2001 - LC - Solarchick v. Metropolitan Life

  • 2001 - LC - Solarchick v. Metropolitan Life  ---  [BonkNote]
  • Lead Case: 2:01-cv-00444-DWA
    • Date Filed: 03/07/2001, Date Terminated: 07/11/2006
    • U.S. District Court - Western District of Pennsylvania (Pittsburgh)
  • Member cases:
    • 2:00-cv-00079-DWA-KJB
    • 2:01-cv-00434-DWA-KJB
    • 2:01-cv-00444-DWA
    • 2:03-cv-01323-DWA
    • 2:97-cv-01173-DWA
    • Case in other court: Related, 2:06-mc-00173 - Allegheny County, G.D.No. 99-19797
  • Solarchick, et al v. Metro Life Ins Co, et al 0:2004cv03143 U.S. COURT OF APPEALS, THIRD CIRCUIT 07/29/2004 08/31/2005
  • SOLARCHICK, et al v. METROPOLITAN LIFE IN, et al 2:2001cv00444 PENNSYLVANIA WESTERN DISTRICT COURT 03/07/2001 07/11/2006
  • 111
    • 111-3
      • p24 -
    • 111-9
      • p62 - 1988 0824 - Letter - James L. Rayl (Manager, Tele-services, Central Head Office) to Matthew W. Galbraith, Senior Vice-President, Customer Advocacy
        • It is my strong feeling that Metropolitan has little idea of the extent of its customer disatisfaction.
      • p69 - 
  • 42
    • 42 - METROPOLITAN LIFE INSURANCE COMPANY'S MOTION IN LIMINE TO EXCLUDE EVIDENCE REGARDING THE PENNSYLVANIA, FLORIDA, AND CONNECTICUT MARKET CONDUCT EXAMINATIONS OF METROPOLITAN LIFE INSURANCE COMPANY - 8p
      • p4 - 3 This Consent Order involved only allegations regarding misrepresentations that whole life insurance policies were sold as retirement or savings plans in violation of Conn. Gen. Stat.§ 38a-815. See Connecticut Report at 6 and Ex A to same. 
      • p7-8 - ORDER OF COURT - Plaintiffs' are barred from introducing evidence of the Pennsylvania Market Conduct Examinations of Metropolitan Life Insurance Company, the Florida Market Conduct Examinations of Metropolitan Life Insurance Company, and the Connecticut Market Conduct Report at trial.
    • 42-1 - Exhibit A - 1993 1227 - Pennsylvania Market Conduct Examinations of Metropolitan Life Insurance Company - Filed 04/17/06 - 46p
      • Document 42-2 - EXHIBIT A - CONT'D - 39p
      • Document 42-3 - EXHIBIT A - CONT'D - 42p
        • p10 - 50/50 Plan
        • p18 - Nurses Insured Retirement Plan: (see pages 98-99}
        • Nurses Guaranteed Retirement
        • p30 - TELEMARKETING SCRIPT USED FOR THE TAX-ADVANTAGED BONUS PLAN
          • In a Nutshell:  With IRS intruding on almost all forms of retirement plans will there be any true Tax-Free Retirement income vehicles left for the small business owner?
          • What would you say if we could show you how to have Tax-Free Retirement income with no-out-of pocket expenses to you?
          • p31 - This plan is tailored as Tax-Free Retirement income plan but does provide an outstanding tax-free death benefit should you pass away prior to retirement, its the best of both worlds. In addition it may be one or the last true tax-free retirement income vehicles.
      • Document 42-4 - EXHIBIT A - CONT'D - 36p
      • Document 42-5 - EXHIBIT A - CONT'D - 32p
        • p5 - "flexible premium" - "free insurance"
        • p15 - Letter - MetLife to Insurance Department re: report
          • p16 - Section by Section Analysis
        • p22 - letter - metlife to insurance department re: report
          • p25 - The TAB concept is far too CQm(llic~ted ~o o-,,11 #otttt- tlni "t1!lephone. Th,e; t.cript reproduced at
            p«_gc$ 105 t.o 107 Of tbe: report. ~ ~ ..,hi.ch va:, ne"Ver approved by MetLife-~ a1•o toentions death benefit~.
            indicating ch.at. the product being Q.Old 11n1.s life i ntntra11ce .
