Transamerica Cost Of Insurance (COI) Case Results In Win For Plaintiffs

Less than two weeks ago we reported on an interesting COI increase lawsuit. In that case, DCD Partners v Transamerica Life Insurance Company, a Los Angeles church pastor who enlisted an outside investor to finance life insurance policies providing burial funds for congregants had filed suit, along with the investor, against Transamerica for a 50% COI increase in policies issued to the group. In their lawsuit, the plaintiffs alleged among other things, breach of contract in violation of California law and breach of the covenant of good faith and fair dealing.

On September 13th after a one week trial in the courtroom of Christina A. Snyder, US District Judge in the Central District of California, the jury handed down their verdict.

The Verdict Form asked four questions:

The first, under the heading, Breach of Contract, asked…Did Transamerica breach the insurance policy contract? The jury answered yes.

The second, under the heading, Implied Covenant of Good Faith and Fair Dealing, asked…Did Transamerica breach the covenant of good faith and fair dealing implied in the insurance policy contract? The jury answered yes.

The third, under the heading, Damages, asked…Did DCD suffer any damages caused by the breach of contract or breach of the implied covenant of good faith and fair dealing? The jury answered yes.

The fourth, since the jury said damages were caused, asked…How much damage did DCD suffer? The jury answered $5,608,495.57

The case involved 2,400 policies that were taken out in 2004. The death benefit of each $275,000 policy was split between the investor DCD $225,000, a charity started by the pastor, $35,000 and the insured’s beneficiary, $15,000. According to the Wall Street Journal, $50 million of the potential $660 million in benefits has already been paid out. (1) 

While both the church pastor and the investment firm stated they relied on Transamerica reassurances that the chance of future COI increases were remote when purchasing the policies, court documents showed that both were aware that the costs within the policies could increase.

The lawsuit was originally filed in 2015 and alleged that Transamerica “impermissibly used race-based data” when calculating the COI increase as the policies insured members of a majority African American church. Transamerica denied the allegations as “categorically false and offensive.”

The outcome may bode well for plaintiffs in other COI increase cases still being litigated.   

  1. Life Insurer Faces Off Against African-American Church in Battle Over Rates, Leslie Scism, The Wall Street Journal, September 1, 2017