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In 2018, a California federal court entered a final judgement in favor of Brewer, Attorneys & Counselors client DCD Partners, LLC. The judgment arose out of a suit filed in 2015, which alleged that Transamerica Life Insurance Company (“Transamerica”) imposed unprecedented and exorbitant increases in premiums on thousands of life insurance policies in 2013. The judgment represented a defining chapter in a case that captured national headlines.
The lawsuit and legal strategy
DCD Partners sued Transamerica in 2015, alleging Transamerica improperly increased life insurance premiums by 50 percent in 2013 on more than 2,000 insureds – predominantly African-Americans from South Los Angeles, who were parishioners of the Praises of Zion Missionary Baptist Church, and other community churches.
Issued in 2004, the policies were part of a charitable life insurance program that provided family members money for burial expenses and funds for the charitable activities of the non-profit Personal Involvement Center and other non-profit groups in that community.
Following a trial, on September 13, 2017, a jury rendered a verdict for DCD Partners on its claims for breach of contract and breach of the implied covenant of good faith and fair dealing.
On August 1, 2018, the Court denied Transamerica’s post-trial motions for new trial and for judgment as a matter of law.
On December 13, 2018, the Honorable Christina A. Snyder of the United States District Court for the Central District of California entered the final judgment.
In addition to the award for DCD Partners, the Court also enjoined Transamerica from continuing to charge excessive rates, based on an increase the jury determined breached the insurance policy. The injunction was the first entered against Transamerica in any rate increase litigation since Transamerica began raising its life insurance rates in the late 2000s.
“The jury verdict and final judgment send a clear message to Transamerica: insureds have contractual rights that cannot be ignored in Transamerica’s seemingly endless pursuit of profits. This case underscores the rights of insureds.”
Justice for all
This case attracted national attention because of the emerging focus on life insurance companies that improperly increase rates on policyholders in order to make up for diminishing investment returns and faulty underwriting practices.
Rev. Benjamin Hardwick, founder and senior pastor at the Praises of Zion Missionary Baptist Church, established the program to ensure that families in his community would not be burdened with burial expenses when their family members passed away.
In seeking an insurance company to help establish the program, Rev. Hardwick has stated he was concerned about “redlining,” the practice of charging policyholders in the same policy class higher rates than others in the class based on characteristics of their community or ethnic background, as his congregation consists mostly of African-Americans.
An article in The Wall Street Journal, “Federal Jury Rules Against Transamerica in Battle Over Rates,” dated September 15, 2017, reported that the lawsuit “…was a closely watched case that challenged the leeway life insurers have when raising rates on old policies.”
“This legal victory enables the life insurance program to continue to provide benefits for the community, the individual insureds, and the investors who have sustained the program,” Brewer said. “It also establishes precedent that will inform future decisions about the rights and responsibilities of parties involved in these types of arrangements.”
Related News
The Wall Street Journal: “Federal Jury Rules Against Transamerica in Battle Over Rates”
Law360: “Jury Awards $5.6M in Fight Over Increased Insurance Rates”
Los Angeles Sentinel: “Hardwick Wins $5.6 Million Lawsuit Against Transamerica Life Insurance”
The Wall Street Journal: “Life Insurer Faces Off Against African-American Church in Battle Over Rates”
