Northwestern Mutual Agrees To Pay $92 Million In Class Action Suit

Nov. 13--Northwestern Mutual Life Insurance Co. has agreed to pay up to $92 million to settle a class action lawsuit accusing it of failing to pay dividends on certain term life policies and using improper sales and marketing practices.

The case was filed in California four years ago by a customer who alleged the sales material used by the Milwaukee-based insurer misled him about whether dividends would be paid on term life and disability insurance.

While agreeing to settle the lawsuit, Northwestern Mutual denied the allegations and contends it fully complied with the terms of the insurance policies. The company also asserts that its sales, marketing and procedures for determining dividends on term life and disability policies have been fair and appropriate.

The company decided to settle the case because of "the uncertainty and expense of litigation," company spokeswoman Jean Towell said Wednesday.

"The court hasn't ruled on the merits of the claims, so the proposed settlement is not an indication they are valid," Towell said.

The proposed settlement covers about 1.3 million current and 1.6 million former policy owners who purchased term life or disability coverage since 1981, she said.

The $92 million will settle the term life dividend issue in the lawsuit, while the suit's concerns about disability dividends will be settled by distribution of a brochure that explains how Northwestern Mutual develops its dividends. Checks with the term life settlement payouts are expected to be mailed next spring if the agreement receives final approval from California Superior Court in Los Angeles next month. The settlement is scheduled for a final hearing Dec. 24.

Any current or former Northwestern Mutual policy owner affected by the settlement will be sent information about it.

In the lawsuit filed in 2004 in Los Angeles, policy owner Nicholas Papadakis alleged fraud, deceptive marketing and sales practices, breach of fiduciary duties, breach of contract and unfair competition by the company.