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January 16, 1997 (#003) CDI pressrelease concerning a crackdown On Prudential Insurance Company
COMMISSIONER QUACKENBUSH CONTINUES
CRACKDOWN ON PRUDENTIAL INSURANCE COMPANY
Prudential's ticket could be pulled in
California unless consumers get fair compensation,
Commissioner says
SACRAMENTO--California Insurance Commissioner Chuck Quackenbush announced today that he is continuing his crackdown against Prudential Insurance Company by issuing subpoenas and forming a special investigative task force. He is seeking to suspend Prudential's license if they do not fairly and adequately compensate hundreds of thousands of policyholders victimized from 1982 through 1995.
"I am taking a tough approach against Prudential Insurance Company as I have from the beginning to ensure that consumers are made economically whole. Consumers should not have to come hat-in-hand to prove they were defrauded," Commissioner Quackenbush said.
"While Prudential's unethical practices have been under review by my Department for the past 18 months, the progress of discussions with Prudential about this matter convinces me that we need to finalize our case against Prudential as soon as possible. Consequently, today I issued the first of several forthcoming subpoenas and have formed a special task force of investigators and attorneys to develop the final pieces of evidence necessary to suspend Prudential's license."
In June, 1995, California joined several other states in a multi-state market conduct examination of Prudential. The examination revealed that, from the early 1980's to the early 1990's, Prudential insurance agents across the country used misrepresentations, omissions, and forgeries to sell new life insurance policies to existing Prudential policyholders. As a result of these findings, the multi-state task force and Prudential proposed a settlement under the terms of which Prudential would pay a $35 million fine and implement a nationwide remediation plan to compensate policyholders. The California Department of Insurance rejected the proposed settlement because the Department believes that the settlement did not provide fair and equitable relief to policyholders who were victimized by Prudential's improper sales practices.
"The California Department of Insurance did not rush to judgment and did not settle quickly in order to let Prudential off the hook. Instead, we filed an objection to a class action lawsuit last month, and today unveiled our own independent attack plan in order to get full compensation for at least 750,000 California consumers," Commissioner Quackenbush said.
The California Department of Insurance filed an objection on December 19, 1996, to the proposed settlement of a class action lawsuit filed by certain Prudential policyholders in federal district court in New Jersey. The proposed class action settlement was opposed by the Department of Insurance because it requires injured policyholders to present documented evidence of agent misrepresentation in order to get fair and equitable relief. The Department of Insurance believes that in most cases, the agent misrepresentations were verbal and policyholders might not have written documentation. As a result, the proposed settlement would not provide enough financial relief to ensure that injured policyholders could recover all of their economic losses. Additionally, Commissioner Quackenbush is concerned that recent reports of document destruction by Prudential at several of its offices could make it even more difficult for policyholders to prove their cases because critical documents may have been destroyed.
Over the past several months, the California Department of Insurance has been in discussions with Prudential to improve the remediation plan for California policyholders. The results of those discussions were not satisfactory, so further action had to be taken to protect consumers.
"Prudential refuses to make some fundamental changes to the remediation plan which are essential in order to get policyholders their money back," Commissioner Quackenbush said. "When an insurance company refuses to treat its policyholders fairly, it is my responsibility to take action to protect insurance consumers from further harm. That action includes suspending the company's authority to do business in California, if necessary."
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