Challenging Unfair Demutualizations & Mutual Conversions

When a mutual insurance company converts into a stock company, a process known as demutualization, the mutual should pay fair compensation to all its mutual policyholder-owners as part of that reorganization. Adkins, Kelston & Zavez, P.C. works to ensure that mutual insurance companies do not convert or demutualize without fully compensating their policyholders or otherwise protect their rights and interests.

AKZ has developed recognized expertise in this multi-billion dollar issue by leading a national effort to challenge dozens of unfair mutual insurance company demutualizations (i.e., conversions from policyholder-owned mutual companies into stock companies) and Mutual Holding Company (MHC) conversions through class action and derivative litigation, administrative agency challenges, and public policy work, including by bringing media exposure to the issue.

We have also brought legal challenges to several problematic stock insurance company mergers on antitrust and other grounds, including that of Paul Revere and Provident, and of UNUM/Provident.

When a mutual insurance company announces that it is going to demutualize or otherwise convert, we review the reorganization plans to ensure that the existing mutual policyholders will be adequately compensated for having their mutual insurance company convert into a stock insurance company and otherwise protected. Many times, demutualizing insurance companies refuse to pay their policyholders the compensation they are entitled to and must be sued. Same goes for MHC conversions, which are inherently defective and unfair to policyholders.

We have litigated those suits in the past, and are available to review a demutualization or MHC conversion involving you. For example:

In Rieff v. Evans et al., we represented a class of 300,000 members in which we succeeded in getting the Iowa Supreme Court to recognize the tort of de facto demutualization, certified the class and, after extensive motion practice, settled the case against Allied Mutual Insurance Company, its directors and affiliates on a nationwide class basis for $128.5 million (plus $110 million in forced dividends).
In Crandall v. Alderfer, we represented plaintiffs in a class action filed in federal court in Philadelphia that alleged that the defendant directors and Old Guard Mutual Insurance Company had clandestinely converted from a mutual insurance company without notice or compensation to the class. After extensive motion practice and discovery, and certification of the class, the case settled on behalf of the class for approximately $7 million.
In re Harleysville Mutual Insurance Company, we were part of a team of law firms seeking equitable relief and damages, on behalf of Harleysville Mutual’s 200,000 policyholders due to alleged unfair agreement to merge Harleysville Mutual into Nationwide Mutual Insurance Company. The companies had proposed structuring the merger so that stockholders (including Harleysville Mutual executives) of a Harleysville subsidiary company would be paid a 137% premium for their stock, while Harleysville Mutual policyholders would receive no financial consideration. The matter settled for $26 million.
We also challenged the demutualizations of John Hancock Mutual Life Insurance Company, Prudential Life Insurance Company, Principal Life Insurance Company and many others.

Challenging Unfair Mutual Holding Company Conversions

Some mutual insurance companies have converted, or are attempting to convert into what is called a mutual insurance holding company (MIHC) or mutual holding company (MHC). We represent policyholders to challenge (and monitor) these hybrid reorganizations that adversely change the rights and interests of a mutual insurer’s policyholder-owners. We have examined and challenged numerous of these MHC conversions around the country seeking to stop or improve the structures so that policyholders are better protected. If your insurer is attempting a MHC conversion, we will evaluate the proposed conversion plan and advise you as to your options, including litigating to stop the conversion.