Prudential 2002 Annual Report Download - page 153
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Please find page 153 of the 2002 Prudential annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
22. COMMITMENTS AND GUARANTEES, CONTINGENCIES AND LITIGATION (continued)
The Company’s property and casualty operations are subject to rate and other laws and regulations covering
a range of trade and claim settlement practices. State insurance regulatory authorities have broad discretion in
approving an insurer’s proposed rates. A significant portion of the Company’s automobile insurance is written in
the state of New Jersey. Under certain circumstances, New Jersey insurance laws require an insurer to provide a
refund or credit to policyholders based upon the profits earned on automobile insurance.
On an ongoing basis, our internal supervisory and control functions review the quality of our sales,
marketing and other customer interface procedures and practices and may recommend modifications or
enhancements. In certain cases, if appropriate, we may offer customers remediation and may incur charges,
including the cost of such remediation, administrative costs and regulatory fines.
It is possible that the results of operations or the cash flow of the Company in a particular quarterly or annual
period could be materially affected as a result of payments in connection with the matters discussed above
depending, in part, upon the results of operations or cash flow for such period. Management believes, however,
that ultimate payments in connection with these matters should not have a material adverse effect on the
Company’s financial position.
Litigation
The Company is subject to legal and regulatory actions in the ordinary course of its businesses. Pending legal
and regulatory actions include proceedings relating to aspects of our businesses and operations that are specific to
the Company and proceedings that are typical of the businesses in which the Company operates, including in both
cases businesses that have either been divested or placed in wind-down status. Some of these proceedings have
been brought on behalf of various alleged classes of complainants. In certain of these matters, the plaintiffs are
seeking large and/or indeterminate amounts, including punitive or exemplary damages.
The Company has been subject to substantial regulatory actions and civil litigation, including class actions,
involving individual life insurance sales practices from 1982 through 1995. As of January 31, 2003, the Company
has resolved those regulatory actions, its sales practices class action litigation and virtually all of the individual
sales practices actions filed by policyholders who “opted out” of the sales practices class action. The Company
believes that its reserves related to sales practices, at December 31, 2002, are adequate.
In addition, the Company retained all liabilities for the litigation associated with its discontinued healthcare
business that existed at the date of closing with Aetna (August 6, 1999), or commenced within two years of that
date, with respect to claims relating to events that occurred prior to the closing date. This litigation includes
purported class actions and individual suits involving various issues, including payment of claims, denial of
benefits, vicarious liability for malpractice claims, and contract disputes with provider groups and former
policyholders. Some of the purported class actions challenge practices of the Company’s former managed care
operations and assert nationwide classes. In October 2000, by Order of the Judicial Panel on Multi-district
Litigation, a number of these class actions were consolidated for pre-trial purposes, along with lawsuits pending
against other managed health care companies, in the United States District Court for the Southern District of
Florida in a consolidated proceeding captioned In Re Managed Care Litigation. Some of these class actions
allege, among other things, misrepresentation of the level of services and quality of care, failure to disclose
financial incentive agreements with physicians, interference with the physician-patient relationship, breach of
contract and fiduciary duty, violations of ERISA, violations of and conspiracy to violate RICO, deprivation of
plaintiffs’ rights to the delivery of honest medical services and industry-wide conspiracy to defraud physicians by
failing to pay under provider agreements and by unlawfully coercing providers to enter into agreements with
unfair and unreasonable terms. The remedies sought include unspecified damages, restitution, disgorgement of
profits, treble damages, punitive damages and injunctive relief. A motion to dismiss the amended complaint in the
subscriber action was granted in part and denied in part and an interlocutory appeal of the remaining claims
Growing and Protecting Your Wealth152