Allianz Life Insurance Set to Pay $251 Million to Settle Annuity Fraud Allegations

In a recent annuity fraud settlement, Allianz Life Insurance Co. of North America has agreed to pay $251 million to settle two racketeering class action lawsuits.

Filed in California federal court, these annuity fraud lawsuits claimed that the company had tricked 230,000 senior citizens into buying bad annuities with severe surrender policies.

Plaintiffs had requested final approval from the court, which was initially approved in August 2015. The defendant allegedly established a racketeering enterprise using field marketing organizations to induce class members to buy deferred annuities through either false or misleading statements regarding the annuities’ value; the plaintiffs claimed to have suffered $489 million in damages.

According to legal documents, class members will receive several different benefits based on the status and intended use of their accounts, and taking into the annuity damage inflicted to their accounts.

The settlement also provides up to $13.3 million for the plaintiffs of the annuity fraud claims, with $11.9 million for those who lack suitability claims, and $9.8 million for those who will be financially stable after surrendering their annuities.

Additionally, this settlement would help prevent the risk of Allianz bringing the argument that its products had received regular approval or that the sales agents did not act on the company’s behalf.

These class action suits were filed in 2005 by Healey and Vida N., who claim that the defendants had told its field marketing agents to falsely market immediate reward annuities, with an instant 10 percent bonus and claim that its annuities would pay full value despite the 10 percent charge on the premiums received, a reduced rate of interest, and no bonus if the annuities remained in deferral for less than five years.

While both plaintiffs reportedly signed statements of acknowledgment that they read and understood the terms of the annuity, and had also stated that they understood how the confusing bonus worked, both women claim that they never would have signed the annuity contract if they had understood the true nature of the annuities.

Overview of Annuity Fraud Allegations

Allianz Life Insurance Company of North America is a large American company that makes a significant portion of their profits from annuities, more specifically deferred annuities.

The company developed a unique two-tiered annuity product that allows a policyholder to withdraw money from their Allianz annuity account, or had annuitized during the first five contract years over over a period of less than ten years. Allianz then takes away a percentage of the deposited premiums and most gains.

However, due to the two-tiered structure of these deferral annuities the penalties increase over time and reportedly never cease, resulting in penalties increasing over 50 percent. Essentially, a deferred annuity is a form of annuity that delays payments of income, installments or lump sum until the investor chooses to receive them.

Deferral annuities come in two phases, with the savings phase in which the policyholder invests money into the account, and then the income phase come into play when the investment is finally turned into an annuity, and then receive payments. Allianz allegedly broke their financial obligation to these policyholders, by taking some money out of the annuity policies.

In order for this settlement to go forward, the plaintiffs will have to prove that the defendant committed fraud and acted in the best interest for itself, rather than the elderly people the company allegedly ripped off.

It is looking positive for the lawsuit, as U.S. District Judge Christina A. Snyder denied a summary judgment bid from Allianz in March 2014, stating that the federal racketeering claims could not be dismissed after plaintiffs filed for additional charges against Allianz under the California Elder Abuse Act.

This law allows California residents to pursue damages against any party that inflicts either physical or financial abuse against any person 65 years old or older.

Additionally, Judge Snyder had ruled that class members in at least 16 states were allowed to bring RICO (Racketeer Influenced and Corrupt Organizations) charges under the McCarran-Ferguson Act, which would prevent state insurance statues. While neither parties’ attorneys could not be reached for comment, legal experts expect positive results for these suits.

The Annuity Fraud Lawsuits are Vida N. v. Allianz Life Insurance Co. of North America, Case No. 2:05-cv-06838, and Carolyn H. v. Allianz Life Insurance Co. of North America, Case No. 2:05-cv-08908, both in the U.S. District Court for the Central District of California.

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If you or your loved one purchased a bonus annuity, life insurance policy or Medicaid qualified annuity and it did not turn out as promised, you may need to have an investment fraud lawyer review the policy, the payments, and the potential benefits. You may be surprised at what they find, and you may even qualify for financial compensation beyond what the policy promised.

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