A Georgia state court judge recently preliminarily approved a $45 million settlement of a nationwide class action lawsuit concerning allegedly improper servicing of credit life and disability insurance policies in Toole v. JMIC Life Insurance Co., Georgia Super. Ct. Docket No. SU-03-CV-246 (filed 2003).
Credit life and credit disability insurance policies cover payment of consumer loans if the consumer dies or becomes disabled during the repayment period. Generally, the policy premiums are paid up front in a lump sum that is added to the loan principal. In the Toole case, the plaintiffs alleged that when consumers paid off their loans early, the insurer did not refund the unearned premiums unless the consumers requested such refunds in writing, essentially retaining premiums paid to protect against a risk that no longer existed. The insurer argued in court filings that it routinely refunded unearned premiums when its insurers notified it of early loan repayment, but that it was not required to monitor its insureds’ financing information.
If the settlement receives final approval, the $45 million settlement amount will be paid into a trust fund. Any amounts remaining after class member settlements and legal fees are withdrawn will be used for charitable consumer rights purposes, according to counsel for the plaintiffs.