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Life Policyholder Sues Over Reinstatement Amount Calculations

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A consumer in California is suing a life insurer over how the insurer calculated variable universal life (VUL) insurance policy reinstatement charges.

(Related: Strong VUL Premium Pumps Up Life Sales: LIMRA)

The plaintiff, Richard Behfarin, is seeking class-action certification for the case, Behfarin v. Pruco Life Insurance Company of America and Does 1-10, inclusive (Case Number 2:17-cv-05290-MWF-FFM), which was filed in the U.S. District Court for the Central District of California).

The plaintiff, Behfarin, acquired a $3 million second-to-die flexible-premium variable life policy from Pruco Life in 2001, according to the complaint.

Pruco Life is a unit of Prudential Financial Inc.

The policy went into default in January 2016. Behfarin says he was told that he needed to pay $47,457.28 by March 6, 2016, to have the policy reinstated. He then sent in $20,000. Pruco Life rejected that payment and told Behfarin he would need to send in $27,457.28 to get the policy reinstated, according to the complaint.

Pruco Life said in March that Behfarin would need to pay $59,737.51 by March 30, 2016, to have the policy reinstated, according to the complaint.

Behfarin was told the amount due in March 2016 included reinstatement payment loads and an amount needed to bring the cash value to zero as well as three months of maximum insurance charges, according to the complaint. Behfarin says the reinstatement payment loads and the maximum insurance charges were not described in the policy.

In June 2016, Pruco declined to reinstate coverage for Behfarin’s father because the father was starting to use a drug used to treat dementia. Pruco said that use of the drug put the father in a different risk class, and that, to obtain reinstatement, the father must qualify for the same risk that the father had when the policy was issued, according to the complaint.

Behfarin says in the complaint that the policy lapsed because the Pruco life reinstatement calculations included lapse and reinstatement loads not described in the policy.

Behfarin is seeking to represent a class of people who have owned universal life policies issued by Pruco Life and who, within four years before the start of his litigation, were affected by reinsurance loads, or by a need to go through a new risk classification process upon reinstatement.

In December, the court set July 22, 2019, as the class certification deadline.

Representatives from Prudential were not available to comment on the case.

Prudential has acknowledged the suit in notes in its quarterly and annual financial reports.

In an answer to the Behfarin complaint, Pruco has acknowledged the existence of the life insurance policies but denied Behfarin’s other allegations.

“Plaintiff is entitled to no relief from Pruco because plaintiffs sustained no injury, damage, or loss by reason of any conduct, act, error, or omission on Pruco’s part,” Pruco says in the answer. “In regard to the alleged events at issue in the complaint, Pruco at all times acted in good faith, reasonably, and without any actual or constructive knowledge of any breaches of any contractual or other duty allegedly owed to plaintiff, or any other wrong done to plaintiff.”

Correction: In an earlier version of this article, the amount that Behfarin was told was due in March 2016 was described incorrectly. The amount included three months of maximum insurance charges.

— Read Insurers, Life Settlement Firms Clash Over UL Cost-of-Insurance Hikes, on ThinkAdvisor.

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