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HomeMy WebLinkAbout99-07438 Q f? III i r l <, WAYNE F. SHADE, : IN THE COURT OF COMMON PLEAS OF Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA : CIVIL ACTION -EQUITY V. THE PRUDENTIAL INSURANCE N0.99- 7438 EQUITY COMPANY OF AMERICA, Defendant : JURY TRIAL DEMANDED NOTICE You have been sued in Court. Ifyou wish to defend against the claims set forth in the following pages, you must take action within twenty (20) days after the pleadings and Notice are served, filing in writing with the Court your defenses or objections to the claims set forth against you. You are warned that if you fail to do so the case may proceed without you and a judgment may be entered against you by the Court without further notice for any money claimed in the pleadings or for any other claim of relief requested by the Plaintiff. You may lose money or property or other rights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP. Cumberland County Bar Association 2 Liberty Avenue Carlisle, Pennsylvania 17013 Telephone: (717) 249-3166 ?? Wayne Shade, Esquire Supreme Court No. 15712 53 West Pomfret Street Carlisle, Pennsylvania 17013 Telephone: 717-243-0220 WAYNE F. SHADE Attorney at Law 53 Wut Pomrmt sum, Gdule. Penmy1mia 17013 r WAYNE F. SHADE, : IN THE COURT OF COMMON PLEAS OF Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA : CIVIL ACTION -EQUITY V. : NO. 99- 1743 9 EQUITY THE PRUDENTIAL INSURANCE : COMPANY OF AMERICA, Defendant : JURY TRIAL DEMANDED COMPLAINT 1. Plaintiff WAYNE F. SHADE is an adult individual whose address is 53 West Pomfret Street,'Carlisle, Cumberland County, Pennsylvania 17013. 2. Defendant THE PRUDENTIAL INSURANCE COMPANY OF AMERICA (hereinafter "Prudential") is a corporation organized under the laws of the State of New Jersey with offices at 150 Corporate Center Drive, Suite 105, Camp Hill, Cumberland County, Pennsylvania 17011. 3. Formed in 1873, Prudential is the largest and one of the oldest life insurance and annuity companies in the United States. 4. Prudential is a mutual life insurance company, which means that it is owned by its policyholders by virtue of their investments in products sold by Prudential. 5. Prudential does business in all fifty states through general offices located in major cities throughout the country, grouped for company purposes into regions. 6. Prudential employs and is responsible for training and supervising some 20,000 WAYNE F. SuADE 17013 full-time professional career agents in the United States and Canada and also uses other Attorney ai law 53 West Pomfret Sums Carlisle, Pennsylvania distribution networks to sell its financial products. 7. Prudential's core businesses include providing financial services to individuals d' an families, including insurance, investment and home ownership services. Through national advertising campaigns, and as stressed repeatedly in its WAYNE F. SuADE Attomey ac law 33 West Pomrmt Street Carlisle. Pennsylnni, 17013 standardized sales presentations for its insurance products, Prudential has historically invited public trust and confidence in its integrity and business acumen by adopting the Rock of Gibraltar as its service mark and selling its products as a "piece of the Rock". 9. Prudential sells primarily three types of financial products: (1) life insurance (term, whole life and combinations thereof), (2) annuities, and (3) investments through its securities subsidiary. 10. Prudential's life insurance products include both traditional whole life policies and variable appreciable whole life ("VAL") policies. As explained in more detail below, the VAL policies constitute "securities" within the scope of the Exchange Act and Rule 10b-5. 11. All of the products sold by Prudential's sales force are prepared, underwritten and issued out of Prudential's headquarters in New Jersey. 12. All sales presentations, policy illustrations and other information used in the ale of insurance products to the public, including computer hardware and software used generate such uniform materials, are standardized, provided and approved by vdential. P -2 __ _ -.1 13. All agencies are supplied with pre-approved materials, such as product brochures, pre-call letters, computer-based selling and illustration systems, seminar materials and newspaper advertisements. 14. If an agent wishes to prepare customized advertising or sales material, such material cannot be used until it has been approved by Prudential. 15. Prudential agents are specifically prohibited from using any advertising or marketing material of any kind which has not been approved by Prudential. 