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GM retirees sue MetLife over life insurance cuts

Washington — A group of 45 General Motors salaried retirees — including a former board chairman — filed suit today in Wayne Circuit Court, claiming Metropolitan Life Insurance Co. breached its contract when it slashed benefits.

In recent years GM reduced life insurance for most salaried retirees to $10,000 from higher guaranteed amounts.GM ended life insurance for its top former executives.

Some retirees lost $500,000 to $1 million in insurance policies when the value was reduced to $10,000, said Andrew Rogers, a lawyer for the retirees. The suit says the reduced benefits are insufficient to even cover funeral and burial expenses and are “extreme and outrageous.”

Another 300 were also affected and could be affected as part of a class-action, Rogers said.

Among those suing: John Smale, GM’s chairman from 1992 until 1995, who now lives in Texas. He was the first non-General Motors executive to hold this position since 1937.

In a June 1, 2009 letter to retirees on the day GM filed for bankruptcy, then GM CEO Fritz Henderson told retirees who joined GM before 1993 “the amount of Basic Life Insurance provided by GM is being reduced to $10,000” and was effective soon after GM exited bankruptcy the following month.

But GM said retirees could buy additional insurance by enrolling in a voluntary Life Insurance program through MetLife — and it did not require “proof of good health” — but they would have to pay for the extra coverage. But during the first two years of participation in the program, the death benefits are equal to the amount of the premiums paid. After that, retirees could get paid full coverage.

MetLife notified retirees named in the suit that their “continuing life insurance” coverage would “remain in effect for the rest of your life,” but GM reduced the amount of coverage to $10,000, the retirees said in a statement.

Some of the letters from MetLife guaranteeing lifetime coverage date to 1986, Rogers said.

“These retirees have taken tremendous losses in their promised, deferred compensation and retirement plans.They are holding written promises from MetLife that they relied on and used for planning their retirement future,” said Sheldon Miller, another attorney for the retirees. “Hitting them with this additional loss of life insurance coverage, when they hold lifetime guarantees comes at a time when they can no longer replace insurance on the open market due to their age and reduced income and is unconscionable.”

The retirees are seeking to reinstate the full value of their reduced policies.

GM didn’t immediately comment and MetLife didn’t immediately return a call seeking comment.

This is the second suit filed by some GM retirees in recent weeks.

Last month, more than 100 former GM executives sued the automaker in federal court to recoup pension benefits slashed during the company’s bankruptcy.

The retirees, including former vice presidents and high-ranking managers, are trying to recoup benefits plus interest, and want a federal judge to order GM to accurately pay future benefits.

The executives suing include a number of former GM vice presidents, including John G. Middlebrook, who was vice president and general manager of vehicle brand marketing. He also was a general manager of the Chevrolet Division and helped launch GM’s now-shuttered Saturn division.

Others suing include Richard C. Nerod, retired president of GM-Latin America, Africa and Middle East; and Donald W. Hudler, a GM vice president and former president of Saturn.

Overall, GM saved $4.6 billion in trimming pension and retiree health care benefits during its bankruptcy reorganization, the company said in a filing last year.

The Detroit News

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Written by lordsinsurancelog

June 22, 2011 at 7:09 pm

Posted in Insurance News