State Farm Faces Lawsuit Over Alleged Life Insurance Policy Violations

Update: The Niewinski et al v. State Farm case has reached a $65 million settlement. Click the preceding link for settlement and award details.

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In the world of life insurance, policyholders expect transparency and fair treatment. However, a group of policyholders led by Lorin Niewinski, John Baker McClanahan as personal representative of the Estate of Melissa Buchanan, Robert A. Bozaich, Ronnie Jackson, and Sherif B. Botros, allege that State Farm Life Insurance Company and State Farm Life and Accident Assurance Company have been less than straightforward.

The plaintiffs claim that State Farm, known for its popular universal life insurance policies, has been charging excessive amounts from policyholders' cash values, in direct violation of the policies' terms. According to the lawsuit, the policies clearly specify the charges that State Farm can deduct from the cash value. These include the cost of insurance (COI) charges and expense charges. However, the plaintiffs allege that State Farm has breached these terms by using unauthorized factors to calculate the COI rates. According to the plaintiffs, the defendant's conduct has been ongoing for decades and undiscoverable to plaintiffs and members of the Class.

"State Farm has been taking into account factors such as profit and expenses," the lawsuit states. This, the plaintiffs argue, is not only unauthorized but also a clear breach of the policies' terms.

The plaintiffs also claim that State Farm has failed to reduce the COI rates when their mortality expectations improved. According to the plaintiffs, the COI rates should be based on projected mortality. However, they allege that State Farm has not been following this principle.

"State Farm's conduct has caused harm by draining policyholders' cash values," the lawsuit states. This has allegedly forced policyholders to make additional payments or risk policy lapse.

The plaintiffs argue that State Farm's conduct has been ongoing and intentional, which they believe justifies punitive damages. They also claim that any statute of limitations has been tolled due to the inherently undiscoverable nature of State Farm's conduct, fraudulent concealment, equitable tolling, the defendants' duty to disclose, and the ongoing nature of the breaches.

The lawsuit seeks class certification, arguing that the class satisfies the requirements of numerosity, commonality, typicality, adequacy, and superiority under Rule 23.

The plaintiffs are seeking relief on behalf of themselves and a class of individuals who purchased life insurance policies from State Farm. The plaintiffs allege that State Farm breached the policies by using unauthorized and undisclosed factors to calculate the COI rates, deducting charges in excess of what was authorized, and failing to reduce COI rates when their expectations of future mortality improved.

"As a result of State Farm's breaches, we and the class members have suffered damages," the plaintiffs claim. They assert causes of action for breach of contract, breach of the covenant of good faith and fair dealing, and conversion, and seek declaratory and injunctive relief.

The plaintiffs request certification of the class, appointment of class representatives and counsel, and notification of the class members. They seek compensatory damages, punitive and exemplary damages, a declaration that State Farm's conduct is unlawful and in breach of the policies, injunctive relief, pre-judgment and post-judgment interest, attorneys' fees, and costs and expenses.

"We demand a jury trial for all triable issues," the plaintiffs state in their lawsuit.

This case serves as a reminder of the importance of transparency and fair treatment in the insurance industry. As the lawsuit unfolds, policyholders across the country will be watching closely to see how the court rules.

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