Fidelity False Advertising Settlement Given Final Approval

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Final approval was given to a class action lawsuit filed against Fidelity & Guaranty Life Insurance Co. by a California judge over alleged false advertising charges in which a $6.25 million settlement agreement was reached.

The false advertising class action lawsuit was filed by plaintiff Eddie Cressy, who claimed that Fidelity, which used to be OM Financial Life Insurance Co., had deceived himself and other California class members by marketing its universal life insurance policies as investments.

Final approval of the settlement was granted Tuesday by Los Angeles Superior Court Judge Amy Hogue.

According to the Fidelity class action settlement, which was given preliminary approval in June, for one year Fidelity will give each class member who had an active Indexed Universal life insurance policy by March 31, 2014 a one year interest enhancement of 1%. This interest rate increase totaled about $5 million.

In addition, for those class members who had a Indexed Universal life insurance policy which lapsed by March 31, 2014, they could file a claim and try to get Inactive Surrender Benefit Relief.

In order to have obtained this relief, class members had until Oct. 2 to file their claims. These class members could partake in a pro rata share of a $1.255 million fund designated for these class members, which gave class members in this category a percentage of the surrender charge they paid when their Indexed Universal life insurance policy was surrendered. The amount received could be 10%, 30% or 60% of the total charge.

The class was defined as all California residents who owned a Fidelity Indexed Universal life insurance policy that they had purchased from either Fidelity of OM Financial from Jan. 1, 2007 through March 31, 2014.

This false advertising class action lawsuit was originally filed in July 2011 by Cressy in a California federal court, alleging that Fidelity and OM Financial had misled customers through their elaborate marketing scheme by claiming the high-dollar equity-indexed universal life insurance policies were investment plans, violating Fidelity’s own policies, which prohibits such practices.

The practice, Cressy alleged, was also a violation of several California consumer protection laws.

The Fidelity class action lawsuit was dismissed in federal court several times by U.S. District Judge John A. Kronstadt, who had given Cressy leave to filed amended complaints.

In May 2013, Judge Kronstadt dismissed all the federal claims with prejudice, meaning he could no longer file an amended complaint concerning those allegations.

However, Judge Kronstadt dismissed the allegations over state law without prejudice.

Cressy then filed the Fidelity false advertising class action lawsuit in California state court in July 2013. He charged Fidelity with violating California’s fraudulent business practices law, its misleading advertising law, breach of fiduciary duty and fraud.

According to Cressy’s false advertising class action lawsuit, Fidelity’s deceptive marketing scheme included training 2,000 sale agents in its Missed Fortune program, which taught the agents to tell customers that the Indexed Universal insurance policies were like mutual funds, certificates of deposits, 401(k)s, individual retirement accounts, stocks, bonds and real estate.

However, Cressy alleged, Fidelity and OM Financial customers were not told that the supposed “safe, liquid and suitable investment products” that would give customers a “good rate of return” came with high costs, agent commissions and costly surrender charges, which rendered the policies “exceptionally illiquid.”

The plaintiffs are represented by P. Michael Yancey and James M. Terrell of McCallum Methvin & Terrell PC; Gary A Waldron of Weintraub Tobin; and David I. Lipsky.

Fidelity is represented by Robert D. Phillips Jr. and Linda B. Oliver of Reed Smith LLP; and Frank A. Taylor and Julie H. Firestone of Briggs and Morgan PA.

The Fidelity False Advertising Class Action Lawsuit is Cressy v. Fidelity & Guaranty Life Insurance Co. et al., Case No. BC514340, in the Superior Court of the State of California, County of Los Angeles.