As reported by Bloomberg.com‘s Carla Main, the plaintiffs in Lucey v. Prudential Ins. Co. of America filed an amended complaint last Monday. Here is my post describing the original complaint. In addition to reflecting the addition of new co-counsel, the amended complaint adds several representative plaintiffs and is much more detailed in its allegations and includes the following introduction:

Congress created group life insurance programs for military servicemembers, veterans, and their families to provide special protection for their beneficiaries in partial compensation for the extraordinary sacrifice these individuals make for our country. Since 1965, Prudential Insurance Company of America ("Prudential") has been trusted to sell these policies, earn the premiums taken from servicemembers; paychecks, and pay beneficiaries when tragedy strikes. It was recently revealed, however, that Prudential has been abusing that trust by failing to pay the benefits in a lump sum as required by federal law and the policies, and instead pretending to place the death benefits it owes in interest-bearing individual checking accounts for each beneficiary. In actuality, Prudential has simply kept the money in its own general account, used that money to enrich itself, and only paid beneficiaries as they wrote "checks", along with whatever small interest rate Prudential unilaterally set. The amount Prudential has made through this misconduct is believed to be a half a billion dollars or more. This class action is brought on behalf of all SGLI and VGLI beneficiaries whose funds are, or have been, improperly retained by Prudential to seek restitution of those funds, disgorgement of Prudential’s ill-gotten gains, damages, and, most importantly, a cessation of Prudential’s abuse of trust.

The original complaint  asserted claims for breach of contract, breach of fiduciary duty, and breach of the implied duty of good faith and fair dealing. The amended complaint includes those claims, and adds these:

  • violation of 38 U.S.C. § 1970(d) and 38 C.F.R. § 9.5 (which specify how the benefits are to be paid);
  • unjust enrichment/money had and received;
  • fraud through affirmative misrepresentation; and
  • fraud through omission.

The parties have stipulated that Prudential has through October 12, 2010 to respond to the amended complaint, so I’ll follow up then and report on what it files.

Not surprisingly, the existence of these retained-asset accounts has attracted the attention of Congress and federal and state regulators.

This article by Andrew Frye in Bloomberg.com discusses statements made by FDIC chairman Sheila Bair and West Virginia Insurance Commissioner Jane Cline, in her capacity as current head of the National Association of Insurance Commissioners, and also describes investigations initiated by New York Attorney General Andrew Cuomo and George Insurance Commissioner John Oxendine.

The article also quotes Representative Edolphus Towns, chairman of the House Oversight and Government Reform Committee, who said that his committee would investigate. This press release from the committee describes the investigation, and links to Towns’ letter to Prudential’s chairman,  and this press release states that the investigation has expanded to include MetLife (which provides insurance to federal civilian employees) and has a link to Towns’ letter to MetLife’s chairman.