NU Online News Service, Sept. 12, 3:58 p.m. – A group of investors has filed a multimillion-dollar lawsuit against the Florida Department of Insurance, accusing it of failing to protect them from fraud perpetrated by American Benefits Services, Lake Worth, Fla.
The lawsuit, which was filed in a state court in West Palm Beach, Fla., charges that state insurance regulators knew American Benefits Services was using deceitful insurance practices but let the company continue to collect investors’ money anyway.
American Benefits was a viatical settlement company. Settlement companies are supposed to buy rights to life insurance benefits from the policyholders, then sell the rights to investors. The policyholders get immediate access to cash, and the investors are supposed to get a chance to profit from the difference between the price paid for a policy and the policy death benefit.
But, according to the Florida suit, American Benefits did not spend investors’ money on life insurance policies. Instead, the suit alleges, American Benefits Services and its partner, Financial Federated Title & Trust, Broward County, Fla., used investors’ money “to fund lavish and ostentatious lifestyles.”
Benjamin Schwartzman, a Seattle lawyer who is representing the plaintiffs, says, the department received “cogent proof” that American Benefits Services was selling fraudulent viatical settlements.