Insurer proposes $1.1M deal to resolve CA teachers’ annuity fee lawsuit

Life Insurance Company of the Southwest has proposed a $1.1 million settlement to resolve a class-action lawsuit alleging it charged California public-school employees annuity rider fees that were not properly disclosed on a state-sponsored website.

The proposed settlement would recover about 36.6% of the roughly $3 million in potential restitution at issue, according to a motion seeking preliminary approval in federal court. The two sides announced a preliminary settlement in August.

Plaintiff Danielle Krimbow claimed that the LICSW improperly charged certain annuity rider fees that were not disclosed on the state's required retirement investment website.

In a July 15 decision, U.S. District Judge P. Casey Pitts of the Northern District of California certified the class. That prompted settlement talks to heat up.

Krimbow represented thousands of California educators and other public employees who purchased Guaranteed Life Income Riders on LICS's indexed 403(b) annuity products and allegedly paid fees that differed from those disclosed on the state-sponsored website, 403bCompare.com.

The proposed settlement would distribute the funds to class members in proportion to the disputed fees they paid. Eligible policyholders with active accounts would receive credits to those accounts, while those without active accounts would receive checks. Class members who do not opt out would not have to submit claims to receive payment.

The settlement would cover approximately $3 million in disputed fees, including about $2.35 million associated with rider fees for products that were no longer offered to new purchasers in California.

Timing of recovery questioned

The insurer argued that a 2025 California appeals court decision involving Metropolitan Life Insurance Co. created uncertainty over whether some fees could be recovered after products were discontinued. The insurer also challenged the legal basis for the claims and the plaintiff’s standing. The plaintiff disputed those arguments, but acknowledged the litigation risks.

The parties reached the agreement after mediation and after litigating the case through discovery, class certification and cross-motions for summary judgment. The insurer had indicated it would appeal if it lost in district court, potentially prolonging the case.

The settlement agreement allows the plaintiff to seek attorneys’ fees of up to one-third of the settlement fund, litigation expenses, a service award and settlement administration costs. Those requests remain subject to court approval.

Any money left after distributions and approved deductions would be donated to the Pension Rights Center, a nonprofit focused on protecting retirement security. No settlement funds would revert to the insurer.

The parties are asking the court to preliminarily approve the agreement and authorize notice to class members. A final approval request would follow after class members have had an opportunity to object or opt out.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.