It has recently come to light that – unbeknownst to families of American veterans – the Department for Veteran Affairs set up a secret deal with the Prudential Insurance Company which has denied millions of families of fallen soldiers their lump sum life insurance payouts. The VA allegedly allowed the Prudential to withhold funds on the basis of using so-called ‘retained assets’ accounts for 10 years.

The agreement was only made public due to a request filed to the Freedom of Information Act. The agreement, forged in 1999, was never put in writing – it allowed the life insurance company to withhold large sums of money which should have been passed directly to survivors – money which went on to make the Prudential a substantial sum in interest.

Grieving Families Disallowed Life Insurance Payouts

Brendan Bridgeland , a lawyer with the not-for-profit group Center for Insurance Research based in Cambridge Massachusetts, said that for a decade Prudential had not been fulfilling its obligations to veterans;  and that it was very clear that Prudential had been “violating the terms of the original contract.”

The revelations have appalled veterans who have accused the Prudential of “brazen war profiteering.” Paul Williams who served in the Afghanistan war as an army cavalry scout stated “When grieving families tick the box that they want a lump sum they should get it.”

Prudential and Other Insurance Companies to Face Fraud Investigation

New York Attorney General Andrew Cuomo has launched a fraud investigation into both the Prudential and other life insurers over the use of ‘retained asset accounts.’ Under the original VA contract with the Prudential the insurance company was “required to send lump sum payouts to survivors requesting them.”

However instead of life insurance payouts the Prudential was issuing families with ‘check books’ or IOUs which are not insured by the Federal Insurance Deposit Corp. The withheld payouts to survivors have were placed in investment accounts, earning the insurer over eight times more in interest than that paid in interest to beneficiaries. Prudential held over $662 million of survivors’ assets in its corporate account in June of this year.

Veterans’ Families have Good Case for Suing Life Insurer for Lost Interest

According to Bridgeland the families have a very good case for suing the Prudential. The Prudential insists it was acting in accordance with the wishes of the VA who, in a bid to salvage the situation has attempted to put in writing the changes only verbally agreed in 1999. According to insurance law Professor Jeremy Stempel this is simply an attempt to ‘reinvent history’ giving nothing to ‘the people in uniform.’

Source: Bloomberg

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