American Express Settles Sales Practices Class Claim Firm sets aside $215 million to pay as many as two million customers.
American Express Financial Corp. is settling a class-action claim alleging fraudulent and deceptive insurance and annuity sales practices.
The settlement was approved by a district court in Minneapolis in September 2000, and class members had until Jan. 29, 2001, to participate. American Express has set aside $215 million for class members and will pay up to $28 million in plaintiffs' attorneys fees.
The products involved were issued primarily by IDS Life Insurance Co., an American Express subsidiary, and sold by reps with American Express Financial Advisors.
At press time, it was not known how many of the more than two million eligible customers will apply for relief, according to Brad Friedman, one of the attorneys for the class with Milberg Weiss Bershad Hynes & Lerach in New York. The settlement covers policyholders from Jan. 1, 1985, to Feb. 29, 2000.
The plaintiffs alleged that the firm and its brokers churned insurance policies and annuities, overstated product performance, misrepresented insurance as an investment product, and wrongly sold annuities to qualified plans and senior citizens.
American Express was aware of the churning activity, trained advisers to encourage replacement and provided sales materials to that effect, according to the complaint. The suit claims that more than 25% of IDS' insurance sales were internal replacements.
The firm would not comment on specific allegations, and in settling the suit, admits no liability.
Class members have three options - general relief, which provides an accidental death benefit; internal replacement relief, whereby transaction costs of replacement are restored; or an individual claims review.
A fairness hearing is scheduled in March to review the response of class members. American Express expects to pay the claims throughout this year, according to Tom Joyce, a Minneapolis-based spokesperson for the firm.
"We are pleased that the settlement has been reached and that we can put this issue behind us," Joyce says.