Northwestern Mutual Life Asserts it Should Never Be Trusted - Claims Bold Print Assurances by Its President Mean Nothing Thanks to the Fine Print

    SAUSALITO, CA, March 03, 2011 /24-7PressRelease/ -- In court filings yesterday, Northwestern Mutual Life Insurance Company effectively said that people shouldn't believe what it says - even when the Company's President says it in big bold writing. This amazing assertion was at the core of an argument filed by Northwestern Mutual seeking to dismiss a nationwide class action suit involving written promises made to holders of over one million whole life policies dating back 33 years.

Insurer Asserts Its Written Assurances Are Meaningless

"Insurance companies normally try to earn the public's trust and insist the public can rely on them," said Gerry H. Goldsholle, the retired Chief Brokerage Executive of MetLife and now one of the lead attorneys for policyholders at the Northern California office of Advocate Law Group P.C. in Sausalito.

"Here Northwestern Mutual has taken the position that its President's big, bold, written assurances don't matter. It claims the fine print enabled the company to renege on everything the Company promised."

Northwestern Mutual Makes Same Argument As Industry's Harshest Critics

"It is as incredible a statement as any insurance company has ever made, and is an admission of lack of trustworthiness and moral bankruptcy by Northwestern Mutual." Goldsholle noted that as a former industry insider he half-expects other insurance industry leaders to take Northwestern Mutual out to the woodshed for taking a position that only the insurance industry's harshest critics previously asserted.

"It is almost inconceivable that a mutual company like Northwestern, which has a duty to operate for the benefit of its policyholders, would make such a statement," added Advocate Law Group partner Robert K. Scott of Irvine, CA. "In decades of helping policyholders I've never come across an insurance company that essentially said that nothing its President said - in writing -- should be relied upon - the reasonable expectation of these insured's apparently means nothing to this company."

Northwestern Mutual Solicited Over 1 Million Policyholders

To convince consumers to buy whole life instead of the far less expensive term, Northwestern Mutual emphasizes the ability to borrow from whole life policies' cash value to pay premiums or meet other financial needs. As interest rates were headed up to historic highs in the late 1970s, Northwestern Mutual wrote to holders of over a million of its policies whose owners had the guaranteed right to borrow their cash values at interest rates of 5% or 6%.

In a letter from Northwestern Mutual's President the company promised that if policyholders allowed it to amend their policies the company would charge them "a flexible loan rate" in the future and also pay slightly higher dividends. The flexible rate would vary "based on prevailing long term economic conditions" - but never exceed 8%, the maximum fixed rate then allowed by state law. Approximately one-third of the Northwestern Mutual policyholders took the bait. It seems all were deceived.

"Flexible Loan Rate" Remains Fixed At 8%

Northwestern Mutual immediately moved to the 8% rate in 1978. Instead of varying the rate as it agreed to do, Northwestern Mutual has continued to charge 8% for 33 years - even as prevailing interest rates dropped to historic lows in recent years. Today, with bank money market rates below 1/2 of 1% and 10-year Treasury notes below 3.5%, Northwestern Mutual continues to charge 8% and has said it has no plans to lower its "flexible" rate.

The Death Squeeze

"The consequences of charging policyholders 8% rates in this economy are horrific. Agents call it the death squeeze," said Goldsholle. He explained that the cash value of the policies are effectively borrowed out, the death benefits under the policies become drastically reduced, and policyholders are paying 8% interest on the total borrowing. He noted most policyholders cannot surrender their policies without facing major income tax consequences, trapping them into paying high premiums and high rates of interest until they die.

The Case

The case, Smith v. Northwestern Mutual Life, is now pending in Federal District Court in Milwaukee, 2:11-cv-00071-RTR.

Advocate Law Group P.C. and members of its nationwide network of leading class action lawyers are now representing current and former Northwestern Mutual policyholders who amended their 5% and 6% policies - including policyholders who lapsed their policies or passed on -- in exchange for what Northwestern Mutual now contends were its empty promises.

What Policyholders Can Do

All those who have a family member or client that have or had a 5% or 6% Northwestern Mutual policy and agreed to amend it and were charged 8% interest are urged to contact Advocate Law Group P.C. at 888-ITS LEGAL (888-487-5342) for a confidential, no obligation, no cost case evaluation. Full details and an online inquiry form are at www.NorthwesternLawsuit.com.

Advocate Law Group P.C.'s founding attorneys Gerry Goldsholle and Bob Scott are nationally respected, top-rated lawyers who also are insurance law experts. Gerry was the President & CEO of an arm of the nation's largest insurance company. Bob has successfully battled insurance companies on behalf of individual consumers and business owners for decades. Both have been repeatedly recognized by their peers for excellence. Both have chaired numerous committees of the American Bar Association, the State Bar of California, and other major lawyer and public groups.

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