Bonus Annuity class action lawsuit

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Bonus Annuity class action lawsuit

Post by Demosthenes » Tue May 15, 2007 5:50 pm

Judge allows Allianz suit to proceed as class action
May 12, 2007 - Knight Ridder Tribune Business News

May 12--A federal judge has ruled that a Minnesota lawsuit against Allianz Life Insurance of North America concerning the sale and marketing of certain annuities can move forward as a national class action.

The decision Thursday by U.S. District Judge Ann Montgomery in Minneapolis could affect 400,000 people across the country who have bought Allianz "cash bonus" annuities since February 2000. The ruling could expose the Golden Valley insurance giant to hu dreds of millions of dollars in potential damages in the event it loses. "There is a lot of money involved," said Karl Cambronne, a partner at Chestnut & Cambronne, the Minneapolis law firm that filed the suit. Allianz said Friday that it plans to appeal. "We want to emphasize that this ruling is procedural only and does not address the merits -- or lack thereof -- of the plaintiff's claim," company spokesman Jim McManus said.
"Allianz Life has and will continue to mount a vigorous defense, and we are co fident that we will prevail." Cambronne's lawsuit is the largest of four national class-action suits that accuse Allianz of using deceptive sales and marketing tactics to sell unsuitable annuities to senior citizens. None of the cases has gone to trial. Minnesota Attorney General Lo i Swanson is also suing the company on similar grounds. An annuity is a financial contract in which the purchaser agrees to pay a lump sum to an insurer in exchange for regular payments that last the duration of the contract or until the customer dies.
The lawsuits focus on an increasingly popular type of product known as a deferred equity-indexed annuity, in which the buyer invests money tax-free in an account tied to a stock market index, such as the Standard & Poor's 500. After a set period of time the account balance, including the principal and a minimum return guaranteed by the insurer, is converted into an annuity that pays the customer. Experts say that the elderly should not buy deferred annuities, because they tie up money -- sometimes long past life expectancy. That type of annuity also is difficult for heirs and beneficiaries to access.
Cambronne's lawsuit contends that Allianz promised customers immediate cash bonuses from buying the annuities. In reality, those who decided to access their money had to pay enormous "surrender penalties" to collect their bonuses, the suit says. "It's a big problem nationally," Cambronne said. "People are encouraged with promises of safety to put their income into these annuities. But they are unable to get out without a huge penalty." Allianz said that it stands by its products. "Allianz Life has always taken great care to disclose the terms and features of our annuity products, especially as they relate to the bonus benefits of these products," spokesman McManus said.
"We believe our policies and procedures in this regard are among the most stringent in the industry, and go beyond what is required by regulations." Thomas Lee -- 612-673-7744 --