MDL-1061 - LC - Prudential Insurance Co. of America Sales Practices Litigation

  • MDL-1061 - LC - Prudential Insurance Co. of America Sales Practices Litigation  ---  [BonkNote]
  • Multi-State Life Insurance Task Force and Multi-State Market Conduct Examination of The Prudential Insurance Company of America - p
  • In re: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA SALES PRACTICES
    • 962 F. Supp. 450 (D.N.J. 1997)
    • Court: United States District Court, D. New Jersey
    • Date published: Mar 17, 1997
  • casetext.com/case/in-re-the-prudential-ins-co-of-america
  • In Re: The Prudential Insurance Company of America ...  CourtListener  https://www.courtlistener.com › opinion › in-re-the-pr...
    • According to the Second Amended Consolidated Complaint, Prudential was aware of these fraudulent sales practices as early as 1982, when internal ...
  • 1997 0805 - WSJ - Prudential Fights to Keep Documents From Some Customers, By Robert Hanley - [link]
    • In the months since the Prudential Insurance Company agreed to pay at least $410 million to settle claims by policyholders that they had been deceived by sales agents, the company has quietly begun a legal fight to keep documents from customers who rejected the settlement.
    • But he noted that juries in Alabama in 1994 and 1995 ordered Prudential to pay $50 million in punitive damages in two lawsuits charging deceptive sales. 
      • [Bonk: 1994 - LC - Gallant v Prudential, which resulted in a $25,000,000.00 jury verdict.  ---  [BonkNote]
    • Of the 65 documents Florida's investigators have, Mr. Dogali and other lawyers for the ''opt-out'' policyholders, including Michael Malakoff of Pittsburgh and Samuel Wilner of Los Angeles, seem most interested in one. It is identified in an appendix in Judge McClure's April injunction only as ''Coopers & Lybrand assessment of internal controls'' at Prudential Insurance and Financial Services, and dated June 30, 1994
      • [Bonk: 1994 0630 - Coopers & Lybrand Assessment of Internal Controls - Prudential Preferred Financial Services - [link]
  • 1998 - LC - The PRUDENTIAL INSURANCE COMPANY OF AMERICA v. Renwick T. NELSON
    • 11 F. Supp. 2d 572 (1998)
    • No. Civ.A. 97-1537
    • United States District Court, D. New Jersey.
  • 1999 0216 - WSJ - Prudential Insurance Reaches Agreement on Insurance Sales, By Deborah Lohse - [link]
    • Based on a rough back-of-the-envelope tally, the 650,000 policyholders who signed up for relief through the class action stand to get an average $3,100.
  • 1999 0709 - WSJ - Prudential Fined $20 Million by NASD Over Sales of Variable Life Insurance, By Bridget O'Brian - [link]
  • 1999 - LR - Insurance Regulation in the United States: Regulatory Federalism and the National Association of Insurance Commissioners, by Susan Randall - 77p
    • A recent class action suit against Prudential Insurance Company provides further evidence of the need for enhanced market conduct regulation.
      • More than eight million claimants from all fifty states and the District of Columbia alleged fraudulent and deceptive sales practices against Prudential.234
    • The first exposure of Prudential’s illegal activities began early in 1994 when the first lawsuits were brought against it.235
    • The New Jersey insurance commissioner organized the Multi-State Task Force on April 25, 1995, to conduct an examination of Prudential’s sales practices.236
      • The Task Force issued its report in July 1996 and cited widespread evidence of fraudulent sales practices by agents, evidence of management’s knowledge of those practices, and failure to investigate or discipline violators.237
    • State regulators failed to detect ongoing, widespread fraud and failed to act until prompted by the plaintiff’s bar and the media exposure of Prudential.238
  • 2001 1214 - WSJ - Ex-Marketing Executive Says Prudential Knew Misleading Materials Were in Use, by Christopher Oster - [link]
    • Much of what he said in court has been revealed previously by regulatory investigations into the allegedly deceptive practices.
      • For example, he testified that top company executives knowingly allowed bad practices by sales agents -- such as duping customers into trading in old policies to pay for costlier new ones -- into the mid-1990s.
      • [Bonk: he = Renwick T. Nelson]
  • 1998 - MDL-1061 - LC - Prudential Insurance Co. of America Sales Practices Litigation  ---  [BonkNote]
    • Volume 1 of 2 - Opinion of the Court - 74p
      • This is an appeal from the approval of the settlement of
        a nationwide class action lawsuit against Prudential Life
        Insurance Company alleging deceptive sales practices
        affecting over 8 million claimants throughout the fifty states and the District of Columbia.
