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‘Group’ Insurer Played Fast & Loose, Class Says

DALLAS (CN) - Insurers illegally sell group insurance to Texans who have no relationship to each other, other than being "credit card holders ... to whom defendants had easy access to market the policies," a class action claims in Federal Court.

Lead plaintiffs Danny and Tracy Walker sued Plano-based Stonebridge Life Insurance Co. and insurance marketer Catalyst Health Solutions fka HealthExtras, and affiliates. Stonebridge is a subsidiary of Transamerica Life & Protection, which is a subsidiary of Netherlands-based Aegon N.V.

The Walkers say that under state law, group accident and health insurance policies may be issued to an association for its active and retired members and employees.

"Defendants purported to issue group accident and health insurance policies to eligible associations and then market those policies with low cost introductory premiums to individuals in Texas, including plaintiffs and others similarly situated," the 26-page complaint states.

"However, the insurance policies were not issued to eligible associations, and the persons to whom defendants marketed and sold the polices were not actual members of any group or association, but merely credit card holders and other individuals to whom defendants had easy access to market the policies."

The Walkers claim HealthExtras engaged several insurance companies, including Stonebridge, to underwrite policies it marketed and sold to customers of credit card issuers, including Citibank.

Tracy Walker says she was solicited to purchase a $1 million policy by a marketing insert in her Conoco credit card bill. Her husband signed on for the same coverage several years later.

The Walkers claim Citibank is the supposed association to which Stonebridge issued the policies, but Citibank is not an eligible association under state law.

"Plaintiffs have never had any credit card or account with Citibank (South Dakota) N.A. or any other Citibank entity," the complaint states. "To their knowledge, plaintiffs have never been a member of any association or group affiliated with Citibank."

The Walkers say Citibank is not an eligible association because it does not have a constitution or bylaws and was not maintained in good faith for purposes other than just buying the insurance.

"The group insurance policies were sold solely to persons whose only commonality is that they have a credit card and/or were chosen by HealthExtras and others as good marketing prospects for the policies," the complaint states.

"... In fact, upon information and belief, the putative class members are not even all customers of the same bank or credit card issuer which led to their solicitation to purchase the insurance policies in question in the first place."

Other defendants include HealthExtras Benefits Administrators Inc. and HealthExtras Insurance Agency Inc.

Stonebridge did not immediately respond to a request for comment.

The Walkers seek compensatory and punitive class damages for money had and received, deceptive trade and violations of the Texas Insurance Code.

They are represented by Roger Mandel with Lackey Hershman in Dallas.

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