American Equity Investment Life Insurance Company has settled a class action suit in Kentucky state court over the sales of annuities to purchasers of living trusts..
The settlement resolves Panter vs. Tackett et al., a class-action suit filed in a Jefferson County, Ky., state circuit court against American Equity, West Des Moines, Iowa, and other plaintiffs.
American Equity could pay the settlement to as many as 24,000 older consumers, according to documents filed with the court.
William McMurry of McMurry & Associates, Louisville, Ky., the lead counsel for the plaintiffs, announced the final approval of the settlement, and a spokeswoman for American Equity confirmed the agreement.
The plaintiffs accused American Equity in their suit of participating in “a living trust mill.”
Marketers who run living trust mills persuade elderly consumers to buy living trusts as a way to avoid probate and reduce estate taxes, McMurry says.
The plaintiffs’ suit charges American Equity of working with Dallas marketing firms and local attorneys from 1997 to 2007 to persuade older consumers to replace current investments with American Equity deferred annuities.
The annuities had 20-year terms, and surrender charges for early withdrawal were substantial, the plaintiffs alleged.
Wendy L. Carlson, American Equity’s chief financial officer and general counsel, notes that recipients of the settlement will receive payments only if they annuitize their settlement. The settlement, therefore, provides an economic benefit to the company as well as to the policyholders who agree to the settlement.
“We are happy to make that benefit available to policyholders in ways that benefit them and that are not a material change to the annuity,” Carson says. “So that is a win-win from our viewpoint.”
There was no finding of liability for the company in the settlement, she noted.
As part of the settlement, American Equity has agreed that it will:
- No longer sell deferred annuities in situations in which it knows that sales leads were generated through the sale of living trusts.
- Train the agents who sell its annuities to use legal sales methods.
- Let investors who were claimants in the case annuitize their annuity contracts immediately, with a 2.4% bonus added to the value of their policies, and withdraw assets without paying surrender charges.
- Let claimants who allege that an annuity sale was unsuitable or the result of misrepresentation receive a full refund of premiums plus interest, the current policy value, modification of surrender charges “or other appropriate relief.”
- Let any claimant who was aged 79 or older at the time of an annuity’s purchase receive the opportunity to withdraw up to 25% of the policy value during each of the next 4 years, penalty-free.