Genworth insurance co. settles class action for $25M
Policy rates were raised in 2019, prompting lawsuit
Richmond-based Genworth Life & Annuity Insurance Co. has settled a class-action lawsuit with 13,400 insurance policy holders for $25 million. U.S. District Judge David Novak of the Eastern District of Virginia approved the settlement Monday.
GLAIC, a subsidiary of Fortune 500 life, mortgage and long-term care insurer Genworth Financial Inc., was sued for $5 billion in 2020, with plaintiffs claiming their life insurance policies were subject to unlawful cost of insurance (COI) increases in September 2019, which could be between 40% and 140% higher than the company’s monthly risk rates scale, according to the lawsuit. The complaint was filed in April 2020.
The agreement reached in May and approved Monday provides a $25 million all-cash fund for settlement class members, before deduction of fees and expenses, and no money reverts to Genworth. The company also agreed not to impose a new COI rate schedule of higher fees during the next seven years, and not to deny a death claim submitted by the plaintiffs’ insurance policies based on a lack of valid insurable interest.
“We’re pleased with the judge’s approval of this settlement, as it supports the policyholders and ensures they’re protected in the future from unlawful rate increases,” Steven Sklaver, partner at Houston-based Susman Godfrey LLP and one of the plaintiffs’ attorneys, said in a statement. “We remain committed to advocating for policy owners affected by similar COI increases.” Novak encouraged the two parties to settle earlier this year.
Sklaver said in an interview with Virginia Business that his firm is involved in another class-action lawsuit against Genworth on behalf of universal life insurance policyholders whose rates were raised. The original complaint was filed in November 2018 in the U.S. District Court for the Eastern District of Virginia, he said, but Genworth filed a motion in Georgia, arguing that a class-action lawsuit settlement approved in 2004 barred the lawsuit. The judge in Georgia ruled in the plaintiffs’ favor in March, and Genworth has appealed the ruling, Sklaver said.
Because discovery has not yet taken place, Sklaver said he is not sure how many people were affected, but added, “We assume it’s substantial,” likely more than 10,000 policy holders.
In July, in a separate class-action lawsuit involving rate increases, a federal judge in the U.S. District Court for the Eastern District of Virginia ruled that Genworth Life Insurance Co. must pay $1.2 million in attorneys’ fees as part of a settlement with plaintiffs. Members of the class will be able to maintain their current benefits and can pursue a claim in court if it’s filed within the next three years.
Sklaver’s firm is involved in class-action cases against several insurers that have raised rates. Lifespans have risen about 1% per year over the past three decades, according to the American Academy of Actuaries; although longer lifespans lower the cost of life insurance for insurers, which provide death benefits, long-term care insurance costs rise as people live longer.
“They raise rates when it’s good for them, but they don’t drop them,” Sklaver said.
A spokesperson for Genworth declined to comment Tuesday about the settlement approved Monday, and the company’s attorneys did not return a request for comment.