Noteboom The Law Firm

VA And Prudential Had Secret Agreement Over Life Insurance Benefits

September 17, 2010 - The Department of Veterans affairs (VA) promised to look into allegations of Prudential Financial profiting off the life insurance payments of deceased veterans by withholding lump sum payments to their families. They appeared outraged at the prospect of that happening and launched their own investigation. What they failed to mention was a secret agreement between the VA and Prudential Financial which allows the actions in the first place.

The agreement allowed Prudential to hold back the lump-sum life insurance payments to survivors. In other words, the VA authorized Prudential to hold back those payments owed to survivors so Prudential could earn income itself off the money from investments. These "retained asset-accounts" have been in use since 1999, but were not put into writing until 2009.

Some groups are equating Prudential's actions to war profiteering. The VA allowed Prudential to profit for 10 years at the families of soldiers' expense. When families chose to accept a lump sum payout and they were not given that payout, Prudential violated their contract with the VA. Every time a lump sum payout was not issued, Prudential violated the contract. Possibly worse than that, is the VA failing miserably in their role of advocate for veterans.

The amount of investigations opened into these events is staggering. Aside from the VA's investigation, investigations were also launched by:

• State and Federal officials;
• New York Attorney General Andrew Cuomo;
• Georgia and New York's Insurance Departments; and
• The U.S. House Oversight and Reform Committee.

The VA has announced they will change their insurance program to allow immediate availability of lump sum payouts. Five survivors have also filed a federal law suit against Prudential based on their improper benefits (Lucey v. Prudential Insurance Company of America).