A federal judge in Los Angeles recently decided in favor of policyholders suing their life insurance company for raising rates three-fold, saying a hike of such a size was a contract violation.
Conseco Life Insurance, based in Indiana, originally notified consumers about the rate hike in 2002, after an ill-judged acquisition of a mobile home insurer left the company bankrupt, according to Investment News. That publication said the firm’s money troubles prompted the state Department of Insurance to require the company to beef up its cash on hand by 100 million dollars in order to be able to cover its policies.
Attorneys for the plaintiffs argued the “rug would be pulled out from under” people who had paid their premiums for 20 years, since the rate increase would have become effective in year 21 of the policy.
Experts say the case demonstrates another reason for customers to read the fine print of any legal document or insurance policy they sign, ensuring they understand what the insurer can and cannot do within the terms of the contract.