The Tribune

By NEIL HARTNELL Tribune Business Editor COLINA Insurance Company has slammed as "embarrassing" allegations that it "mis-sold and negligently misrepresented" the benefits of Universal Life insurance policies to five elderly Bahamian policyholders, who have initiated a 'class action' type lawsuit against the BISX-listed insurance giant. In their statement of claim, which has been obtained by Tribune Business, the five allege that they were misled by the insurer's sales agents and marketing materials into believing that their Universal Life policies were a 'traditional life insurance policy with a savings element', and did not adequately explain the risks associated with a portion of their premiums being invested in various mutual funds. The five - Maria Burrows, Margaret Foreskin, Arthur Peet, Inez Peet and Virginia Sawyer - alleged that they were all contacted by Colina Insurance Company in October 2009 to warn them that their insurance policies "had achieved, or were close to achieving a 'negative fund balance', and were therefore purportedly liable to cancellation". But, while admitting that such a letter was sent out, Colina Insurance Company, in its amended defence filed on February 8, 2012, denied it warned that their policies were "liable to cancellation". And, in denying the claims of 'negligent misrepresentation', Colina described them as "embarrassing", saying the five policyholders in their statement of claim had failed to identify any specifics or particulars to back-up their allegations. "It is specifically denied that there was any failure to disclose any material circumstances in relation to the policies," the BISX-listed insurer said. "Insofar as the plaintiffs rely on misrepresentation, no representation is pleaded, no falsity alleged, and no reliance is pleaded. No particulars are given of the allegation that the defendant [Colina] negligently represented the benefits of the policies." However, Colina Insurance Company admitted it had failed to issue annual certificates to the five policyholders, in accordance with their policy terms, providing critical financial information on the performance of their investments. This had been rectified from May 2009, the insurer said, denying this oversight was "a fundamental breach" of the policies. And Colina Insurance Company also admitted it was aware that the five policyholders had complained about the situation to the sector regulator, the Insurance Commission of the Bahamas (ICB). A March 19, 2010, letter from the Insurance Commission, quoted in the plaintiffs' statement of claim, said it had "received significant numbers of similar complaints" regarding Colina Insurance Company's Universal Life product and the remedies offered by the company to affected policyholders. "After initially reviewing the situation, the ICB was of the opinion that the company [Colina] breached provision seven of the policy's contract and failed to provide useful information to policyholders on a timely basis in order to make informed decisions," said the ICB letter. "In light of this, the ICB had requested that the company reconsider its position presented to the affected policyholders and offer more favourable and reasonable options." In response, Colina Insurance Company said it would rely on the full slate of correspondence with the regulator if the case came to trial. Tribune Business understands that long-running mediation efforts, attempting to broker a settlement between the two parties, has failed leaving a likely Supreme Court date as the only option. Colina Insurance Company, meanwhile, also conceded it had made a number of voluntary offers to the five policyholders "in an effort to provide for the continuity of the life cover, but it is denied that such offers were attempts by the defendant 'to cure its default', and it is denied that such offers 'are to the clear and material disadvantage of the plaintiffs'. To the contrary, as was confirmed by the ICB, the offers were fair in all the circumstances". The life and health insurer added that the policies for Ms Burrows and the Peets' remained in force, while it had "undertaken" to main the policies for the other two plaintiffs until December 31, 2014, provided they paid their due premiums and made no further cash withdrawals. Colina Insurance Company inherited the Universal Life insurance policies on May 28, 2003, when its acquisition of Global Bahamas - the carrier that initially sold and issued them between 1993 and 1997 - was completed, the latter's business being merged into its own. It was Global Bahamas that issued the policies, leaving Colina Insurance Company to now deal with the situation. In their statement of claim, the five policyholders - who are all aged between 64-76 years-old - alleged that the correspondence sent to Ms Sawyer informed here that her policy had a negative fund balance of $4,830 as at September 30, 2009. And Ms Burrows was told, via an October 20, 2009, letter that her Universal Life premium would increase from $73.76 to $318.74 per month. "The defendant's above-mentioned proposed revised scheme meant that the first plaintiff's monthly premium payments would substantially increase in amount, as opposed to decreasing over time as indicated on the face of her policy," the statement of claim alleged. "The defendant contacted, or was contacted by, the plaintiffs and gave them all the same or similar information concerning their policies' purported fund balances, and provided them with the same or similarly unacceptable options." By failing to provide the policyholders with the annual certificate detailing their fund balances, they alleged that Colina Insurance Company had prevented them from being able to "make an informed decision as to the future of their policies". "The plaintiffs have invested significantly in the said policies, and cannot now, due to their ages and other factors, find comparable coverage on the terms which they originally agreed with the defendant," the statement of claim alleged. "Even the defendant does not now offer the plaintiffs life coverage on comparable terms. The plaintiffs are at the date hereof 70, 64, 76, 75 and 68 years of age respectively." In response, Colina Insurance Company said: "The defendant admits that, for a period of time, it did not issue certificates to the plaintiffs in accordance with the terms of the policies. It is denied that there has been any failure (negligent or otherwise) to keep the plaintiffs properly informed. "It is denied that the plaintiffs have suffered any loss as a result of the failure by the defendant to issue certificates." Colina Insurance Company said it denied "each and every allegation" in the statement of claim, which is seeking a variety of declarations to safeguard the policies and associated benefits, plus damages for alleged breach of contract and negligent misrepresentation. The five policyholders are being represented by Cedric Parker & Company. Colina Insurance Company is being represented by Alexiou, Knowles & Company.