SPRINGFIELD, Mass. (CN) – Prudential Insurance Co. of America cannot dismiss a lawsuit that accuses it of misappropriating hundreds of millions of dollars worth of life insurance benefits from fallen members of the U.S. military, a federal judge ruled.
The decision clears the way to trial for four class actions against Prudential, which has a government-sanctioned monopoly that Congress authorized during the Vietnam War as insurers were unwilling to underwrite service members.
U.S. District Judge Michael Ponsor handed down the ruling in connection to the lawsuit filed last year in the District of Massachusetts. Earlier this year, three other similar complaints filed in the District of New Jersey were transferred to Ponsor’s court for consolidated proceedings.
Though Prudential is required to disburse the life insurance proceeds to the beneficiaries of the fallen service members and veterans, the families say the giant insurer will not send them an actual check. Instead it has been lining its own pockets with interest earnings accrued on lump sum insurance benefits owed to families of deceased service members, according to the complaint.
Prudential concocted the scheme by creating an “Alliance Account” that is riddled with problems and false representations, one of the most significant being that the money in the account lacks the safety and security of FDIC insurance, according to the complaint.
Ponsor rejected Prudential’s motion to dismiss on Thursday after finding that Prudential’s arguments did not hold water. Prudential had claimed in the hearings that creating an Alliance Account is the same as a lump-sum payment, but Ponsor found that “a lump sum payment by check is simply not the same as a lump-sum payment by checkbook (which allows the insurance company to retain the funds and earn interest on them).”
The judge also brushed off Prudential’s argument that the families did not allege any damages, as it had “admitted at the hearing that the interest it has earned on the Alliance Accounts is more than the interest it pays.”
Without assuming truth in the plaintiffs’ claims that Prudential’s abuses constitute “abhorrent behavior not to be tolerated in a civilized society, and warrants the imposition of punitive and exemplary damages,” Ponsor concluded that they have stated a “sufficiently cognizable injury to avoid dismissal.”