        • p31 -
          • rne Report fails to note that all of the replacement transactions it discusses involved internal replacements that is replacements of MetLife policies with other Mett.ife policies which are exempt from the replacement regulations and hence those regulations...
      • Document 42-6 - EXHIBIT A - CONT'D - 30p
        • p6 - internal replacements, illustrations - misleading
        • p7 - guaranteed vs non-guaranteed rates, performance
        • p8 - cashflow, costs, benefits
        • p8-9 - cash accumulation, savings
        • p9 - Although the Report notes that some unapproved field literature does not use the word insurance, there is no evidence in the Report that the presentation of the product at the point of sale was inappropriate or that any  policyholders misled.
        • p11-12 - 
        • p13 - tax-free income = policy loans
        • p16 - 10 The language which was ommitted from the policy form when the transition was due to laser printing relates to the policy's cash value upon surrender and not to whether the policy's death benefit is "free" or "paid-up". The Report does not identify any point pre-sale misrepresentations as to cash values further undercutting the Department's suggestion that this omission was anything other than an accident.
        • p17 - Illustrated Value Tables, Monetary Penalty to the State
    • Document 42 - Exhibit B - 1994 0306 -  Florida Market Conduct Examinations of Metropolitan Life Insurance Company - by Thomas Tew
      • Document 42-7 - Exhibit B - 34p
        • p8 - Those who purchased Plans believed they were making scheduled deposits to their retirement/savings plans. Deposits in round numbered amounts such as $50.00, $100.00, etc., were suggested.
        • p8 - This investigation focuses on management's awareness of, and responses to, certain sales practices of Mets Personal Insurance Unit, a marketing unit comprising career agents, including Urso and his agents, who sell to individuals and small groups.
          • This report does not take issue with the fundamental soundness of Met's whcle life policies, it challenges the manner in which those products were sold,
        • p8-9 - A significant portion of these unapproved sales materials, in addition to those used by Rick Ursos agency force, violated state laws.
        • p10 - Sales scripts and other sales practices used by the sales force were unregulated and apparently unexamined.
        • p10 - Thus, those policyholders who allowed their policies to lapse (a high percentage) lost all their premiums paid.
        • p11 - As is usually thee case with financial deceptions perpetrated on consumers, those harmed are the least equipped to absorb lll0netuy losses. The legal and supsrvisory issues raised in this report 4218 overshadowed by the larger human issue of economic pain and suffering. In view of the unfortunate cirumstances. Wider which
          the losses were incurred, Mat luis, c0111m11ndably, proposed an appropriate plan of restitution and has adopted an innovative compliance program.
        • p13 - IV. DANIEL RICHARD - Rick Orso
        • p13 - Urso was sought out throughout :. Hat to present his sales techniques nationwide in a variety of forums.
        • p14 - 
        • p16-17 - 11. ~ ~g Concept - Savings
          Rick O'.T:so did not develop for Met the concept of repackaging a traditionally unattractive product (Whole Life) into a more popular fom Retirement and Savings Plans . Rather, the idea of selling insurance disguised as Savings was ingrained in Mets marketing culture in the Southeast Territory years before Urso was hired.
        • p18 - 'l'hWI, this Commission structure, standard in the industry, has the potential to create an i:rreconoilablil conflict between the agents need for commission and the customers need tor a suitable product.
        • p19 - Thus, if savings, not life insurance protection, is the client's objective, an annuity is the preferred product.
          • Even more deplorable, however, is that this concept selling approach appealed to a financial need, falsely promised a solution and, in the end, ignored the objectives of the client.
        • p19 - Urso preferred to rec1'1!it agents with no prior insurance experience who he could subject to rigorous training that refined the techniques taught at the career success schools.
        • p23 - In January 1991, Bertke wrote to Urso regarding his authorized sales literature stating that the brochure misleads people, a violation of insurance laws in every state. •ll' Bertke's statement was accurate in 1991 and is accurate today.
