Calif. Lawsuit Charges Insurers, Financial Planners with Taking Advantage of Seniors

Two Bay Area senior citizens organizations have announced that a consumer protection lawsuit they filed in October in San Francisco Superior Court puts annuities companies on notice to end unfair marketing to seniors.

The lawsuit charges two insurance companies and three others offering deceptive estate planning services with colluding to operate “living trust mills” that target seniors as sales prospects for annuities that often do not mature until after their buyer’s death.

The suit seeks substantial reimbursement and damages based on the companies’ earnings in commissions as well as other profits from the annuity sales.

The two Bay Area organizations – Institute on Aging and California Advocates for Nursing Home Reform (CANHR) – say the companies lure seniors to estate planning seminars and meetings as a pretense with the intention of obtaining their personal financial information and selling them the annuities. The organizations are joined in the lawsuit by several individual seniors who have been the victims of these deceptive marketing practices.

The companies, American Equity Investment Life Insurance Company, based in Iowa; American Investment Life Insurance Company, based in Kansas; AmeriEstate Legal Plan, Inc., based in Irvine, Calif; Estate Preservation Inc., based in El Segundo, Calif; and Gentry Group Inc., based in Texas, are charged with elder abuse, false advertising, and violating California’s Unfair Business Practices law by selling annuities with severe tax penalties, exorbitant surrender charges, and long maturation dates to senior citizens.

“Unless you have a life expectancy of 110, buying an annuity at age 70 or 80 is not a good idea,” said David Werdegar, president and CEO of the Institute on Aging. “These so-called estate planning companies are, we believe, misrepresenting the nature of the services they are providing. We are joining others to tell them they are not going to get away with it any longer.”

“We want to alert seniors not to attend living trust seminars without knowing the facts,” said Jenefer Duane, CEO and executive director of Elder Financial Protection Network (EFPN), a Novato-based organization that helps prevent financial abuse against seniors. “The estate planning seminar you are thinking of attending may be a front for an annuity sales pitch,” she noted. “Never get rushed into a financial decision. Do not sign your savings over to an estate planner without first getting independent advice.”

Seniors targeted by living trust mills are typically lured to estate planning seminars by newspaper ads promising free advice or billed as community service events. Once there, they are reportedly subjected to high pressure sales pitches for living trusts and annuities.

Government agency action taken

The California Department of Insurance warned companies against operating living trust mills in 2002, and California and other states have taken sporadic action against the mills.

AmeriEstate was fined for violations of Pennsylvania’s Consumer Protection Law by the Pennsylvania Attorney General in 2003. Estate Preservation Inc. was the subject of a 2002 California Department of Insurance action alleging fraudulent business practices. Gentry Group Inc. was the subject of enforcement actions by the Federal Trade Commission in 1997, the Attorney General of Oregon in 2001, and the California Department of Corporations in 2004 alleging deceptive trade practices.