Nashville, Tenn. – Lieff Cabraser partners Mark Chalos and Annika K. Martin, and Montgomery Ponder partners Luke Montgomery and Brad Ponder, have filed a class action lawsuit in Tennessee federal court on behalf of Marietta McClendon of Nashville, Tennessee alleging that North Carolina Mutual Life Insurance Company (NCM) cheated her family and potentially thousands of other life insurance customers, often minority individuals and families, for financial gain.
The complaint alleges that NCM shorted Ms. McClendon’s family and other beneficiaries of life insurance policies after the deaths of their loved ones. NCM, according to the complaint, charged higher interest rates on customers’ policy loans than originally promised and failed to credit payments from customers on policy loans, making life insurance payouts lower than the beneficiaries were entitled to receive. The lawsuit applies to life insurance policies purchased through 2009 and alleges breach of contract and violations of North Carolina’s Unfair or Deceptive Trade Practices Act.
Nashville-area resident Marietta McClendon, the named Plaintiff, was the beneficiary of a $10,000 life insurance policy originally bought by her mother, Bessie Mae McDaniel, on behalf of her son (and Ms. McClendon’s brother), Willie Charles McDaniel, Jr. Ms. McDaniel paid the premiums faithfully. In 1995, Ms. McDaniel took out a policy loan against the life insurance policy for approximately $1,500.
Pictured above are Bessie Mae McDaniel and her son, Willie Charles McDaniel, Jr. Ms. McDaniel purchased a life insurance policy on her son, Willie, in the 1980s in Central Alabama. She later took a loan on the policy, and made ongoing payments on the loan. The family later learned that Ms. McDaniel’s repayments on the loan were allegedly not applied correctly by the insurance company, decreasing their benefit when Willie passed away. A surviving family member of the McDaniels is suing for breach of contract and fraud. Other families may have experienced similar alleged misconduct.
Ms. McDaniel continued to pay the premiums on that policy and on the policy loan until her death in 2005. From then on, her son Willie continued taking care of the policy, paying premiums and paying back what was owed on the loan.
When Willie passed away in March 2016, NCM said they only owed the family about half of the $10,000 face value of the policy. The family investigated and discovered that NCM was attempting to short them money that NCM owed. Despite the family asking for full payment, NCM has failed to make it right.
Ms. McClendon said: “My mother and brother worked hard to protect our family. Losing them was hard on our family. We expected the life insurance company to stand behind their policy and to pay what they owed. We want to hold the insurance company accountable and are fighting to keep other families from being cheated.”
“Taking unfair advantage of families who bought life insurance is both wrong and illegal,” said Lieff Cabraser partner Mark Chalos. “The families deserve a square deal; they never expected to get ripped off.” “
“These families bought life insurance policies to provide their children and other loved ones in their time of need,” Montgomery Ponder partner Luke Montgomery, said. “It’s especially unfair to cheat grieving families.”
In 2009, NCM assumed over 52,000 life insurance policies from Alabama insurance companies Booker T. Washington Insurance Company, Inc., Protective Industrial Insurance Company, and Universal Life Insurance Company. At the time of the assumption, the Alabama insurers were in receivership proceedings.
A large number of the life insurance policies had modest face values, around $10,000, and many policy holders were encouraged to take out “policy loans” based on the value of the policies. As noted in the complaint, these policy loans had specified interest rates in loan documents, many of which are believed to have an interest rate of 5 percent. When NCM took over the policies, it allegedly did not apply the interest rate promised in the loan documents to the policy loans. Instead, NCM intentionally applied a 6 percent interest rate to all policy loans, the complaint states. As a result, policyholders were charged an interest rate higher than the agreed upon rate, again as noted in the complaint.
In addition, payments made on the policy loans were pocketed by the insurance companies and allegedly not applied properly to the loans. As a result, when life insurance proceeds were eventually paid following the death of a loved one, NCM did not pay the full amount owed to the beneficiaries, according to the complaint.
Policyholders or beneficiaries of life insurance policies originally sold by Booker T. Washington Insurance Company, Inc., Protective Industrial Insurance Company, or Universal Life Insurance Company in Alabama or elsewhere, who believe they have been cheated, are urged to contact us about their experiences.
About Lieff Cabraser
Recognized as “one of the nation’s premier plaintiffs’ firms” by The American Lawyer, Lieff Cabraser Heimann & Bernstein, LLP is a seventy-attorney law firm with offices in San Francisco, New York, and Nashville. We are committed to achieving justice for consumers, employees, patients, investors, and business owners; promoting safer products and fair competition; protecting our environment; assisting individuals blow the whistle on fraud; safeguarding the rights of patent and copyright holders; and remedying violations of the civil rights of citizens worldwide.
About Montgomery Ponder
Montgomery Ponder, LLC focuses on complex litigation, class actions, False Claims Act cases, and railroad litigation on behalf of consumers, small businesses, and individuals in Alabama and in partnership with firms across the nation. Montgomery Ponder utilizes sophisticated case strategy tools to pursue the most significant cases involving deceptive trade practices, illegally billing the government, or corporations wrongfully withholding consumer funds.
Lieff Cabraser Heimann & Bernstein, LLP