Nassau Financial Sues Its Insurers for Help With Paying Its Legal Bills

Nassau Financial, the parent of life insurance and annuity issuers, has sued its own insurers for help with paying bills related to lawsuits involving universal life insurance policies.

James Kenney, the owner of a universal life policy written by PHL Variable Insurance, is seeking permission from the U.S. District Court in Connecticut to represent a class of PHL policyholders affected by cost-of-insurance charge increases.

PHL was acquired by Nassau in 2016 and was separated from Nassau in 2021. It recently entered rehabilitation in Connecticut.

“In defending the Kenney Action, Plaintiffs have incurred, and will continue to incur, substantial ‘Defense Expenses,’” PHL says in the complaint. “Plaintiffs also confront the potential of having to fund a settlement or satisfy an adverse judgment.”

A universal life policy is set up in such a way that the the performance of the assets inside the policy is separate from the cost of administering the policy and protecting against mortality risk.

Universal life policy issuers may increase cost-of-insurance charges for a variety of reasons. Some holders of universal life policies issued by PHL and a variety of other issuers have sued over cost-of-insurance increases, arguing that they were not warned adequately about how the COI charges might change.

Nassau says that it’s currently the named insurer for $10 million in directors and officers coverage and $5 million in errors and omissions coverage written by XL Specialty Insurance Co.