Columbus Life Insurance Cost of Insurance Basis Class Action

With certain life insurance policies, the insurance company subtracts certain charges from an account value to pay for the policy each month. The complaint for this class action alleges that Columbus Life Insurance Company has for several years deducted too much from its customers’ account values, in breach of the terms of the policy.

The class for this action is all persons who own or owned a universal life insurance policy issued by Columbus in which the terms provide for (1) a charge or deduction calculated with a rate based on Columbus’s expectations about future mortality experience, (2) additional but separate charges, deductions, or expenses, (3) an investment, interest-bearing, or savings component, and (4) a death benefit.

The plaintiff in this case had a flexible premium, adjustable life insurance policy with Columbus dated August 17, 1997. Along with the death benefit, the policy has a savings or interest-bearing element, the amount of which is known as the Account Value.

According to the complaint, the account value rises every month, by (1) the interest earned on the account value during the previous month, and (2) the premium paid for the upcoming month, minus that month’s deduction and expense charges.

The complaint alleges, “The money that makes up the Account Value is the property of the policy owner and is held in trust by” Columbus. Columbus can therefore only take from the account the funds expressly authorized by the policy.

Two deductions are authorized each month, the Monthly Deduction and the Monthly Expense Charge.

The Monthly Expense Charge for the policy is $7. The Monthly Deduction is defined as “the cost of insurance plus the cost of additional benefits provided by rider.” The complaint alleges that the cost of insurance (COI) is calculated each month.

The complaint again quotes from the policy: “Any change in the monthly cost of insurance rates charged will be on a non-discriminatory basis toward any one insured and will apply to all insureds of the same age, sex, and classification whose policies have been in effect the same length of time… The cost of insurance rates will be determined by us based on our expectations as to future mortality experience.”

The complaint alleges, “Although the Policies authorize [Columbus] to use only its expectations as to future mortality experience in determining Cost of Insurance rates, [Columbus] uses other factors, not authorized by the Policies, when determining those rates, including, without limitation, non-mortality related expenses.”

Because of this, the complaint claims, Columbus deducts too much from its insureds’ Account Values each month.

The complaint makes another allegation: Columbus “has, on information and belief, failed to lower Cost of Insurance Rates for the Policies even though is mortality expectations have improved, as people are living longer today than when the Policies were initially priced.

Article Type: Lawsuit
Topic: Insurance
Tags: Cost of Insurance, Incorrect Deductions from Policy Accumulation Value, Insurance, Life Insurance