Interior of glass-walled office buildings (Photo: Thinkstock)

A federal court in Illinois has taken a step toward approving a deal that could apply to the owners of 530,000 interest-sensitive life insurance policies who were affected by a life insurance company system conversion effort.

Judge Colin Stirling Bruce — a judge in the U.S. District Court for the Central District of Illinois — recently issued an order granting preliminary approval to a class action settlement for the case Clapp et al v. Accordia Life and Annuity Company et al.

(Related: New York Regulators Impose $15 Million Fine Over Life Notice Problems)

The plaintiffs in the case owned policies that were issued or assumed by Accordia Life and Annuity Company and administered by an outside company. The outside administrator moved the policies from a number of old administration systems to a new system.

The plaintiffs in the Accordia case allege that Accordia and other defendants stopped automatically withdrawing, accepting or applying premium payments during a conversion period, and that, in some cases, this caused policies to lapse, or for other problems to occur, according to a memorandum filed by the plaintiffs.

Accordia has not opposed the proposed settlement agreement, according to the order providing preliminary approval for the agreement.

The Class

The Accordia case in Illinois combines a class action lawsuit filed in the U.S. District Court for the Central District of California in October 2016 with a separate lawsuit filed in the Illinois court in April 2017.

The Illinois court has now provided preliminary certification for a class that includes holders of most Accordia policies issued from May 1, 2014, through June 7, 2019, and of Accordia policies that were converted to a new administration system on or after Aug. 1, 2015. The class also includes the executor or representative of any deceased class member’s estate.

The Preliminary Settlement

Policyholders or estate representatives who dislike the settlement can object or opt out.

Class members can also file claims for extra cash compensation within the settlement framework.

The settlement provides automatic, “injunctive relief” for class members who do nothing.

For those policyholders, the defendants are supposed to retroactively fix any premium payment, interest payment or lapsation problems, or other types of problems related to the system conversion, such as income tax problems.

“There is no cap on the total value of the injunctive relief,” according to the memorandum. “It provides for the automatic review and adjustment of policies to correct errors in their status or classification.”

The judge set Dec. 2 as the final approval date for the settlement.

Accordia’s Reaction

Accordia has sent distributors a notice telling them about the preliminary court approval of the settlement agreement. The company said in the notice that it begin mailing notices about the settlement to policyowners in waves starting July 22.

Independent producers of record will also get detailed notices about the settlement, according to Accordia.

Accordia is a subsidiary of Global Atlantic Financial Group Ltd. Global Atlantic has issued the following statement about the preliminary settlement agreement:

Following the 2013 acquisition of the former life insurance business of AvivaUSA, we partnered with DXC, a leading third-party service provider, to move the policies off several legacy systems onto a modern technology platform to better serve our policyholders. This project was more complex than anticipated and caused unintended service disruptions. Throughout this process we have worked with policy holders to address any service disruptions or issues as they arose, and this settlement ensures applicability of those accommodations across the class. While this project was challenging, the new technology platform is critical in our continuing efforts to improve service for our customers over the long term.

Resources

Links to documents related to the Accorda case are available here.

— Read California Regulators Blast Accordia and Athene Over Policy Administration, on ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on FacebookLinkedIn and Twitter.