      • I. BACKGROUND AND PROCEDURAL HISTORY
        • This case began in early 1994, when the first of many individual and class action lawsuits alleging improper sales and marketing practices was filed against Prudential, the nation's largest life insurer. As lawsuits began to accumulate, the New Jersey Insurance Commissioner sought to organize a group to investigate the allegations against Prudential.1
      • A. The Multi-State Life Insurance Task Force
        • At the instigation of the New Jersey Insurance
          Commissioner, the Multi-State Life Insurance Task Force was formed on April 25, 1995, with the stated goal of conducting a thorough and extensive examination of Prudential's sales practices during the period from 1985 until 1995. 

          • In July 1996, the Task Force issued its final report, citing widespread evidence of fraudulent sales practices and inadequate supervision by Prudential's management.
      • (12-13) - The district court granted Prudential's motion in part on May 10, 1996, dismissing without prejudice all claims of three of the five named plaintiffs, and several claims of the remaining two. It also noted that plaintiffs would not likely prevail on many of their claims at trial.
      • (p12) - 8. Krell declined to join the class, claiming that Ohio policyholders with replacement claims deserved the protection of Ohio insurance law. Krell Brief at 5.
      • (p15) - According to the Second Amended Consolidated Complaint, Prudential was aware of these fraudulent sales practices as early as 1982, when internal investigations...
      • (p14) - On September 19, 1996, plaintiffs filed their Second Amended Consolidated Complaint. The Second Amended Consolidated Complaint contained essentially the same claims as the first, alleging Prudential implemented a systematic fraudulent marketing scheme which made use of false and misleading sales presentations, policy illustrations, and marketing materials. Once again, the Complaint specifically referred to Prudential's "churning," "vanishing premium," and "investment plan" sales tactics.10
        • 10. While the Complaint stated that "Prudential's scheme involved [these] three notorious deceptive life insurance sales tactics," Second Am. Cons.
          Compl. P 5, the allegations detailed therein also refer to other sales abuses which fall outside these three categories. See, e.g., Second Am. Cons. Compl. P 89-91 (alleging Prudential took affirmative steps to conceal its misrepresentations);
  • Krell v. Prudential Insurance, 148 F.3d 283 (1998) - July 23, 1998 · United States Court of Appeals for the Third Circuit · Nos. 97-5155, 97-5156, 97-5217 and 97-5312, 148 F.3d 283
    • In re: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA SALES PRACTICES LITIGATION. Richard P. KRELL, MDL transfer, N.D. Ohio, DNJ
    • Civil Action No. 95-6062
    • Federal Reporter - 64p
    • Pacer - 2:95-cv-06062 - No Docs
  • 1998 - MDL-1061 - LC - Prudential Insurance Co. of America Sales Practices Litigation  ---  [BonkNote]
    • Volume 1 of 2 - Opinion of the Court - 74p
    • Volume 2 of 2 - 14p
      • (p70) - The primary focus of the Multi-State Task Force was the practice known as "churning" or "twisting," which it defined as "the sale of any policy based upon incomplete or misleading comparisons." Task Force Report at 35
      • (p71) - Turning to its examination of Prudential, the Task Force acknowledged its goal was "to determine whether during the sale of new policies, those involving financing or replacement, consumers were adequately advised of the potential failings of the new policies or the funding basis on which they were sold." Id. at 45. The Report notes that although all of the required disclosure forms may have been completed and filed by Prudential, "[o]ne must look beyond the required forms to determine whether or not presentations were accurate and not misleading." Id. In its discussion of the remediation protocol, the Task Force explained "the documentation received from Prudential did not always support the consumer's assertion," and consequently "[w]hat was or was not agreed upon at the time of sale became a question of fact." Id. at 189; see also id. at 191 (noting that while "some replacements may have been appropriate . . .  misrepresentation is never appropriate," and thus "the challenge is to distinguish appropriate replacement activity.")
      • (p71-72) - Consequently, it appears that misrepresentation, rather than compliance with bookkeeping requirements, was the primary concern of the Task Force examination of Prudential's replacement sales.
      • ⇒  (p72) - Resolution Guidelines, Stipulation of Settlement, Ex. B, at 17.  --  Considerations for a vanishing premium claim include whether the policyholder was advised to disregard notices from Prudential, whether the policyholder made a "significant financial decision" in reliance on the belief that premium payments would cease, and whether the policyholder received altered or unclear sales materials from an agent. Id. at 26-27. 
      • (p73) - settlement-only class actions
      • (p73) - 6. The ability of the defendants to withstand a greater judgment  --  The district court found "Prudential's ability to withstand a greater judgment is a matter of concern."69 Fairness Opinion, 962 F. Supp. at 540.  Noting that the settlement was valued between $1 billion and $2 billion, the court found a larger judgment could negatively impact Prudential's declining credit rating.70 Id. The court also expressed concern that, because Prudential is a mutual insurer, non-class member policyholders could conceivably be adversely affected by an excessive settlement in the form of lower dividends. Id. 
      • (p75) - But Krell ignores the fact that any claim, whether brought at trial or under the ADR process, will require evidence of deceptive conduct in order to support
        liability. 
