Phoenix Life Insurance Settles Rate-Hike Class Action for $42.5M

On May 29, Phoenix Life Insurance Co. agreed to a $42.5 million rate-hike class action settlement, resolving claims that the insurance company unlawfully raised its premium-adjustable universal life (PAUL) insurance policies’ rates. In addition to paying over $40 million to establish a Phoenix Life settlement fund, the defendant has also agreed to freeze the “cost of insurance” rates (or COI rates) for the next five years, according to the Phoenix Life insurance rate-hike class action lawsuit.

Furthermore, per the agreement of the rate-hike class action settlement, which resolved plaintiff’s breach of contract claims, Phoenix will be prevented from challenging a Class Member’s PAUL policy validity as an unlawful “life wager,” according to court documents. The plaintiff’s counsel in this Phoenix Life insurance rate-hike class action lawsuit claim that this is a tactic commonly used by the insurer to avoid paying death benefits to policy holders.

Instead of having to make claims against Phoenix Life Insurance, the more than 1,000 rate-hike class action settlement Class Members will receive a Phoenix Life Insurance settlement check in the mail, unless of course they decide to opt-out individually from the settlement.

Lead plaintif Martin Fleisher originally sued Phoenix Life Insurance in 2011, around the same time the insurer announced it was raising COI rates on Phoenix PAUL policies for a second time (the first COI rate-hike occurring a year prior). In his rate-hike class action lawsuit, the plaintiff claimed the insurer was treating investors in their life settlement plans unfairly. Whole life insurance plans typically require fixed monthly premium payments; Phoenix’s PAUL policies allegedly only require a policyholder’s premium to cover COI cost and other charges, which theoretically should allow an individual to minimize their investments.

However, according to the Phoenix Life Insurance rate-hike class action lawsuit, Fleisher claims that Phoenix Life Insurance punishes life settlement investors who make timely payments on their premiums by increasing (or hiking) the COI rates. The plaintiff claims the insurer does this in order because Phoenix profits from policy lapses, allowing the insurance company to deny policyholders death benefits.

This rate-hike class action settlement is a huge win for the plaintiffs and Class Members involved in this Phoenix Life Insurance class action lawsuit, as the case was “heavily litigated,” according to the plaintiff’s counsel, and survived motions for dismissal, summary judgment, and proposed class decertification.

Further information about the Phoenix Life Insurance class action settlement was not immediately available. Keep checking TopClassActions.com or sign up for our free newsletter for the latest updates. You can also mark this article as a “Favorite” using your free Top Class Actions account to receive notifications when this article is updated.

Fleisher is represented by Steven G. Sklaver, Frances Lewis and Seth Ard of Susman Godfrey LLP.

The Phoenix Life Insurance Rate-Hike Class Action Lawsuit is Fleisher v. Phoenix Life Insurance Co., Case No. 1:11-cv-08405, in the U.S. District Court for the Southern District of New York.