After more than six years of vigorous advocacy on behalf of insurance policyholders who had been subjected to allegely improper Cost of Insurance rate increases on their flexible premium, universal life insurance policies, on October 4, 2023, U.S. District Judge Gerald J. Pappert granted final approval of a nearly $110 million settlement achieved on behalf of the injured policyholders.
In September 2016, Lincoln National Life Insurance Company and its corporate parent, Lincoln National Corporation, imposed Cost of Insurance (COI) rate increases on four sets of flexible premium, universal life insurance policies that it has acquired from the Jefferson-Pilot Life Insurance Company in a merger of Jefferson-Pilot into Lincoln National in 2006. Nine months later, in June 2017, Lincoln increased COI rates on ten other similar sets of policies acquired from Jefferson-Pilot. Unlike standard life insurance policies, the Lincoln policies allowed for flexible premium payments, as long as policyholders maintained enough funds in their accounts to cover the insurer’s monthly deductions, which comprised COI charges and other administrative expenses.
Representing policyholders, Barrack Rodos & Bacine and several other firms asserted in a complaint filed in December 2016, and in a follow-on lawsuit, that Lincoln improperly imposed the COI rate increases, seeking to recoup for past losses occasioned by the historically low interest rates for fixed income investments in the market from approximately 2010 to 2016. The higher the COI charge, the more in premium payments that policyholders had to pay into their policy account or have deducted from their policy account. We alleged that by hiking the COI charges in September 2016, and again in June 2017, Lincoln improperly used its discretion to “blunt the impact of the prevailing low interest rate environment” at the time and avoid paying benefits by inducing policy lapses.
The cases were extensively litigated. Our efforts included: (i) comprehensive discovery requiring the review and analysis of nearly one million pages of documents, data, and native spreadsheets produced in the actions; (ii) briefing and arguing numerous pretrial motions; (iii) retaining and working with consulting and testifying experts; (iv) taking or defending more than 50 depositions; (v) collecting and producing documents of the policyholder plaintiffs in response to Lincoln’s discovery requests; and (vi) serving and enforcing third-party subpoenas.
The parties entered into a settlement mediation in December 2022. The mediation session moved the parties close to reaching an agreement, and through continuing post-mediation negotiations, a settlement was achieved several weeks later. In a Declaration filed with the Court, the dediator attested that “the negotiations were fair, at arms’ length, and in good faith;” and “[w]hile both sides zealously advocated their respective positions, they also both recognized the significant risks they faced if they proceeded with the litigation, as well as the substantial costs to pursue the matter through continued class certification proceedings, merits expert discovery, summary judgment, trial and appeal.”
On October 4, 2023, Judge Pappert granted final approval of the nearly $110 million settlement, finding the settlement to be in the best interests of the policyholder Settlement Class members. The settlement is designed to mitigate the impact of the allegedly impermissible COI increases for each participating policyowner. In addition to the mutual releases of claims that settlements typically have in order to achieve a resolution, the settlement has three primary features:
- Creating a fund of nearly $110 million that will provide direct, non-reversionary cash payments, and which will return to each Settlement Class member the same percentage of the disputed overcharges imposed on their policies (subject to a minimum assumed overcharge of $200);
- a five-year COI rate freeze prohibiting Lincoln from imposing any further COI rate increases on their policies during that time period; and
- a voluntary restriction on Lincoln’s ability to cancel policies or to deny death claims based on a purported lack of insurable interest or misrepresentations in policy applications.
Affected policyholders have already been notified of the settlement, and do not need to take any actions in order to receive their proportionate share of the settlement fund. Following Court approval, plaintiffs’ counsel issued the following statement: “We are very proud of this settlement that provides direct cash payments to each and every class member along with important business practice changes with respect to their policies.”
The cases were In Re: Lincoln National COI Litigation, Case No. 16-cv-06605, and In Re: Lincoln National 2017 COI Rate Litigation, Case No. 17’cv-04150, both in the U.S. District Court for the Eastern District of Pennsylvania.
Jeffrey W. Golan of Barrack, Rodos & Bacine served as the Chair of the Plaintiffs’ Executive Committee (the Co-Lead Counsel for Plaintiffs) in the 2016 COI Case and as a Co-Chair of the Plaintiffs’ Executive Committee in the 2017 COI Case.