American Bankers Life Assurance Co. Hit with Class Action Over Alleged Automatic, Unauthorized Premium Withdrawals

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A proposed class action claims American Bankers Life Assurance Company of Florida has a practice of continuing to automatically withdraw bank loan insurance premiums from policyholders’ accounts even after the loans have been paid off.

The case alleges the defendant has “never sent policy updates or premium notices” to policyholders yet has continued to collect premium payments while the insureds may not be aware that a policy even exists.

The lawsuit, which has been removed from Raleigh County, West Virginia Circuit Court to the state’s Southern District Court, claims American Bankers has violated West Virginia law, its own written policies, and ethical standards of good faith and fair dealing “without regard to financial losses to its policyholders.”

American Bankers sells life, disability and unemployment insurance to bank customers as part of bank loan transactions, the suit explains. Per the lawsuit, the defendant’s policies are marketed as insurance to pay off loans in the event of a covered claim, such as a policyholder’s death, loss of employment or disability. 

The case was filed by a Raleigh County, West Virginia resident who serves as the administratrix of her deceased husband’s estate and a third-party beneficiary of his American Bankers credit life insurance policy, the complaint states. The plaintiff relays in the suit that her husband obtained in March 1994 an American Bankers credit life insurance policy, which he paid for through automatic monthly premium withdrawals of $17.50 from his bank account, in connection with a 30-year loan to purchase real estate in West Virginia.

The lawsuit alleges American Bankers has had a practice of using loan officers as unlicensed insurance agents to sell its insurance products and then issue a certificate of insurance without providing customers with a copy of the policy itself. Once customers have paid off their loans, the defendant would, unbeknownst to them, continue collecting premium payments through automatic withdrawals from their bank accounts “and never communicate with its insured,” the suit attests.

According to the case, West Virginia law requires insurers such as the defendant to terminate all credit life and credit accident and sickness insurance when the indebtedness is paid off or discharged and provide any refunds to policyholders. Moreover, state law further requires insurers to review policyholders’ bank accounts to determine whether the policy needs to be terminated or adjusted or if claims need to be paid, the lawsuit says.

American Bankers, the case claims, has failed to comply with both of the law’s requirements.

“Due to the lack of communication or proper review of accounts by American Bankers and the passage of time, its insureds, including Plaintiff and the putative class members, were unaware that an American Bankers policy existed, remained in force, and that premium payments were being automatically withdrawn every month,” the complaint alleges.

Though the plaintiff’s husband, for example, paid off his loan in 2009, American Bankers failed to cease premium withdrawals, terminate the policy or communicate with the man regarding the withdrawals and the policy remaining in force “despite its legal and good faith requirements to do so,” the case alleges. As a result, the plaintiff continued to make premium payments for the policy for more than 10 years after the loan was paid off, the suit says. Per the case, the plaintiff did not become aware of the “wrongful premium payments” and existing life insurance policy until June 2020.

The lawsuit claims American Bankers has “intentionally and deliberately” failed to properly communicate with policyholders regarding their existing policies and premium withdrawals “in order to increase profits” by avoiding claims and continuing to collect premium payments. From the complaint:

The lawsuit looks to represent those who have held a West Virginia certificate of insurance through the defendant at any time since March 22, 2011 and whose bank loan was paid off but from whom automatic insurance premiums continued to be withdrawn through a banking institution.

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