A Michigan court has ordered Dearborn Federal Credit Union to pay $1.2 million to account holders who bought its family group life insurance after August 1984.
The Circuit Court for the District of Wayne County, with judges Michael F. Sapala and William Leo Calahan presiding, ruled on Dec. 22 that Dearborn Federal breached contract agreements by using premiums to pay for operating expenses for the past 12 years.
The award represents unpaid returned premiums as well as interest, plus attorneys' fees, said David L. Nelson, a lawyer who represented the plaintiffs. The suit was brought by Clifton R. Smith as an individual and Frank Tofil and Jean Tofil as individuals and representatives of up to 7,000 account holders.
"We're in the process of appealing," said Jim Orlowsky, a spokesman for $851.9 million-asset Dearborn Federal. "We disagree with the ruling."
Until 1984 the members received refunds from the surplus premiums that the insurance company returned to the credit union, Mr. Nelson said.
But in 1984 the credit union switched to Maccabees Mutual Life Insurance Co. and the refunds went to operating expenses for the credit union and its subsidiary, Dearborn Financial Services, Mr. Nelson said.
"Our argument was the premiums should go back from where it came," Mr. Nelson said.
Mr. Orlowsky said the credit union acted within regulation and, by putting the money toward expenses, it was helping all members.