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Seniors Can Pursue Punitives Against Allianz

(CN) - A federal judge in San Diego ruled that a class of senior citizens can pursue punitive damages against Allianz Life Insurance accused of using deceptive sales tactics to sell highly inappropriate derivative investments at senior centers in a carnival atmosphere with free drinks, joke sheets and door prizes.

Allianz asked the court to decide punitive damages on a case-by-case basis, but U.S. District Judge Janis Sammartino said the company's deceptive practices, as described in the underlying complaint, "were substantially the same" for all plaintiffs.

"A jury can assess the harm that could have been caused by these misrepresentations as a whole based on the Defendant's misconduct irrespective of the individual circumstances surrounding the class members, as they are all, at bottom, elderly persons who relied on misrepresentations regarding the bonus that was allegedly part of the offered annuity plan," Sammartino wrote.

Allianz allegedly targeted seniors with deferred annuities, which are fixed-account investments that mature over a long period of time. Allianz also hit seniors with "substantial surrender charges" if they tried to withdraw their money early, according to the 2005 lawsuit.

"This inherent lack of flexibility, coupled with the diminishing resources of the elderly, was one of the principal reasons for California's enactment of the Senior Insurance provisions," said plaintiff lawyer Ronald Marron in the class complaint, referring to regulations protecting seniors from con artists.

Citing the experience of the named plaintiff, Anthony Lorio, the complaint says he received a flyer advertising a complimentary financial planning seminar for seniors at the Harding Center in Carlsbad.

The defendant Allianz used cut-outs, or contractors, in an effort insulate itself from liability, said the complaint. The pitch man in Carlsbad is described in the complaint as a "very dynamic speaker" pitching bad investments to the old folks in "a carnival atmosphere with free beverages, a folder filled with information including a sheet of jokes on top, and changes for door prizes."

In allowing the class to go after punitive damages over the defendants' sales tactics, Judge Sammartino was also critical of the defendants' legal tactics. "Though defendants originally brought this matter before the Court on the false assertion at oral argument that new Ninth Circuit law has been produced, prompting the Court to allow the present motion to filed, this simply not the case."

Sammartino said she declined to turn the law on its head without further guidance from the Ninth Circuit or the Supreme Court. "The Court finds that class certification of the punitive damages claim in the above action does not violate the defendant's due process rights under the current state of the law."

Trial is set to begin in March 2010.

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