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DUNCAN v. UNITY LIFE AND ACCIDENT INSURANCE ASSOCIATION

April 16, 2003

JOHN DUNCAN, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF, AGAINST THE UNITY LIFE AND ACCIDENT INSURANCE ASSOCIATION, ET AL., DEFENDANTS.


The opinion of the court was delivered by: Robert L. Carter, United States District Judge

OPINION

Background

Plaintiffs, represented by Jaqueline Gadsden,*fn1 filed suit against defendants, Unity Life Insurance et al., alleging that defendants engaged in racially discriminatory practices in the marketing, sale, formation and administration of life insurance policies in violation of 42 U.S.C. § 1981 and 1982. The class consists of over 40,000 African-Americans who claim that their premiums were higher than those of Caucasians with similar insurance coverage, solely on account of the class members' race.

Originally filed in September, 2000, the parties began settlement negotiations in October, 2000, after plaintiffs had conducted extensive discovery and their own private investigation. After numerous, contentious meetings and telephonic conferences, the parties resolved their differences with respect to the material terms of the settlement in April, 2002. They now submit the Settlement Agreement for approval by the court and incorporation into this Opinion.

The proposed Settlement seeks to place the class members in the same position as similarly situated Caucasians by equalizing the death and maturity benefits in the following ways. First, defendants agree to cease collecting any racially discriminatory premiums from the class members. Second, class members with policies that have not matured will receive additional payments upon the realization of their policy benefits or, in the alternative, can choose an immediate cash payment. Third, class members whose policies matured after January 1, 1990, will have their benefits supplemented by additional payments. Fourth, class members whose policies were terminated will be allowed to reinstate their policies and be eligible to receive the same, improved benefits as those whose policies have not yet matured. Fifth, in the event a policy matures or of a death claim, a comprehensive search will be made of defendants' policies for any other policies held by the claimant/beneficiary. In total, the parties expect the settlement to provide $1,205,000.00 of relief to the class members.

The parties have also agreed that defendants would fund and establish a Notice and Outreach Program, run by a Settlement Administration Center, to inform the class of the remedies available to it. The main responsibility of the Administration Center is to mail packages with benefits statements, claim forms, and formal notices giving details of the settlement to each class member with a known address. Addresses were obtained by cross-referencing the names and addresses of the 41,649 policies against the National Change of Address system maintained by the United States Postal System, producing 17,185 policies with current addresses. (Glenn Aff. ¶ 7.)

In addition, the Center has attempted to notify those class members for whom no known address exists by publishing details of the settlement and a toll free information number in 11 newspapers whose readership is largely African-American, giving notice to 29 community centers and 409 churches in African-American communities, and establishing a website, www.unitysettlement.com. These attempts at notification were undertaken between 7-9 weeks before the deadline for class members to object or request to be excluded from the settlement. For those that call the toll free number, the Center has customer service representatives available weekdays, 9 A.M. to 5:30 P.M., to respond to questions by class members regarding their eligibility and benefits.

Following the negotiation and agreement to the proposed settlement, the parties agreed to attorneys' fees worth $284,180.00. This is slightly more than half of the actual fees of $530,000.00 incurred by plaintiffs' attorneys and only 17 percent of the value of the settlement.

Finally, of the more than 17,000 class members notified, only twelve*fn2 have chosen to opt out of the settlement and no objections have been filed.*fn3

Discussion

I. The Settlement

The court should weigh the following factors to determine whether a settlement is fair, adequate, and reasonable: (i) the complexity, expense, and likely duration of the litigation; (ii) the reaction of the class to the settlement; (iii) the stage of the proceedings and the amount of discovery completed; (iv) the risks of establishing liability; (v) the risks of establishing damages; (vi) the risks of maintaining the class action through the trial; (vii) the ability of the defendants to withstand a greater judgment; (viii) the range of reasonableness of the settlement fund in the light of best possible recovery; and (ix) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation. City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974). When evaluating these factors, the absence of collusion and presence of `arm's length negotiations' by counsel, is essential to determining their fairness. Malchman v. Davis, 706 F.2d 426, 433 (2d Cir. 1983); In re Warner Communications Sec. Litig., 618 F. Supp. 735, 740 (S.D.N.Y. 1985) (Keenan, J.).

Plaintiffs' claims involve insurance policies issued as early as the beginning of the last century. Since many of the individuals responsible for the alleged race-based pricing are no longer available to testify, at trial plaintiffs would have had to rely exclusively on expert testimony regarding defendants' internal actuarial and underwriting procedures from several decades ago to establish proof of race-based pricing. It is clear to the court that the parties' reliance on the interpretation of this data would have made continued litigation very complex, time consuming, and expensive.

Several other factors also suggest that proceeding to trial entailed a high risk for plaintiff. As mentioned earlier, the sole reliance on documentary evidence and expert testimony would have turned a trial into an unpredictable `battle of the experts.' In addition, plaintiffs still were not certified as a class by the court, defendants had a strong statute of limitations defense, extensive motion practice was a foregone conclusion, and the possibility of a lengthy appeals process increased the likelihood of the dilution of any successful verdict as well as a substantial delay in relief for a class that consists of many elderly individuals. An unfavorable result in any of these instances would have either precluded ...


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