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Lawsuit: Teachers were tricked out of $60 million in insurance coverage

Josh Moon

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By Josh Moon
Alabama Political Reporter

A class action lawsuit filed in Dallas County Circuit Court earlier this month claims nearly 500 Alabama teachers were bilked out of approximately $60 million in long-term insurance coverage by American Fidelity Life Insurance Company.

The lawsuit, filed by six current educators in Dallas and Montgomery counties, claims representatives from American Fidelity tricked them into purchasing new life insurance policies — policies that allegedly had “more stable” rates — in order to cancel their previous policies. Their previous policies carried a long-term care rider, which provided the holder with up to 75 months of long-term care at 4 percent per month of the face value of the policy.

“Defendant American Fidelity obtained a list of educators who had insurance paid for by payroll deduction,” the lawsuit states. “American Fidelity salesmen approached the plaintiffs and other educators … and offered them a term life policy underwritten by TexasLife Insurance. American Fidelity did not reveal to the plaintiffs that purchasing their policy would cause the plaintiffs to lose long-term care coverage.”

Essentially, once the teachers purchased the new policies, American Fidelity cancelled their previous policies which contained the long-term care coverage.

The lawsuit claims that American Fidelity failed to file the proper paperwork with the Alabama Insurance Commission, which would have alerted it that the company planned to terminate nearly 500 policies. The lawsuit claims this is evidence of American Fidelity attempting to hide its fraud.

“(American Fidelity) had a duty under common law and under Alabama statutes and insurance regulations to honestly compare their product with the product they replaced and inform the (teachers) that purchasing from them would effectively cancel their long-term care coverage,” the lawsuit states.  

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American Fidelity has not yet filed a response to the lawsuit. A call to the company’s headquarters in Oklahoma seeking a comment on the suit was not returned.

Josh Moon is an investigative reporter and featured columnist at the Alabama Political Reporter with years of political reporting experience in Alabama. You can email him at [email protected] or follow him on Twitter.

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