Parry Deering Futscher & Sparks represents policy owners in litigation against major life insurance companies and consumer lenders who market credit life and credit disability insurance policies.

When a consumer buys relatively costly items such as automobiles, furniture, or appliances, the purchase price is often wholly or partly financed by the dealership or retail store. When the contracts of sale and financing are signed, buyers are frequently asked if they would also like to obtain a special kind of insurance — for an additional fee—that would protect their purchase from repossession if they were unable to make the required monthly payments as a result of various calamities. One such coverage, dubbed “credit life insurance,” is designed so that in the event of the purchaser’s death, no further payments of any installments would be needed. The primary financial beneficiary of this type of insurance is not the purchaser’s family, but rather the seller-creditor who would be paid directly for all outstanding amounts owed on the purchase. But such coverage allows the surviving family members to rest assured that they would not have to return the goods or incur continued monthly payments if income ceased due to death.

The credit life insurance premium is sometimes itself financed and included in a loan’s repayment schedule. Credit life shares a number of similarities with other optional finance insurance policies, such as those that cover the loss of the property (credit property) or the loss of the purchaser’s income from either involuntary unemployment (credit unemployment) or health reasons (credit disability).

Parry Deering Futscher & Sparks, P.S.C., represents consumers in cases against life insurers who allege that the amounts of insurance actually sold were in excess of that needed to protect the indebtedness which remained in the event of death. Moreover, some credit life and disability insurers actually charge rates which exceed those permitted by state statutes or regulations.  This allegation has been supported by investigations performed by consumer groups.  (See, Consumer groups accuse credit insurance companies of overcharging.)

For more information on credit insurance products please see "The basics of credit insurance: Do you really need it?"

American Bankers Insurance Group Sanctioned by Multi-State Task Force

In 1999 American Bankers Insurance Group ("ABIG") agreed to a Consent Order negotiated by a Multi--State Task Force investigating the company's practices.  The Task Force investigated several sales and administration practices of ABIG.  In a press release, the Kentucky Department described the action as follows:

Of the 50 states in which ABIG is licensed to do business, 39 states have participated in this multi-state market conduct examination. These states have jointly signed a consent order to resolve possible insurance code violations by ABIG. The company could face up to $15 million in monetary sanctions as a result of the regulatory agreement. Twelve million is due immediately and the remaining three million may be collected upon re-examination.

After multistate discussions about ABIG's compliance with individual state insurance laws, an investigation of the company's business practices unearthed violations including marketing and sales violations, the use of unlicensed insurance agents, and improper claims handling. The company was accused in several states, including Minnesota and Tennessee, of selling insurance policies not approved by the states, meaning policyholders may not get what they were paying for.  (Reported by Insure.com).

Upon re-examination, the Task Force was again required to take action and enforce the additional sanctions against American Bankers.  In a recent press release the National Association of Insurance Commissioners described a new enforcement action against ABIG as follows: 

During 1997 and 1998, a number of the states experienced similar regulatory problems with ABIG. As a result, the states began a multi-state market conduct action. In November 1998, the states jointly signed a Consent Order to resolve possible insurance code violations by ABIG. Under the Consent Order, ABIG agreed to pay states a monetary sanction of $15 million. Of this amount, $3 million was to be paid by ABIG after the states’ on-site examination, if the results of the examination found that ABIG had not complied with the Consent Order. Based on the results of the most recent examination, ABIG will be sanctioned the additional $3 million. In addition to the monetary sanctions, ABIG agreed to conduct an audit of all transactions during the period of May 27 through Nov. 23, 1998, and pay any appropriate refunds or additional claim payments identified.

ABIG was also required to initiate a compliance plan and provide monthly reports to the states on the progress of the plan. An on-site market conduct examination, made up of a team of representatives from a number of states participating in this action, was initiated in December 1999.

The State of Minnesota also had concerns about whether ABIG fully complied with the Consent Order.  In February 2002, the Minnesota insurance regulators sought to impose the state's largest-ever civil penalty — $10 million — against two subsidiaries of American Bankers Insurance Group (ABIG) for selling illegal insurance policies to more than 200,000 Minnesota residents.  (Reported by Insure.com).

Our current credit life & disability cases include: