have led me to believe that universal life insurance policies are fundamentally defective unless they are managed with extreme care. The annual reports companies send to policyholders are so complex that the average policyholder—or even a sophisticated policyholder—will find it difficult to perform the management function adequately. A skilled and highly professional agent may be able to perform that function, but many policyholders do not have access to the services of such agents. I plan to write further on this in the near future. Meanwhile, I plan to continue following developments in the Feller case.
Available Material
I am offering a complimentary 58-page PDF consisting of the memorandum in support of the motion for preliminary approval of the proposed settlement (39 pages) and the proposed notice to be sent to class members (19 pages). Email jmbelth@gmail.com and ask for the October 2018 package relating to Feller v. Transamerica.
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Email: jmbelth@gmail.com
Blog: www.josephmbelth.com