Insurer, Credit Union Settle South Dakota Suit over Premium Hikes

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Black Hills Federal Credit Union in South Dakota and a Wisconsin-based insurance company have agreed to pay $3 million to settle a class-action lawsuit claiming they improperly raised insurance premiums on thousands of loans.

A judge is expected to consider the proposed settlement later this month. The agreement would resolve the eight-year-old lawsuit initially filed by a Rapid City, S.D. couple.

Edward and Kathy Thurman received a home equity loan totaling around $30,000 from the credit union in 1995 and bought a disability insurance plan offered by CUNA Mutual Insurance Society, the Rapid City Journal reported. The couple sued after the credit union and the insurance company failed to properly inform them that their disability insurance premium was increasing.

The suit gained class action status in 2013 when the Thurmans took the matter to the South Dakota Supreme Court. The couple then hired a computer programmer to analyze more than 500,000 copies of the defendants’ financial documents, resulting in an additional 4,461 loans being added to the suit. Kathy Thurman died in 2016, but the lawsuit continued with her widowed husband, Edward, as the lead plaintiff.

Circuit Judge Robert Mandel approved the settlement on Dec. 21, following a 12-hour mediation session. A hearing for final approval of the settlement is scheduled for later this month.

Around $1.73 million of the $3 million settlement will be split among the customers associated with the 4,461 affected loans. The remainder will cover lawyers’ fees, plaintiffs’ costs and a $30,000 plaintiff’s incentive award for Edward Thurman.

The settlement prohibits the parties from defaming each other. The terms do not include any admission by the credit union or the insurance company that the plaintiffs’ claims were valid, or that the credit union or life insurance company violated any laws.

The Black Hills Federal Credit Union and the now renamed CMFG Life Insurance Company sent written statements to the Journal denying any wrongdoing, but agreed it was in the best interests of all parties to settle.

The plaintiffs’ motion for approval of the settlement said: “CMFG would be foolhardy ever to tell a credit union again that it can switch its customers’ credit disability policy in this same manner.”