Advertisement
The suit alleges that the retirement vehicles sold by Midland don't make sense for seniors because the annuity payment schedule in most cases doesn't begin until after the policyholders die.
Steve Horvat, senior vice president and general counsel at Midland, said in a telephone interview that the company was reviewing the suit and had no immediate comment.
The lawsuit says that John Migliaccio purchased a life insurance annuity policy from Midland at age 73, paying about $43,000 in premiums. Based on the company's payment schedule, he was not due to receive payouts until he turned 115 years old. Migliaccio died 17 months after buying the policy.
William Shernoff, a partner at the law firm representing the plaintiffs, said Migliaccio's widow is entitled to receive a death benefit payout of about $48,000, which includes his premium and $5,000 in interest on his investment.
Linda Lanam, vice president of annuities and market regulations at the American Council of Life Insurers (ACLI), said every annuity offering has a different component based on a variety of factors, but that there is no legal structure that deals with age. However, most firms have age-appropriate exceptions, she said.
Shernoff, of Shernoff, Bidart & Darras, said that payment on insurance annuities should start at retirement age, not at a time after life expectancy.
Midland's policyholders are also being duped into paying significant surrender charges, Shernoff said. According to the policies, the elderly are only allowed to withdraw 10% of money at a time without having to pay a fee that in some cases is as high as 22%, Shernoff said.
Most annuity contracts allow for some funds to be withdrawn without charges. When there are surrender charges-charges deducted from a withdrawal-they generally don't exceed 15%, Lanam said. She said she hadn't seen surrender charges as high as the suit alleges.