16. Beginning in the early 1980's, when interest rates and competition from other life insurers were both at an all time high, Prudential engaged in a systematic scheme of marketing fraud in which it wrongfully induced policyholders to purchase from Prudential certain types of life insurance policies. 17. Prudential's scheme involved three notorious deceptive life insurance sales tactics: The so-called "chuming", "vanishing premium" and "investment plan" tactics of which the specific fraudulent scheme involved in this case was the "vanishing premium" tactic. 18. Prudential implemented its fraudulent scheme through the use of false and misleading sales presentations, policy illustrations, marketing materials and other information approved, prepared and disseminated by Prudential to its nationwide sales force. 19. In the "vanishing premium" scheme, the aforesaid standardized presentations, WAYNG R SIIAm. Alromey at lew 57 War Pomfret Street Carlisle, Pennsylvania IIOn policy illustrations and materials, separately and in combination misrepresented, inter -3- alia, (i) the number of out-of-pocket cash premiums a policyholder would have to pay for his or her policy; and (ii) the cash value and benefits a policyholder would realize under his or her policy based on a particular number of cash premium payments. 20. Prudential employed the "vanishing premium" tactic, through a program euphemistically called the "Accelerated Payment Plan". 1 21. Under the "Accelerated Payment Plan", Prudential sold policies based on standardized sales presentations and policy illustrations that made it appear that premium payments would be "accelerated" so that payments only need be made for a pre- determined number of years, after which time there would be no further need to make additional premium payments. 22. It was specifically represented that the need to make further "out-of-pocket" payments of premiums would "vanish". 23. In ' urtherance of its fraudulent scheme, Prudential approved, prepared and allowed the dissemination of policy illustrations that were false and misleading as being based upon a number of undisclosed assumptions, including inflated dividend scales, values, assumptions and interest rate projections that had no reasonable basis in fact. 24. The policy illustrations were inconsistent with Prudential's own existing nternal forecasts, estimates, analyses and projections of interest rates, dividends, mortality experience, expenses and related investment returns and their effect on ividends payable by Prudential. WAYNE F. SHADE Attomey at law 55 West Pomfret Street Carlisle. Penmylvania 17013 -4- 25. Another euphemism Prudential used for the vanishing premium tactic was "Four Pay" in which the policies were the fourth premium. represented to be self-sustaining after payment of 26. Prudential at its regional and local sales conferences encouraged its agents to use the "Four Pay" sales technique. 27. Prudential implemented the vanishing premium aspect of its scheme by orchestrating the agents' sales presentations and policy illustrations. 28. Prudential provided its agents with computer hardware and software which the agents used to generate the misleading sales materials and policy illustrations. 29. Prudential also prepared and disseminated standardized sales presentations, scripts and other materials which it compelled its agents to commit to memory. 30. Agents were instructed never to leave with the customer the vanishing premium policy illustrations used during the sales pitch. 31. Prudential's standardized sales presentations and policy illustrations failed to disclose that the policy premiums did not in fact vanish and that the policies were not in fact expected by Prudential to pay for themselves as illustrated. 32. Policyholders were also not informed of the actual false assumptions upon hich the policy illustrations were based. 33. Prudential failed to apprise policyholders of the enhanced risk they undertook WAYNr F. SI IADI Allomey at law 55 Wool Pomfret Street Carlisle. Penmsylvania HOU i purchasing life insurance policies from Prudential in or about the early 1980's. -5- 34. During this time period, Prudential created new classes of dividend participating individual life policies which could reap benefits from then-existing interest rates undiluted by participation in dividends declared to policyholders prior to that time. 35. The new "interest sensitive" insurance products were far more complex and volatile than Prudential's traditional whole life insurance, and their performance was dependent on a host of complicated actuarial computations and assumptions. 36. Prudential knowingly failed to disclose that the policies comprising the new classes of dividend participating individual life policies would suffer greater adverse consequences when Prudential lowered dividend rates. 