Newark, NJ: The families of six dead soldiers are suing Prudential Financial over allegations that the life insurance company is profiteering from the deceased soldiers' policies with various bookkeeping manoeuvres. The lawsuit is seeking class action status.
Filed August 30, the suit accuses the company of misrepresenting the way beneficiaries could collect lump-sum payouts.
If the suit is granted class action status, 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 may be affected.
The crux of the lawsuit is the interest paid to beneficiaries who kept the money in Alliance Accounts, which are similar to checking accounts and come with a booklet of drafts. Interest paid on these accounts over the past few years has ranged from 0.5 percent to 1.5 percent. However, the suit claims that the monies don't actually sit in the accounts from the time of a soldier's death, and that the book of drafts is equivalent to IOUs.
The plaintiff allege that Prudential holds the money in a $200 billion general account which earns five percent to six percent in interest, and that beneficiaries claims are only paid into an Alliance account when a beneficiary requests it, then pays the claim out at the lower interest rate keeping the difference in interest earned. One attorney for the plaintiffs estimates that the lost interest could amount to as much as $20,000 to $30,000 for families who let the money sit in Prudential's accounts.
The lawsuit was filed by parents of soldiers who died in Iraq, Afghanistan, El Salvador and after returning to the U.S. They live in Massachusetts, California, Illinois, Maryland, and Texas.
