War Profiteering: Dead Soldiers’ Parents Sue Insurers Over Military Benefits
Posted by defensebaseactcomp on August 31, 2010
Five plaintiffs joined the original plaintiff Monday in the lawsuit, which was filed in July in U.S. District Court in Springfield, Mass. It accuses Prudential of profiting from the dead soldiers’ policies with bookkeeping maneuvers and misrepresenting the way the beneficiaries could collect lump-sum payouts.
Their attorneys are seeking class-action status.
If granted, it could affect tens of thousands of beneficiaries who received payments under group life insurance policies for military members and veterans created by Congress and administered by Prudential.
A spokesman for the Newark, N.J.-based financial giant said Monday that while company officials cannot address the pending litigation, they strongly defend their handling of the money as responsible and deferential to the beneficiaries’ grief and needs.
The debate centers on Prudential’s use of what it calls Alliance Accounts. The accounts are similar to checking accounts and come with a booklet of drafts. Beneficiaries can write drafts to themselves up to the payout’s full amount, an option they can pick in lieu of 36 equal monthly installments.
Interest paid to beneficiaries who parked their money in Alliance Accounts in the last several years has ranged from 0.5 to 1.5 percent, according to the lawsuit.
But the plaintiffs say the checks are equivalent to an IOU, and that the money doesn’t actually sit in those accounts as of the time of the soldier’s death.
They allege Prudential holds the money in its $200 billion general account and earns 5 to 6 percent interest; moves it into an Alliance Account only when the beneficiary requests it; pays out at the lower interest rate; then keeps the difference.