37. Previously written policies enjoyed the benefit of a cushion created by the pooling of premium proceeds with proceeds from all other policies invested over many years. 38. Policy proceeds, which were invested in a smaller pool, risked greater exposure to declining returns on Prudential's investments, increased operating expenses and risks posed, among other things, by Prudential's investment in Prudential-Bache Securities Group, Inc., and forecasted fluctuations in other factors affecting dividend rates. 39. The illustrations used in Prudential's standardized sales presentations omitted any direct disclosure of this enhanced risk and Prudential sales agents, as encouraged by Prudential, routinely failed to explain this risk at the time of sale or thereafter. WAVNI> F. SI IADr. Almmty at Ilse 53 West POM(ret Slreel Carlisle, Pennsylvania 1701] -6- t r.srC ??:r}r9 40. Nowhere in the policies or other documentation ultimately delivered to policyholders were the foregoing omissions disclosed or the foregoing misrepresentations directly contradicted or rectified. 1 41. Although separate dividend disclosure forms were purportedly required to be given to prospective policy purchasers explaining the potential instability of Prudential's dividend, this was routinely not done and was not done in this specific case; and Prudential repeatedly discouraged and inhibited its agents from providing adequate disclosures to policyholders. 42. Senior Prudential management was aware of the rampant use of the vanishing premium technique. t 1 43. Senior Prudential management did nothing to halt the practice but rather A encouraged the practice by training its agents to exploit the relationship of trust and confidence that Prudential had advanced in its nationwide advertising programs by using the vanishing premium technique and by supplying its agents with deceptive policy illustration materials, despite the lack of any reasonable factual basis for their I, assumptions. , 44. Prudential, through its standardized sales presentations to Plaintiff and its other prospective individual policyholders, specifically encouraged them to reveal personal and confidential information about themselves and their finances and to otherwise place their trust in Prudential. WAYNF. F. SUADr Atlomeyal law 57 West Pomfret Street cadisle, Pennsylvania 17013 ?Mm IT WAYNE R SNADL Allom y,l Lew pr 57 West PomRm S"_1 11 licyholders placed an additional, special degree of trust in it because of its status as a Culisle. Pennsylvania 17017 45. Prudential realized the great disparity and inequality between it and Plaintiff and its other prospective policyholders in terms of sophistication regarding life insurance products in general and its actuarial assumptions in particular. area wherein Prudential had specialized knowledge. 46. Prudential knew that Plaintiff and its other prospective policyholders were relying upon it to protect their interests and provide guidance to them in a complicated that was formed in response to various lawsuits against Prudential. 47. Prudential's fraudulent marketing scheme was investigated by a number of state regulatory agencies and by the "Multi-state Life Insurance Task Force" (hereinafter "The Task Force") a group of regulator representatives from thirty states and jurisdictions 48. On July 9, 1996, The Task Force issued its "Report of the Multi-state Life Insurance Task Force and Multi-state Market Conduct Examination of The Prudential Insurance Company of America" ("The Task Force Report"), confirming the wrongful :onduct alleged in this action and fined Prudential $35 million. 49. The Task Force Report and other regulatory investigations have confirmed the (legations in this Complaint on a nationwide basis. 50. In a report released by the Attorney General of the State of Connecticut, rudential admitted that consumers rely on the oral representations of its agents, and that ost consumers do not understand the fundamentals of the life insurance process. 51. Prudential furthermore knew that Plaintiff and its other prospective -8- mutual life insurance company owned by the policyholders themselves by virtue of their investments in products sold by Prudential. 52. Prudential's marketing fraud was an enormous success. 53. Millions of permanent life insurance products were sold to unsuspecting policyholders, including Plaintiff, based on the deceptive sales tactics described above, and Prudential received billions of dollars in premium income from the sales of its insurance products. 54. Because the fraudulent marketing scheme was instigated and implemented by Prudential, it was necessarily aware of the agents' training in and use of the deceptive sales practices taught to them. 55. From at least the date of purchase of Plaintiffs policy, Prudential was aware that Prudential agents were in fact implementing the deceptive practices as instructed by Prudential. 