Penn Mutual Life Insurance Faces Lawsuit Over Alleged Misleading Sales Practices
A group of 29 policyholders has filed a lawsuit against Penn Mutual Life Insurance Co., claiming they were deceived into purchasing high-premium life insurance policies. The plaintiffs allege they were promised tax benefits that never materialized, according to a report from AM Best.
The lawsuit, filed in the US District Court for the Central District of California, seeks $13.5 million in actual damages and over $10 million in consequential damages.
High-premium life insurance policies can generate commissions ranging from 75% to 125% of the first-year premium, the lawsuit says, creating an incentive for agents to push these products.
The complaint alleges that Penn Mutual agents promoted “tax-advantage strategies” tied to life insurance and related products, which were ultimately “shams” with benefits described as “illusory and/or illegal.” Policyholders allegedly suffered financial losses through premium payments, loan interest, and other costs, while agents profited from commissions, bonuses, and fees.
At the center of the allegations is Randall Scott Boll, a Penn Mutual-appointed agent the lawsuit describes as the scheme’s “mastermind.” Boll was indicted on federal money laundering and other charges in 2021 and pleaded guilty to conspiracy to cause a financial institution to fail to file currency transaction reports. He admitted to structuring financial transactions to avoid reporting requirements.
The complaint also alleges that Boll was falsely presented as a qualified tax advisor to lend credibility to the sales strategy. He and other agents are accused of preparing and filing tax returns with sham deductions, inflating clients’ net worth on applications, and designing policies to lapse before the insureds’ expected lifespans.
Some policyholders reportedly took out loans to pay for their policies, believing they would see tax advantages that never materialized.
Should the allegations prove true, this case could raise significant concerns about sales practices within the life insurance industry, particularly regarding the marketing of complex financial products that tout tax benefits. Penn Mutual did not respond to requests for comment.
Penn Mutual’s operating entities hold an A+ (Excellent) financial strength rating, indicating a strong capacity to pay claims. However, this lawsuit could potentially trigger regulatory scrutiny and pose reputational risks for the company.
