Florida Department Is Sued Over Viatical Company Practices

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The Florida Department of Insurance is the target of a multi-million dollar lawsuit by investors who say the department failed to protect them from fraud perpetrated by American Benefits Services, Lake Worth, Fla.

The lawsuit accuses the state insurance regulators of knowing that American Benefits Services used deceitful insurance practices and allowing the company to continue to collect investors money anyway.

American Benefits sold viatical settlements, which are agreements in which existing life insurance policies are bought by viatical settlement providers and re-sold to investors.

The life insurance policies are sold for a percentage of the face value, and the investor collects the death benefit when the insured dies.

But, according to the suit, American Benefits did not spend investors money on life insurance policies. Instead, the suit alleges that American Benefits Services and its partner, Financial Federated Title & Trust, in Broward County, Fla., used investors money “to fund lavish and ostentatious lifestyles.”

Plaintiffs attorney Benjamin Schwartzman, The Grant Law Firm, Seattle, says, the department received “cogent proof” that American Benefits Services was selling fraudulent viatical settlements.

“As time went on (the Florida department) received more information that substantiated there was a fraud and they never took any action, so they allowed further investors to put their money into something completely bogus.”

Tami Torres, press secretary for the Florida department, says the department wont comment on the suit, filed Sept. 9, until it has “had an opportunity to review whats in the suit.”

The plaintiffs, a married couple and two individuals living in Florida, are seeking class-action status and $117 million in compensatory damages.

The suit also alleges that the department was likely bribed into closing its eyes to what was going on.

American Benefits Services and Financial Federated “executives were initiating a concerted program to curry political favor with high-ranking officials from the DOI and another branch of state government, the Department of Banking and Finance,” the suit says.

Schwartzman explains he has no hard evidence to that effect; his argument is based on inference.

“There was a lot of contact between regulators and the officials of this company and the timing and nature of the contact is suspicious on certain levels,” he says. “It would raise the inference that there was potential that those contacts were responsible for the lack of actions.”

The state has 40 days to respond either with an answer or a motion to dismiss on legal grounds.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 23, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.