Pacific Life to Settle Lawsuit for $115 Million

Pacific Life Insurance Co. of Newport Beach has agreed to pay more than $115 million to settle a class-action lawsuit claiming it cheated customers over 15 years by lying about its policies.

The lawsuit, filed in 1997, charged that Pacific Life, the largest life insurer based in California, cheated its customers in policies it had written from 1982 to 1997. The agreement in Kentucky settles all claims arising from those policies.

The case was filed in Covington because the lead plaintiff, Ace Seat Belt Covers Inc., is based there.

Neither Pacific Life nor Ace Seat Belt Covers officials could be reached for comment Friday.

Circuit Judge Douglas Stephens in Covington approved the settlement--estimated to have a total value of close to $140 million when administrative fees and other costs are included--in a written order Thursday.

The money will go to an estimated 127,000 people who held about 160,000 policies across the country.

The lawsuit alleged, among other things, that Pacific representatives told potential customers that a single payment would cover all premiums, that it sold life-insurance policies as investments, and that it replaced or rolled over certain policies without policy-holders’ knowledge.

Ace Seat Belt said when it bought a $50,000 life insurance policy, it was incorrectly told that dividends from a previous policy would cover the premiums, the Kentucky Post reported.

Plaintiff’s attorney Ronald Parry said a number of life insurance companies sold these “vanishing premium” policies in the early 1980s, according to the Post. Parry has been involved in similar suits against other insurers, including Prudential, New York Life, TransAmerica and Sun Life.

According to the agreement, Pacific will pay $49.4 million to add to the value of existing policies, and offer another $32 million worth of insurance to members whose policies have expired. An additional $35 million is set aside for policy-holders with special circumstances, Parry said.