Symetra reaches $32.5 million settlement over cost-of-insurance charges

A group of Washington policyholders are asking a federal judge to preliminarily approve a $32.5 million settlement with Symetra Life Insurance Co. over cost-of-insurance claims.

If approved, the 11-state settlement deal will cover about 43,000 policyholders in the class. The other policyholders live in Arizona, California, Florida, Illinois, Indiana, Kentucky, Minnesota, Missouri, South Carolina and Texas.

It is just the latest multi-million dollar verdict in a cost-of-insurance lawsuit. Plaintiffs won several similar verdicts across the country in recent years.

Symetra sent InsuranceNewsNet a statement:

“We are pleased to have reached a mutually beneficial settlement in the class action involving universal life insurance policies issued in 11 states by American States Life. The settlement is not an admission that Symetra did anything wrong. Rather, the settlement avoids prolonged litigation, and allows us to continue our focus on serving our customers.”

The lawsuit was filed in April 2021 in the U.S. District Court for the Western District of Washington. Symetra is headquartered in Bellevue, Wash.

Original plaintiff Dennis E. Davis, of Des Moines, Iowa, purchased a $100,000 adjustable life policy from American States Life Insurance Co. on Sept. 16, 1987, the complaint states. Symetra took over American States in 2005.

The terms of the policy authorized Symetra to deduct cost-of-insurance expenses from the cash value on a monthly basis. Terms permitted the insurer to use only the insured’s age, sex, rate class, and the expectations as to future mortality experience to determine cost-of-insurance rates.

“Defendant uses other factors, not authorized by the Policy, when determining such rates, including without limitation, expense experience,” the lawsuit states.

Policyholders were 'unaware'

Plaintiffs were completely unaware that they were allegedly being shorted on the value of their policies, the lawsuit claims.

“The nature of Defendant’s conduct is such that Plaintiff and each member of the class would be unaware that Defendant was engaging in wrongdoing by taking Cost of Insurance deductions in inflated charges and improper amounts,” the lawsuit reads.

Davis surrendered his policy on Oct. 9, 2020. At that time, he consulted with an actuarial expert and learned of the allegedly inflated cost-of-insurance charges, the lawsuit says.

Davis sued for breach of contract and violations of the Washington Consumer Protection Act. The two sides spent three years in disclosure, discovery, and finally, settlement negotiations.

The class covers policies that were active on or after Jan. 1, 2000, and were issued by American States as MasterPlan, Executive MasterPlan, MasterPlan Plus, Joint MasterPlan Plus, and Juvenile MasterPlan Plus universal life insurance policies, the lawsuit states.

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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 [email protected]. Follow him on Twitter @INNJohnH.