56. When the abuses were brought to the attention of senior Prudential management, the concerns were dismissed as unimportant. 57. Remedial action was taken by Prudential only if necessary as "damage control". 58. Prudential hired local public relations firms or brought in their own public relations firms from New York to handle the incidents. 59. Auditors who uncovered evidence of deceptive practices were removed from WAYNG F. SHADE Attomey at Law 53 West Pomfret Street Carlisle. I'mmyNaaia 17013 the particular auditing project and told that "Marketing" would intercede. -9- C's, 60. Auditors were also warned that "rocking the boat" was viewed with displeasure by their superiors; and, if they persisted, they were demoted or transferred to innocuous positions. 6I. Some Prudential district managers were demoted and even terminated as whistle blowers for complaining to Prudential regarding its use of deceptive sales practices. 62. In or about 1984, Prudential's auditing department designed a computer system to detect churning abuses. 63. When the system to detect churning abuses was tested in Prudential's Minneapolis office, the extent of churning activity was illustrated by plummeting sales. 64. In 1986, an expanded monitoring and detection system was put into place by Prudential. 65. Results of the expanded monitoring and detection system, which were shared in December 1986 with senior Prudential management, showed (a) the general ineffectiveness of Prudential's "Marketing" group in deterring wholesale abuse in sales practices and (b) the need for a single uniform detection system. 66. Rather than remedy the abuse or implement a single uniform detection system, Prudential transferred the individuals reporting the deficiencies out of their auditing positions. 67. Not only did Prudential not establish a centralized compliance system, it also WAYNE F. SHADE AOnmey at law 33 West Pomfret Street Carlisle. PennsyHania 17013 eliminated marketing practice reports that previously went to top management, directing _to_ that those reports be sent instead to hundreds of field offices dispersed throughout the country. 68. There was little, if any, follow-up regarding deficiencies and abuses detected by auditing personnel, and all such matters were referred to "Marketing". 69. "Marketing" took no steps to stop the fraud but rather pursued a policy of avoiding pursuit of compliance issues, especially where its largest producers were involved. 70. Prudential did have in place a system of monitoring its agents' marketing conduct through a series of performance review reports which could have identified transactions which were characteristic of sales that were not in the best interests of the policyholders. 71. Prudential affirmatively concealed its material misrepresentations and omissions from Plaintiff and its other prospective policyholders. 72. The level of concealment escalated as time went on, culminating in Prudential's mass destruction of incriminating documentary evidence. 73. A sample policy was typically withheld from policyholders at the point of sale, and was specifically not provided to Plaintiff at the point of sale. 74. The vanishing premium policies, in general and particularly as to Plaintiffs WAYNE P. SHADE Attomey at Lew 53 West Pomrmt Street Carlisle. Pennsylvania 17013 policy, were steeped in incomprehensible insurance jargon, were cast in vague and ambiguous terms and failed to address, let alone contradict or correct, the misrepresentations of the vanishing premium sales presentation. 75. The vanishing premium policies, generally and particularly as to Plaintiff, failed to disclose any of the undisclosed assumptions underlying the policy illustrations and failed to address or qualify the vanishing premium schedule set forth in the policy illustrations. 76. Prudential's instructions to its agents to never leave a policy illustration with a prospective policyholder were designed and intended to deny policyholders, including Plaintiff, access to the actual policy terms at the point of sale and to conceal the fraudulent nature of the sales presentations. 77. When Plaintiff and other policyholders raised concerns about their vanishing premium policies or inquired about the status of their policies after the point of sale, Prudential actively concealed the true facts with responses consisting of half-truths and false and misleading statements. 78. Prudential also prevented and deterred any meaningful inquiry or investigation by policyholders that would have disclosed Prudential's fraudulent common course of conduct by taking affirmative steps to conceal from policyholders the omissions and misrepresentations that preordained out-of=pocket premiums in addition to those set forth in the vanishing premium illustrations. 