A federal court judge in California has rebuked Conseco Life Insurance Co., ruling against them in a class action suit.
The ruling will prohibit the insurer from tripling its rates on nearly 50,000 life insurance policies sold in the late 80’s into the mid 90’s. The decision was made on Wednesday.
The case began in 2002, when the Indiana Department of Insurance voiced their worry about the insurers’ ability to manage itself appropriately. Conseco filed for Chapter 11 bankruptcy protection that year after it failed to acquire a competing insurance group. After this, Conseco formulated plan to sell policies at a lower than expected rate, only to raise the premiums of the policies after they reach their 21st year of service.
Though last year Conseco insisted that they had no intentions of raising rates, Judge A. Howard Matz determined that the simply formulating the plan was in violation of operating terms.
The ruling may prevent other insurers from raising their rates on policies sold in the 1980’s. Andrew S. Friedman, attorney at Bonnett Fairbourn Friedman & Balint, said that there have been no signs of companies attempting to raise rates the way Conseco had. But he notes that insurers have been raising rates on policies that have had tragic consequences for the policyholders, financially speaking.
Conseco Life is expected to battle the decision, holding that they have the right to raise premiums as the market dictates they must.
Friedman hails the ruling as a victory for those that have dutifully paid for their coverage for the past 20 years.