A class action lawsuit brought against Mass Mutual Life Insurance Company has resulted in preliminary approval of a $37.5 million payout. The payout benefits policyholders of Mass Mutual participating policies held between January 1st, 2001 and December 31st, 2016. A participating policy is one that receives dividends. ITM TwentyFirst has begun to receive notices of the payout that was agreed to in a document filed March 13th of this year in United States District Court District of Massachusetts. ITM TwentyFirst manages or reviews almost 1,000 policies from the carrier, the majority being whole life participating policies.
The settlement grew out of a case filed in 2012 against the carrier that, according to information provided by the court (1), alleges the carrier “withheld more surplus than allowed by Section 141 of Chapter 175 of the General Laws of Massachusetts.” The suit, which was brought by a Massachusetts resident on behalf of herself and others with a similar claim, maintained that “MassMutual therefore was obligated to pay additional dividends on its participating policies in years during the Settlement Class Period.”
Mass Mutual, as its name implies, is structured as a mutual insurance company, owned by its policyholders, not outside investors. The carrier denied any wrongdoing in this case, saying they settled the case to avoid additional expenses, disruption, and risk.
The amount of the payout “is based on annual dividends paid on each participating policy…as a pro rata share of the total amount of annual dividends MassMutual paid on all participating policies issued during the Settlement Class Period.” Therefore, the larger the dividends received by a policyholder during this time, the higher the benefit.
If you presently own a policy that is part of this settlement your benefit will be received as a paid-up addition to your policy. If your policy for some reason cannot receive paid-up additions, or if you previously owned a policy that is part of the settlement but no longer do, you will receive a check for your pro rata share.
You do have options as a policyholder. You can exclude yourself and retain rights to pursue further claims against the carrier by notifying the court by July 3rd of this year, you can object to the settlement in writing by the July 3rd date, or you can attend a hearing scheduled for July 27th in Boston to speak out on the case. If you do nothing, the settlement amount will be paid out to you as noted above.
Attorney fees will be paid out of the settlement, but will be limited to no more than 25% of the settlement amount.
This is a preliminary settlement and if and when the court approves a final settlement, “a final order and judgement dismissing the case will be entered in the Action.”
While the $37.5 million settlement number may seem large, Mass Mutual will pay out an estimated $1.6 billion in dividends this year (2). The settlement amount will average approximately $22 per policyholder, a fraction of the dividends paid yearly on a typical well-seasoned Mass Mutual whole life policy.
- Class Notice, United States District Court for the District of Massachusetts, Karen L. Bacchi v. Massachusetts Mutual Life Insurance Company
- Mass Mutual Press Release dated November 7, 2016