79. Prudential affirmatively concealed declining dividend scales and interest crediting rates in its sale illustrations and in-force ledgers. 80. If policyholders voiced concerns that their policies did not seem to perform as WAYNr F. SHADE Anamey at law 53 West Pomfies Sir" Culisle, l'ennsylswis 17017 illustrated, Prudential provided seemingly innocuous, but misleading, explanations for its -12- caudulent conduct, stating that vanish dates had to be adjusted due to unanticipated `market conditions" or that the policies had suffered "minor setbacks". These ;xplanations were false; Prudential knew but continued to conceal the numerous, undisclosed facts adversely impacting the performance of the vanishing premium policies, such as the adverse impact of its pooling of premium proceeds. 81. Prudential was specifically aware that the downward dividend and interest- crediting adjustments on its range of products would extend the "vanish year" on its "accelerated payment" policies. 82. Prudential failed to notify and intentionally concealed these material facts from policyholders despite numerous opportunities to fully disclose this critical information in policyholder annual statements, in-force ledgers, vanishing premium reproposals and annual reports issued to policyholders. 83. As defrauded policyholders began to file class action lawsuits alleging that Prudential misled customers nationwide by selling policies on the basis that they would pay for themselves over time through dividends after payment of premiums for the stated number of years, Prudential commenced a widespread, deliberate strategy to systematically eliminate damning documentary evidence. 84. Prudential engaged in an elaborate management-directed attempt to cover up W Awls F. SIIAUI Attomcy at hw 57 West Pomflet SIM colisle, IYnnsyhanit 17013 evidence of corrupt sales practices through a systematic and extensive destruction of evidence of such practices, including the massive destruction of sales and marketing materials that did not comply with government regulations. -13- 85. During the summer of 1994, Prudential issued a directive to its offices ordering all sales literature, product brochures and canvassing letters to be destroyed immediately with the exception of several items which were still "approved" by the Home Office. 86. Managers in local Prudential sales offices were instructed to destroy marketing documents previously provided by Prudential. 87. Documents to be destroyed included not only those documents issued and approved by the Home Office, but also documents created by regional offices and individual agents. 88. Agents received the so-called "Don Southwell memo" which instructed them to return and destroy any materials related to private pension or guaranteed retirement plans that were actually life insurance. 89. The directive to destroy documents covered not only those located in Prudential sales offices, but also those materials located at agents' homes or in their automobiles. 90. Prudential itself removed from agents' offices and destroyed "selling papers" including among other things marketing brochures, rate of return disclosures, prospectuses and application forms. 91. Examples of items included in the destruction are VAL brochures and other WAYNE F. SHADF. Allomeysl law 37 Wen Pomfrc15trtt1 Cedi3le. Penmy1min IIOn documents in which Prudential improperly characterized the VAL policies as an investment plan. -14- 92. One account of the cover-up was given by William Yancey, a 13 year Prudential veteran who worked in Prudential's Kansas city oft-ice before his dismissal in April 1995 for allegedly using some of the deceptive sales practices alleged above. 93. In a swom statement, Mr. Yancey described "a continuous and wholesale destruction by my management of the sales and marketing information and computer software which existed in our office." 94. Mr. Yancey's computer had contained form letters, policy-pricing information and data on his clients, including their payment status. Mr. Yancey testified he received "direct orders [from Prudential] to delete [the] software". 95. Prudential agents stationed in other states have corroborated Mr. Yancey's experience, revealing a systemic destruction of software and documents conducted by Prudential. 96. If agents did not comply with the instructions to destroy the sales materials and other literature, Prudential threatened to delay indefinitely their future paychecks and possibly 401(k) and other investment proceeds. 97. On some occasions, documents that were not produced voluntarily by agents were seized involuntarily by Prudential. 