  • 1995 - LC - In Re: PRU SALES LITIGATION, et al v. PRUDENTIAL INSURANCE, et al
  • 04/16/1999 1424 AFFIDAVIT of PAUL DE ANGELO [Bonk: NJ Insurance Commissioner] [Fax Signature] Re: [1421-1] petition (ar) (Entered: 04/20/1999) - [Bonk: <WishList>]
  • 11/26/1996 176 Notice of MOTION FOR APPROVAL OF PROPOSED SETTLEMENT AND DISMISSAL OF THE CONSOLIDATED SECOND AMENDED CLASS ACTION COMPLAINT by PRUDENTIAL INSURANCE in 2:95-cv-04704, Motion hearing set for 10:00 1/21/97 on [176-1] motion w/cert of svc. (Brief Subm) (ar) (Entered: 11/27/1996)
  • 12/19/1996 280 Notice of MOTION for leave to file AMICUS BRIEF by THE INSURANCE COMMISSIONER FOR THE STATE OF FLORIDA - [Bonk: <WishList>] in 2:95-cv-04704, Motion hearing set for <date not set> on [280-1] motion w/cert svc. (Briefs: SUPPORT and AMICUS BRIEF with voluminous exhs/PO Subm) (ar) (Entered: 12/20/1996)
  • 12/19/1996 286 Notice of JOINT MOTION for LIMITED INTERVENTION by MASSACHUSETTS ATTORNEY GENERAL in 2:95-cv-04704, and MASSACHUSETTS COMMISSIONER OF INSURANCE - [Bonk: <WishList} in 2:95-cv-04704, Motion hearing set for <date not set> on [286-1] joint motion w/cert svc. [Proposed Order Sub.] (ar) (Entered: 12/20/1996)
  • 1995 0103 - WSJ - Fine Print Victims: Some Agents 'Churn' Life Insurance Policies, Hurt Their Customers, by Leslie Scism
    • 2000 - LR - The Filed Rate Doctrine and Insurance Fraud Litigation, by Allan Kanner - 33p
      • (p) - As these cases illustrate, insurers are often sued for fraud and bad faith.
      • (p31) - 169. This is also the view of other states. See, e.g., In re Prudential Ins. Co. of Am. Sales Practice Litig., 148 F.3d 283 (3d Cir. 1998) (illustrating that private litigation is the primary watchdog that wakes up state regulators). The Prudential court observed that Prudential's illegal activities first came to light through private lawsuits filed in early 1994, which triggered a front-page news article.
        • See Lastly Schism, Fine Print Victims: Some Agents 'Churn' Life Insurance Policies, Hurt Their Customers, WALL ST. J., Jan. 3, 1995, at 1. In April 1995, more than a year after the first private suit, the Multi-State Life Insurance Task Force was formed. Id.
          • ⇒  Prudential shows that private claims for relief are absolutely crucial to ensure that victims of insurance fraud receive restitution. Id.
  • 1999 - LR - Insurance Regulation in the United States: Regulatory Federalism and the National Association of Insurance Commissioners, by Susan Randall - 77p
  • 1999 - AP - Persuasion, Probity, and Paltering: The Prudential Crisis, by Betsy Stevens - <WishList>
    • Journal of Business Communication, v36 n4 p319-34 Oct 1999
    • https://doi.org/10.1177/002194369903600401
    • Abstract: In July, 1996, The Prudential Insurance Company agreed to pay a $35 million fine for misleading sales practices after a task force of insurance regulators from 11 states and the District of Columbia found that Prudential agents had engaged in misconduct.
    • This article examines Prudential's actions, its response to the ethical crisis, and the ways in which the organization communicated its response to stakeholders.
      • Many of Prudential's sins were rhetorical: Agents misrepresented some products to customers.
      • Charges of misrepresenting products to clients stem back to problems with its securities division, then known as Prudential-Bache.
      • Prudential is making amends to its customers who were harmed by egregious sales practices, but it may take the organization a long time to recover customer goodwill and the damage incurred to its reputation
  • A recent class action suit against Prudential Insurance Company provides further evidence of the need for enhanced market conduct regulation.
    • More than eight million claimants from all fifty states and the District of Columbia alleged fraudulent and deceptive sales practices against Prudential.234
  • The first exposure of Prudential’s illegal activities began early in 1994 when the first lawsuits were brought against it.235
  • The New Jersey insurance commissioner organized the Multi-State Task Force on April 25, 1995, to conduct an examination of Prudential’s sales practices.236
    • The Task Force issued its report in July 1996 and cited widespread evidence of fraudulent sales practices by agents, evidence of management’s knowledge of those practices, and failure to investigate or discipline violators.237
  • State regulators failed to detect ongoing, widespread fraud and failed to act until prompted by the plaintiff’s bar and the media exposure of Prudential.238

1999 - LR - Insurance Regulation in the United States: Regulatory Federalism and the National Association of Insurance Commissioners, by Susan Randall - 77p