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Shareholder Class Certified in Prudential Unpaid Policy Suit

"Unclaimed property" is generally defined as a liability a company owes to an individual or entity when a debt remains outstanding after a certain period of time. Most unclaimed property is abandoned because of a change of address or name, or the death of the owner. Unclaimed property laws remit the unclaimed property to the custody of a government trust account until claimants come forward. Many current and former policyholders and heirs are unaware that they are entitled to unclaimed policy benefits. If insurance companies do not handle these liabilities appropriately, several consequences concerning policyholders and shareholders can occur.

One consequence is discussed in the case, Feingold v. John Hancock Life Insurance Co, No. 13-cv-10185 (D. Mass. 2012), in which John Hancock Life Insurance ("John Hancock") consulted the Social Security Administration's Death Master File ("DMF") list regarding annuity clients' deaths, but neglected to check the database on the deaths of its customers who have life insurance policies with the company. John Hancock ultimately agreed to a $13.3 million settlement for policyholders who were owed life insurance benefits.

Another consequence is a securities-related issue that negatively impacts shareholders. When a company does not account for known unclaimed property liabilities, the company's earnings and stock price inflate because it is retaining monies that should have been disbursed to life insurance beneficiaries. So, when the New York Attorney General's Office had launched an investigation into Prudential Financial, Inc.'s ("Prudential") compliance with unclaimed property laws and the next business day the company's stock price fell from $53.99 to $48.14 per share, shareholders assumed the aforementioned effect occurred and filed a lawsuit.

On August 31, 2015, Judge Madeline Cox Arleo of the United States District Court for the District of New Jersey granted class certification to investors who purchased Prudential's publicly-traded stock between May 5, 2010 and November 4, 2011. Judge Arleo also rejected Prudential's argument that the National Shopmen Pension Fund was insufficiently educated about the case. Judge Arleo also held that the plaintiffs proved Prudential's stock trades were on an efficient market and, thus, were allowed to invoke a fraud charge. Although Prudential did not dispute the assertion that its stock price dropped after it was accused of misusing the DMF, it attributed the real cause of the stock drop to results of "contemporaneous disclosures." Judge Arleo treated Prudential's argument as a loss causation argument, which she held was not appropriate for consideration at the class certification stage.

If you have questions about issues similar to the ones discussed here, don't hesitate to speak with an attorney with experience in securities class action litigation. Class actions allow individuals to band together to take on much larger opponents, and the class action lawyers of Shepherd Finkelman, Mille,r & Shah, LLP have experience in representing clients on both sides of class action cases.

Shepherd, Finkelman, Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Wisconsin. SFMS also maintains an affiliate office in London, England and is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.

SOURCES:

Bumpus, Stacey. "John Hancock Life Insurance Faces Lawsuit on Unpaid Life Insurance Benefits." Go Insurance Rates. Last modified March 18, 2013.

Toutant, Charles. "Class OK'd in Prudential Securities Suit Over Death Payments." New Jersey Law Journal. Last modified September 2, 2015.

Winegarner, Beth. "Prudential Investors win cert. in unpaid policy suit." Law360. Last modified August 31, 2015.

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