Lawsuit Charges JCPenney With Insurance Scam

A class-action lawsuit filed against J.C. Penney Co. Inc. alleges that the company and its business partner used telemarketing to mislead millions of consumers into buying worthless insurance policies.

The suit, filed June 28, charges JCPenney and Dutch insurance firm Aegon with charging consumer credit cards without permission as well as with denying rightful claims made by consumers on insurance policies.

JCPenney has marketed an accidental-death-and-dismemberment insurance policy to consumers via telemarketing since 1987. According to attorneys at Berg & Androphy, the law firm representing the plaintiffs, JCPenney promised to send information in the mail to interested consumers without obligation.

In some cases, consumers were told the first three months of premiums on the insurance policies would be paid for them, according to the law firm.

However, the consumers were automatically enrolled, and no signatures were required to activate the policies, the law firm charged. JCPenney made withdrawing from the program “nearly impossible” and capped all refunds at two or three months regardless of how long the premiums had been paid, according to the suit.

A spokesman for JCPenney, Plano, TX, did not return phone calls yesterday. JCPenney sold its telemarketing unit to Aegon in March for $1.3 billion and gave Aegon the right to sell insurance products endorsed by JCPenney.

The lawsuit stems from the case of a Corpus Christi, TX, woman, Marguerite York, 81, who died in June of injuries sustained in a 1999 car accident. Her son, Houston attorney William York, discovered she had unknowingly paid premiums through her credit card on a $100,000 life insurance policy since 1993, the law firm said.

The policy specifically protected York if she was “struck by a vehicle,” but JCPenney automatically denied the claim, the law firm said.

Lawyers for the plaintiff argue that the insurance policies offered to consumers were worthless. They also claim JCPenney targeted elderly and low-income consumers and used high-pressure tactics to make sales.

The law firm is seeking up to $4.4 billion in damages from the class-action lawsuit, which could include those among JCPenney's 12 million insurance customers who have unknowingly paid for policies as well as those whose claims were rejected, the law firm said. The lawsuit was filed in state district court in Corpus Christi.

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