98. In response to Prudential's directive to destroy documents through at least October 1995, thousands of pieces of prudential sales materials and other literature were destroyed. WAYNI: F. SIIAr Auomcy at law 50 West PomGct Stn calhsle.11MIyhan 17017 -15- u 99. Prudential demanded that agents sign statements avowing that they never used any noncomplying sales presentation materials, despite the fact that no agent could legitimately sign such a statement. 100. Many agents refused to sign the statements. COUNTI IN EQUITY WAYNE F. SHADE 11 fl Attamey st I,w SP West Pomrmt Street Cwhsle. Pennsylvania 1701) 11 101. The averments of % I through 100 above inclusive are incorporated herein by reference as though fully set forth. 102. Prudential's fraudulent scheme was designed to and did induce Plaintiff and thousands of other new prospects to purchase new vanishing premium life insurance policies from Prudential. 103. In 1981, Plaintiff approached Christopher H. Cantrell, a Prudential life insurance agent, for the specifically expressed purpose of purchasing low-cost term life insurance to protect his wife and infant child. 104. The agent persuaded Plaintiff that it would be cheaper in the long run for Plaintiff to purchase a whole life insurance policy known as Whole Life-Estate 25 lecause it would provide permanent paid up coverage as opposed to the term coverage for vhich premiums would increase substantially in later years. 105. The policy was promoted upon the basis that the premium would be paid om interest on prior premiums after the payment of four annual premiums over the first ve years. -16- 106. The ability to be excused from payment of premiums in one of the five years in the event of financial necessity was promoted by the agent as another advantage of the policy arrangement for a young family. 107. On the basis of the presentation and illustrations, Plaintiff purchased Whole Life-Estate 25 Policy Number 73073927 in the amount of $100,000, a copy of which is attached hereto as Exhibit "A" and incorporated herein by reference as though fully set forth. 108. Plaintiff timely paid all of the required premiums in accordance with the presentation of the agent. 109. Nothing was ever said about the policy's being based upon interest rate assumptions or that it would ever be necessary to make additional cash outlays if market interest rates were to change. 110. All aspects of the sale and purchase of said policy occurred in Cumberland County, Pennsylvania. 111. By 1988, Plaintiff began receiving annual notices from Prudential that his policy had lapsed for lack of payment of premium, at the same time reassuring Plaintiff that the policy was performing as had been represented and that it remained in full force and effect. 112. When he would receive those notices, he would forward them to his agent WAYNE F. SHADE Attorney at law 57 Wat Pomfret Stsea Carlisle. PenmyNama 17017 who would return a Disbursement Request Form for Plaintiff to sign authorizing a loan against the policy to pay the annual premium. -17- 113. This continued annually until on or about August 13, 1992, when Plaintiff requested of Prudential in writing that Plaintiff be relieved of the annoying procedure of receiving annual notices that the policy was going to lapse and to being required to "authorize" a loan against the policy. 114. On or about August 25, 1992, Prudential indicated that it would add an automatic premium loan provision. 115. Also on or about August 25, 1992, Prudential first advised Plaintiff that there would come a time when the cash value dividends would not be enough to pay the premium and interest due on the loans against the premiums paid and that Plaintiff would be required to make additional premium payments in excess of those previously agreed in order to keep the policy in force. 116. The notice of August 25, 1992, for the first time, directly contradicted the specific representations of Prudential that, after the stated period of years, there would be no additional requirement of payment of premiums. 117. On or about June 18, 1997, Plaintiff was first notified by Prudential that his death benefit was reduced from $100,000 to $76,430. 118. This reduction in coverage was the first that Plaintiff was actually harmed by the fraud of Prudential. 119. On September 23, 1997, Plaintiff was advised that his whole life insurance WAYNE F. SIIAm.* Altomey at law 51 West PamOet S(rtet Carlisle. Pennsylvania 17017 )olicy had lapsed and that extended term insurance coverage was in place through )ctober 13, 2000, after which the contract would no longer have any value. -18- ?i 120. Defrauded Prudential policyholders have filed class action lawsuits alleging that Prudential misled customers nationwide by selling policies on the basis that they would pay for themselves over time through dividends after payment of premiums for the stated number of years. 