Prudential is facing a class action suit for fraud in the United States District Court for the District of New Jersey for selling Buy-Up Long Term Disability Insurance, Supplemental Term Life Insurance, and Supplemental Accidental Death & Dismemberment policies to employees of defense contractors working overseas without disclosing the presence of a wartime exclusion in the policies. New Jersey Law Journal, May 21, 2012. Specifically, the policies state that Prudential will not cover losses “due to war, declared or undeclared, or any act of war.” As Prudential was allegedly aware that it was selling these policies to individuals supporting military operations in Iraq or Afghanistan, the Complaint alleges that Prudential wrongfully profited from selling policies, as it “knew that the [policies containing the exclusion] would be of negligible value and/or of no value to” plaintiffs who became disabled, dismembered, or died while working in Iraq of Afghanistan. (Complaint, paragraphs 23, 49, and 74).
The Complaint alleges losses based on plaintiffs’ payments of premiums to Prudential, and Prudential’s denial of claims based on the wartime exclusion. Highlighting the case are the claims of the class representatives. Stephen Wolfe was offered a benefits package when he accepted employment with a defense contractor at the Kirkuk airbase in Iraq, and he additionally selected buy-up coverage and supplemental term life insurance, which combined cost him nearly 30 dollars a month. Alexander Menkes, a retired Major from the United States Army Reserves, worked as an aviation Physician’s Assistant/Flight Surgeon in Kirkuk, and purchased both buy-up long term disability and accidental death and dismemberment insurance. While serving in Iraq, he became disabled due to a lumbar spine injury, exposure to tuberculosis requiring a long-term course of medication, and post-traumatic stress disorder stemming from his exposure to the fighting. Prudential refused to pay his disability claim under the wartime exclusion in the policy. The plaintiffs brought suit under the New Jersey Consumer Fraud Act; New Jersey Truth in Consumer Contract, Warranty and Notice Act; state deceptive practices acts; and common law fraud.
While it remains to be seen how this case will play out in the District Court, a victory for the plaintiffs would send a message to insurance companies that the courts will heavily scrutinize insurance transactions and will not allow insurers to profit off of illusory deals.