Annuity Fraud Class Action Lawsuit Settles for $21M

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The insurance company National Western Life Insurance Co. has agreed to a $21 million class action settlement, which will be paid to elderly clients who were allegedly sold bad deferred annuities. The settlement will resolve a Racketeer Influenced and Corrupt Organizations Act class action lawsuit which alleged the life insurance company fraudulently marketed poor deferred annuities to elderly clients.

The plaintiffs alleged that National Western had actually utilized a network of sales agents to aggressively market badly planned annuities with huge surrender penalties. Allegedly, the company misrepresented the annuity contract and failed to disclose the costs associated with the plans including the surrender and withdrawal provisions, the fixed maturity dates and other material facts.

National Western denies any of these allegations, but has agreed to the pay the settlement nonetheless. The class action settlement provides the plaintiffs an annuitization bonus, payments to owners of annuitized policies and surrender benefit relief for those who qualify through the claim review process.

“Although plaintiffs believe the action warrants certification as a litigation class and presents a strong case for liability, National Western vigorously contested certification and denies any wrongdoing or liability. National Western also contends that plaintiffs may suffer failures of proof at trial, including inability to prove certain elements of the claims on a class wide basis. Plaintiffs thus recognize the risks and uncertainty if the action proceeds to trial,” the class action settlement said.

This class action lawsuit was originally filed in 2005, when a group of elderly plaintiffs accused National Western of having a sales associate target prospective elderly clients with deferred annuity plans, without providing proper explanations of the risks involved in the plans and surrender penalties. The deferred annuities would allegedly force the clients to incur massive “surrender charges” and penalties to access their funds within the first 10 to 15 years, which often means they would not live to see the benefit of their investment.

In February 2013, a California federal judge rejected National Western’s bid for summary judgment, ruling in favor of the plaintiffs. This class action settlement was reached this at the end of October 2013.

Overview of Annuity Fraud

An annuity is an insurance product that pays a steady stream of income, making it a popular investment and retirement plan for many elderly citizens in the United States. The two most common types are variable and fixed annuities.

A variable annuity, also known as a deferred annuity, is an annuity in which the insurance company invests the client’s money into stocks, bonds and other investments. These annuities are tax-deferrable and the payments are determined by the performance of the client’s chosen investments. Variable annuities allow the client to receive periodic payments for the rest of the client’s life. A fixed annuity is an annuity in which the senior’s money earns interest at rates set by the annuity contract. Unlike variable annuities, fixed annuities provide a guaranteed payout date.

While annuities can be useful investment options for retirement, they have also become a scamming tool for investment companies. Various investment companies have been found to be using annuities to trick elderly clients into paying for bad annuity investment, which will never become fruitful.

Four signs that you or your loved one may have been the victim of an annuities scam:

• A senior is unlikely to live long enough to collect the payment
• The annuity makes up more than 35 percent of the senior’s assets
• The Surrender Fee (the amount the senior will have to pay if they cash-in an annuity early) is more than 14 percent of the principal
• The same agent sold the senior client multiple annuities

This annuities fraud class action lawsuit is In Re: National Western Life Insurance Deferred Annuities Litigation, Case No. 3:05-cv-01018, in the U.S. District Court for the Southern District of California.

File an Annuity Lawsuit Today

If you believe that you or a loved one have been the victim of annuities fraud, you have legal options. Please visit the Life Insurance Annuities Fraud Class Action Lawsuit Investigation. There, you can submit your claim for a free legal review and if it qualifies for legal action, a seasoned annuity lawyer will contact you for a free, no-obligation consultation. You will be guided through the litigation process with no out-of-pocket expenses or hidden fees. The annuity attorneys working this investigation do not get paid until you do.