        • p24 - Robert Cr1JIUllins, head of Met's Personal Insurance Unit, was aware of the problems with the unauthorized sales literature, and personally intervened to make sure that SEHO's selection as Office of the Year for 1990 did not
          embarrass Met.
        • p25 - TluJH p<'OlpaCtllf lott•H are hl.9hly quaotl.onlllle fot th• toll.owl.nq :r-aaao:11;
        • ...................
      • Document 42-8 - Exhibit B - 43p
        • p2 - president who reported directly to Mr, Maurer, and stated thats I'm Mt. vaq- enamored vlth ■e111n9' llf• 11aur&nee &■ '• ■avlng.-·plu with life l.nauiaace a, a banua' • And thl.e ia 1:h• t.ype of approach, a ■ ■paoUlecl in the v&rloue ■ aJ.e ■. ma.terial.■ ., ancl presumably al.Ila in face-to-face pi:etentaacl.on■ , whlch ha ■ bea t:he p:-oblem wl.t.b· 'nur ■ea• matter. But it ala a le r1f•• co=pany-vld.a.
        • p4 - At the meeting, Urso claimed he was a victim of circumstances and was not a renegade manager. In an emotional presentation, he argue.d that his sales techniques did not differ from those prevalent th,:oughout the Company and that he was being singled out for harassment by an incompetent legal department unable to
          effectively process requests ta approve sales literature, p8 - Met's initial public position was that the objectionable sales practices were 1.iJDited to the Tampa, Florida office, an assertion that failed.
        • ⇒ p8 - Countless Met training documents reiterated the theme that insurance sells best vhen disguised as savings or retirement planning.
        • ⇒ p8 - "even premium sales" i-amiw:A Ci•••• $25 • month,- $50 a contb,- etc.). someone who pu:cc?iues • lnnranca ln u odd face amount 1■ .focu ■1.ng on. tha aa.ving ■ a■pact. of the pl&a. :ather than on the Uaut&n~• ■■ peat .of a plan.
        • p13 - XII, The Heart of the Problem
          • The laclc of a timely reuponse to the t!rso problem cm be attributed to Hat's marketing culture, AS ststed 1D II memor1111dam dated:February 24, 1993, from IIJ:uce Hemer to 'l'ho1111111 KcDemott, the problem of selling life insurance 1111 a •1111vinga plan• with life insurance as a •bonus• was •rife, company. wide,• Urso was only
            remarkable because he effected a national singl-product approach,
          • 'l'he sales force toolc advantage of its position as generator of sales and profits for the Company and enjOJ(ed a free band in the marketing of products, Met taciUy condoned natl.onwide efforts of its aggressive sales force to s_ell whole· life policies disguised as avings or Retirement plans.
        • p15-16 - A, Even Premium Policyholders
          • The whole life policies sold have •even• premiums (ending.in 5 or 0) and "odd" face lllllOUnts.
          • such
            •even premium• policies are in contrast to the great majority of
            whole life insurance polici;!s which are sold principally for the
            death .:enefit and which tend to have an even face 111110unt and an cdd
            premium.
          • It is reasonable to conclude, therefore, that any policyholder misled into the pu:chase of a whole life policy as a retirement or savings plan will, be with few exceptions, an even premium policyholder.
          • Second, purchasers of policies with a face value of $1,000,000 or more are excluded. These policyholders are likely to be financially sophisticated; are almost certain to investigate the nature of the product being purchased, and are likely to be required to take a full medical examination as a condition to obtaining the policy. 
        • p19 - E. Size of the Class
          • The size of the class oa be notified is approximatlely 60,000 policyholders (including lapsed policyholders, with premiums paid through December 1993 of more than $76 million.
        • p20 - Met is a defendant in a class action lawsuit filed in United States Distdct Court for the Middle District of Florida,
        • Document 42-9 - Exhibit B - 44p
          • p17 - IRS, 59 1/2 penalty
      • Document 42-10 - Exhibit B - 36p
      • Document 42-11 - Exhibit B - 36p
    • Document 42- Exhibit C - 1993 1014 - Connecticut Market Conduct Report - George M. Reider, Jr., Insurance Commissioner - Submitted by Richard Blumenthal, Attorney General of Connecticut
      • Document 42-12 - Exhibit C - 67p
  • Case 2:01-cv-00444-DWA- Document 184-1 - Filed 05/17/06 - 38p
    • ⇒ Deposition - 2002 0802 - Harry P Kamen - In The Matter Of: Hazen v. Metropolitan Life - <Case Number - Any Information>
    • p17 - [20] Q: And if you give someone permission to use what you were calling an unauthorized document, does it not then become an authorized document?
