Veteranclaims’s Blog

September 15, 2010

Prudential With Holding of Death Benefits and Profiting from that Action may be Illegal

One legal professor said that may make the insurance giant vulnerable to lawsuits. “I think the policy holders have a great legal claim to get back the difference in the interest and they may have a claim for punitive damages as well,” said Jeffrey Stempel, of the William S. Boyd School of Law.”

Full Article at: VA Officials Knew About Death Benefit Profits
Report by Bloomberg Markets Magazine Shows How Prudential Made a Deal with the Department of Veterans Affairs

By Katie Couric

(CBS) “Revelations that the country’s second largest life insurer was profiting from the death benefits of fallen soldiers was news to almost everyone.

“I was stunned to find out that yea, I had been duped,” said Cindy Lohman, whose son Ryan was killed in Afghanistan.

Secretary of Defense Robert Gates said, “I actually believed that the families of our fallen heroes got a check for the full amount.”

But, as CBS Evening News anchor Katie Couric reports, it wasn’t news to the U.S. Department of Veterans Affairs. In fact, in September of 2009, the VA amended its contract with Prudential – ratifying what had been a 10-year long verbal agreement: to allow the insurance company to retain lump sum death benefits of soldiers and deposit that money in its own account.

Read the New Bloomberg Markets Magazine Report
Read the Original Bloomberg Markets Magazine Report

“VA has a very solemn obligation to make sure that for-profit companies do not take advantage of the government, or grieving families,” said Paul Sullivan of Veterans for Common Sense.

When beneficiaries elect “lump sum” on the claim form provide by the V.A., they expect a check. Instead, they receive a checkbook, and a packet from Prudential – saying the money has been placed in a secure interest-bearing “Alliance Account.” But the funds are actually held in the company’s own general corporate account. Some years, Prudential earned almost 5 percent interest, while paying survivors less than 1 percent.

“So from 1999 until 2009 – a 10-year period – Prudential was sending out checkbooks, holding onto billions of dollars in survivors’ money, even though the contract required them to send out checks,” said David Evans of Bloomberg Markets Magazine. His six-month investigation in late August broke the story.

One legal professor said that may make the insurance giant vulnerable to lawsuits. “I think the policy holders have a great legal claim to get back the difference in the interest and they may have a claim for punitive damages as well,” said Jeffrey Stempel, of the William S. Boyd School of Law.”

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