Transamerica agrees to $57M settlement in cost-of-insurance lawsuit

A federal judge in Iowa has granted preliminary approval to a proposed class-action settlement to resolve accusations that Transamerica Life Insurance Co. improperly increased cost-of-insurance charges on certain life insurance policies in 2022 and 2023.

The agreement clears the way for policyholders to be notified and for a final approval hearing later this year. Although a court order issued by Chief U.S. District Judge C.J. Williams did not reveal the settlement amount, a website set up to manage the class action revealed that Transamerica will pay out $57 million.

The court certified a proposed settlement class that includes individuals and entities who currently own or previously owned certain life insurance policies during the defined class period.

The case, brought by the Estate of Lawrence Handorf and other plaintiffs, alleges disputes related to policy terms and costs. The settlement agreement, which is not opposed by Transamerica, would resolve all claims covered under the agreement if it receives final approval.

No wrongdoing assessed

Transamerica admits to no wrongdoing in the settlement. The insurer also agreed not to:

• Impose any new additional cost-of-insurance rate or monthly deduction rate schedule increases on policies covered by the settlement for a period of five years, unless ordered to do so by a state regulatory body.
• Cancel, void, rescind or deny a death claim submitted under the settlement class members’ policies or contest the validity of a policy based on an alleged lack of insurable interest or misrepresentation made in connection with the original application process under any applicable law or equitable principles.

The court said it is likely to find the settlement “fair, reasonable and adequate,” a key legal standard under federal rules governing class actions. The judge also determined that the case meets the requirements for class certification for settlement purposes.

As part of the order, the court appointed the plaintiffs as class representatives and named Susman Godfrey LLP as class counsel. A third-party administrator, Simpluris Inc., will oversee the notification process and handle requests from class members who wish to opt out or object to the settlement.

Class members have until May 30 to opt out of the settlement and retain their own right to sue Transamerica. Objections to the settlement must be received by the court by June 1, court documents say.

A final fairness hearing is scheduled for July 13, in Cedar Rapids, where the court will decide whether to grant final approval of the settlement, as well as rule on attorneys’ fees and other related matters.

The order also pauses all other proceedings in the case while the settlement process moves forward. If the settlement is not approved, the case would revert to its status prior to the agreement, and the parties would resume litigation.

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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.