    • p18 - [2] Q: What procedural safeguard was in place to guarantee the integrity of what was being said orally to the customer?
      • p18 - A: [13] A: There's no taping, there's no hidden camera, so you don't know what's happening.
    • p19 - [4] Q: Were you aware that Mr. Urso not only instilled training at his managerial office on his sales personnel, but he was invited to go other places throughout the country to train people to sell this particular product?
    • p19 - 1121 Q: Mr. Kamen, the Tew report dealt specifically with the Urso office and the problems there, but do you recall that it also made findings as to what was occurring nationally within MetLife?
      • A: I recall it did discuss other, yes, it did have- discuss other instances-
      • Q: What !'d like to do -
      • A: - of impoper sales approach letters.
      • MR. DePASQUALE: What I'd like to do is show you what we're going to label as Kamen Deposition Exhibit 1, and it's going to be page 41 of the Tew report. I'd like you to take a look at that. Why don't we do it as a two-page Exhibit with a cover page and then with page 41.
    • p19 - Q: Okay. Mr. Tew has a section in his report on page 41 under Roman numeral XII which is described as, quote, the heart of the problem, and in the first paragraph of that Mr. Tew states that the problem of selling life insurance as, quote, a savings plan with Iife insurance as, quote, a bonus, was, quote, rife companywide. Did you accept that, when this report came out, as a fact?
      • A: No, I didn't.
    • p19 - A: You know, if they had a free hand, we would have been in trouble much before this.
    • p20 - Q: ...the last sentence of the third paragraph, which is the last paragraph, Met tacitly condoned nationwide efforts of its aggressive sales force to sell whole life policies disguised as savings or retirement plans. Didn't Met tacitly condone those efforts nationwide?
      • A: No, I don't agree with that. I mean, there were cases where it happened, but it was not tacitly condoned, where cases were brought to anybody's attention, maybe other than in the southern territory but, you know, this is a conclusion he reaches, tacitly, from the assumption that the earlier facts are correct, which I don't agree with.
    • p20 - 99 - - [6] A: Now, two things, one, I said it was basically accurate, had to do with what it had focused on, which was Urso and his selling techniques and the nature of the preapproach letter and the fact that he got away with it for awhile. What I'm disagreeing with is saying that it was the heart of the problem for the whole company, that it was the culture of the company, that the majority, overwhelming majority is implied here, of the sales force was violating all the rules, all the statutes, and that was the reason for the success of the company.
    • p20 - 101 - Q: Well, he does not say that, Mr. Tew, He says, tacitly, which means that the words you just used may never have been conveyed, but by the silence of MetLife, there is consent.  I mean, you're familiar with the Latin maxim, having gone to Harvard qui tacet consentire, he who is silent gives consent?
      • A: No, we studied the whole thing in English.
    • p20 - 101 - A: It relates to all ow- efforts in terms of training and meeting and issuing, you know, and distributing regulations in terms of the results, in terms of the policyholders' satisfaction, which is rifer than this. We have enormous policyholder satisfaction that results - it's evidenced in a lot of things. Nobody asked me to make a study today. It would take me a week maybe.
    • p20 - 102 - A: Based on my overall impression, and my overall impression of what I read in 1993 was that it was okay, we could live with it.
      • p20 - 102 / 103 - A: --- We 're talking about page 41, with the evidence that Tew had and with the evidence that we had, if we were litigating this particular thing, but we were in the position of, here's the report, it wasn't nearly as bad as we  thought it could be, and so that was that, we just had to live with it.
      • We were in the process at this time of putting in the new compliance program and negotiating with all the states on penalties and fines and all that stuff.
