The parties in an 11-year class action lawsuit announced yesterday that they had finally reached a proposed settlement.

Attorneys for the Savings Bank Life Insurance Company of Massachusetts and a group of policyholders jointly announced the proposed settlement of the case, which was preliminarily approved by Massachusetts Suffolk Superior Court Judge Margaret Hinkle.

The settlement, which must receive final court approval after a hearing set for May 20, would resolve a lawsuit that began in May 1998.

The suit was filed by policyholders who claimed that SBLI had underpaid annual dividends on their policies as well as special dividends required as a result of SBLI’s reorganization in 1992.

SBLI denied the accusations from the outset, arguing that the dividends it had paid were in line with its legal requirements. Under the settlement, SBLI admitted no liability.

The parties agreed to settle for $18,675,330 plus the costs of notifying claimants and administering the settlement. A settlement fund of $15 million was created, in addition to about $3.7 million already paid in 2005 to another group of policyholders in the case.

After attorneys’ fees and expenses, the remainder of the fund would be used to pay settlement dividends, pro rata, to the owners of around 515,000 policies in the suit.

“We are glad to have resolved this case with these substantial benefits to the class after nearly 12 years of heavily fought litigation,” said Jason B. Adkins, plaintiffs’ lead counsel from the Boston law firm of Adkins, Kelston & Zavez P.C.

SBLI president and CEO Robert K. Sheridan said, “We are pleased to be able to resolve the litigation in a mutually acceptable fashion that is in the best interests of our policyholders and the company.”

The Savings Bank Life Insurance Company of Massachusetts is not affiliated with SBLI USA Mutual Life Insurance Company Inc.