    • p20 - 103 - Q: Well,how much worse could it be where it states that Met tacitly condoned nationwide efforts of its aggressive sales force to sell whole life policies disguised as savings or retirement plan?
      • MS. TAYLOR: Objection as to form.
      • BY MR. DePASQUALE:  Q: Could you think of anything stated on a national base that could be worse than that?
    • p21 - 106 - ...Maurer reported to Robert Crimmins...
    • p21 - 107 - ...Tom McDermott...
    • p22 - 110 - A: ...but I think he's referring to Urso's office, that the selection of Urso's office as office of the year did not embarrass Met.  - [Bonk: Crimmons, 1990]
    • --- A:  ... senior vice president in charge, Rudy Michaud...
    • --- Q: Well, I'm still trying to get to why Mr. Maurer was fired.
    • --- Q: ... Pennsylvania report of sales practices that was issued by the Pennsylvania Insurance Commission's office, I believe by Cynthia Milewski...
    • --- Q: Inconsistent.
      • A: It was, I agree with that.
      • Q: Was it incoherent?
      • A: It was incoherent. I didn't know what they were talking about, when I read it, in many instances
      • Q: And therefore the third would follow as well, it arrived at unwarranted conclusions?
      • A: I'd have to look at it again. As I say, what I remember is it was a poorly drawn report with incoherence and inconsistency. Whether it was totally unwarranted, I'd have to look at it.
    • ---  Q: Well, I want to show you a transcript of a deposition that you gave in the case of Carothers versus MetLife on March 7, 1995 and ask you to look at... (Document marked Exhibit Kamen-3 for identification.)
    • p23 - Q: Under what decision-making process was the determination made by MetLife to pay $ 1.5 million to the Commonwealth of Pennsylvania as a penalty resulting from a report that was inconsistent, incoherent and recited conclusions that were unwarranted?
      • A: Well, you know, you try to argue on the fine, but they're in control and we're on the ropes.
    • --- Q: In addition to the $1.5 million fine there was an excess of $20 million in restitution that was made by MetLife to Pennsylvania policyholders because of the Pennsylvania Insurance Commission's investigation,  correct?
      • A: ...we came after the people and said, if you feel you've been deceived, you get your money back, you can get an annuity if that's what you want, your money with interest, and all you have to do is tell us, that's all.
    • ------
    •  
    • --- A: I mean, it was unbelievable to us that three or four insurance departments could have complained
      about it and nobody in the home office knew about it.
    • p24 - A: Urso ...had a branch of 10 people that grew to 125 people in a year or two, another flag. Everyone said, wow, what a great leader he is; but when that happens, unusual success means a special investigation, special care, and that's why he had the success, he was cheating orat least in his - yes, he was cheating. So I've forgotten a lot of the facts over the years, but I still remember my emotions.
    • --------------------------------------------------------
    • p24 - [
    • --- A: single premium life, life at 95, which is whole life, and universal life are excellent vehicles for building your grandchildren's college education fund.
    • --- Q: All right. Would it be a deceptive practice to sell to somebody a universal life policy for a grandchild
      under the pretense that that universal life policy is in fact a college funding savings program?
    • --- [Illustrations]
    • ---  Q: MR. DePASQUALE:Okay. I'm going to show you a document that we'll label as your Deposition Exhibit 5. It's a memo, purports to be a memo, at least, from a senior vice president out of the head office
      operation of MetLife, and it's dated June 29, 1977. (Document marked Exhibit Kamen-5 for identification.)
    • [piggybacking = FIP]
    • 26 - Q: Do you agree with Mr. Maurer's assessment that the field employees act, in general, towards the policyh.older in overseeing financial security, No. 1, and No. 2, acting in a fiduciary capacity?
      • A: Yes. I don't know what he means by fiduciary capacity. I think that he is referring to things
        like handling money, policy payment checks, and so forth, so, you know, I don't think he means that the relationship between a sales rep and a policyholder is a fiduciary relationship. I think Maurer was talking about just the trust that policyholders have in the agent when he's handling their money or claims or what have you.
      • ...
      • MS. TAYLOR: Objection as to form. It calls fora legal conclusion and, as you know, what is a fiduciary varies from Jurisdiction to Jurisdiction.
      • A: Right, and in that respect I would say that the relationship between a policyholder and a sales rep is not a fiduciary relationship. The laws governing fiduciary relationships do not apply in general to that relationship.
    • p26 - Q: Okay.If we can go now to the next document - (Document marked Exhibit Kamen-8 for identification. --- October 17, 1979 - Mauer)
    • p27 - Q: Did that safeguard, that mechanism that he established in October of 1979, get dismantled at some point prior to 1993? --- [he = Mauer]
      • A: Prior to 1988 or something like.
      • Q: It did get dismantled?
      • A: I mean, '93, the problems, for example with Urso started in '88, '89.
    • p27 - A: ... When interest rates are 15 percent and the policy loan has a guaranteed interest rate, you know, a maximnm of 5 or 6 percent, 5 percent in New York, then 6, it's financially desirable often for the policyholder to borrow at 5 percent when rates are 15 percent and buy another policy or buy stocks or buy bonds, and that is a severe cost to the company. 
    • p28 - A: ... Were you aware that Mr. Athanassiades wanted to, if he could, eliminate replacements or FIPs? - [president and chief operating officer]
    • p28 - [Company vs. Sales Rep vs. Consumer - Who Benefits / Loses?]
    • p28 - Q: You did testify at that time the red flag watermark of 15 percent did ring a bell with you as something that was ... companywide.
      • A: Yes
      • Q: Were you aware that in the late 1980s into the early 1990s there were some offices in Pennsylvania that had replacement ratios as high as 45 percent, some higher?
      • A: No.
    • p28 - Q: Now, inaddition to his concern, by his I mean Mr. Athanassiades, his concern about the replacement of policies, do you recall an April 1994 address, speech, given by Mr. Athanassiades at the president's conference, which I believe you were present at, in which Mr.Athanassiades stated, and I'm quoting, let's be frank with eacn other, since the early 1980s we, the industry, and MetLife have tended to highlight the savings/investment attributes of the product instead of what should have been emphasized, which was the fact that it was life insurance.
    • p28 - A: [History - UL, etc]
    • ------------------------------------------------------
    • p32 - Q: Did the replacement problem within Metropolitan accentuate or spike with the introduction of universal life in the early 1980s?
      • A: I'm assuming the correctness of this memo, and the memo does say that the introduction of universal life not only Metropolitan but the industry has heightened the concern with replacement and a measure here is provided to help MetLife's salespeople replace the customer's universal life policies where another company is seeking to replace --- [MORE] - [one-page memo dated December 5, 1983.]
    • p32 - (Document marked Exhlbit Kamen - 16 for identification.) -
    • p33 - Q: There's been a number of times that we referred to one of the safeguards that MetLife relied upon with the sales force was the honesty and integrity of the sales force.
      • A: Right.
    • p33 - Q: This memo's saying, we discontinued sending Mr. Maurer's letter back on April 3, 1980, and we're not going to send it anymore because, quote, we do not need to tell people we expect them to be honest.

-----------------------------------------------

    • p35-36 - A: Well, this looks like the fines or penalties paid by MetLife as a result of Multistate determination.
      • p36 - A: This is the National Association of Insurance Commissioners
    • p36 - Q: Was that the position of MetLife in the payment of this, that the states were greedy?
      • MS. TAYLOR: Objection as to form.
      • MR. DePASQUALE: I didn't use the word greedy, Ms. Taylor.
      • MS. TAYLOR: I know, but l don't think you were clear.
      • THE WITNESS: That's a personal view. I don't think that's the position of MetLife.
    • p36 - Q: Based·upon everything you know today, do you still hold to that personal view?
      • A: Yes, I still hold to that personal view because the amount of the fine is in relation to fines previously paid by insurance companies for all kinds of things as excessive and an insurance commissioner, who I won't name, told me that a number of the insurance commissioners thought the fine was excessive, but the Florida Commissioner insisted.
      • Q: Well,you're here under oath. Who is this insurance commissioner that told you that the fines were excessive?
      • A: I have to say because I'm under oath?
      • Q: This isn't a private conversation. We're doing a deposition.
      • A: The New York State Commissioner.