121. The various class action lawsuits have resulted in fines and damages against Prudential in the hundreds of millions of dollars. 122. Plaintiff was never notified that he was a member of the class of any of the various class actions that were filed against Prudential as a result of its deliberately fraudulent misconduct as alleged herein. 123. In the absence of an award of damages under either of the other two counts of this Complaint, the refusal of Prudential to honor the terms of its policy as promoted to Plaintiff will result in irreparable harm to Plaintiff and his family. WHEREFORE, Plaintiff demands that your Honorable Court award the following relief: (a) Ordering Prudential to extend permanent life insurance to Plaintiff in the amount of $100,000 at no further expense to Plaintiff; (b) Ordering Prudential to pay Plaintiffs attorney fees for its fraudulent misconduct; and (c) Such other relief as may be just and proper. WAYNE R SI IADE Allomcy at law 57 West Pomfret Street Carlisle. Pennsylvmia 17017 -19- COUNT II UNFAIR TRADE PRACTICES AND CONSUMER PROTECTION LAW 124. The averments of ¶¶ 1 through 100 and 102 through 122 above inclusive are incorporated herein by reference as though fully set forth. 125. Prudential had actual knowledge of the material misrepresentations and material omissions set forth herein and intended thereby to deceive Plaintiff. 126. Alternatively, Prudential acted with such reckless disregard for the truth that it failed or refused to ascertain and disclose such facts as would reveal the material false and misleading nature of the statements made in the sales presentation although such facts were readily available to it. 127. Plaintiff did not know, and in the exercise of due diligence, could not have known of the material misrepresentations and omissions averred herein. 128. Prudential, in connection with the marketing of the policy in this case and in the case of thousands of others similarly situated, engaged in a scheme, common course of conduct and conspiracy to defraud. 129. Prudential's statements, representations and omissions were material in that there was a substantial likelihood that Plaintiff and all other reasonable prospective purchasers would have considered them important in deciding whether or not to purchase the vanishing premium insurance policy from Prudential. 130. The representations on which Plaintiff relied were not true, and Prudential WAYNL,F. SIIADL• Allomey at IAw 57 West PomRal Street Carlisle, Perm ylvaaia 17013 did not believe them to be true when made. -20- 7-7- 13 1. Plaintiff reasonably relied upon the agent's representations because Prudential, through its conduct and the representations of its agent and advertising, had caused Plaintiff to believe that the insurer-customer relationship was one of trust and confidence and that Prudential would make full disclosure as to the advantages and disadvantages of the policy and because Plaintiff was not a sophisticated consumer of insurance products and lacked the ability to verify the completeness and accuracy of the sales presentation. 132. Prudential's conduct was wilful, wanton, malicious, outrageous and in reckless disregard for the rights of Plaintiff, warranting the imposition of punitive damages. 133. Every insurance contract imposes upon the insurer a duty of good faith and fair dealing so as not to deny the insured the bargained-for-benefit of the policy. 134. Prudential breached its duty of good faith and fair dealing owed to Plaintiff by engaging in the dishonest and deceitful course of conduct alleged herein, including specifically, providing false assurances that notices generated by Prudential were erroneous or were otherwise being taken care of. 135. As a consequence of the deception, Prudential has reaped billions of dollars in premiums while attempting to deprive Plaintiff and others similarly situated of the full value of the contracted death benefit. WAYNfi F. sIIADE Altomey m law 53 West Pomfmt Sum CuBsle. I'emyl'w'a 17013 -21- 136. For income tax year 1997, Prudential also issued to Plaintiff a Form 1099-R in which Prudential indicated that Plaintiff had realized taxable income in the amount of $7,577.35 as a portion of an insured annuity. 137. This generated an assessment by the Internal Revenue Service of an income tax deficiency for 1997 of $2,128. 138. At the same time that Prudential was unilaterally and fraudulently terminating Plaintiff's life insurance coverage and depriving Plaintiff of the benefit of his purchase of a fully paid $100,000 life insurance policy, Plaintiff received no income from which to pay the income tax deficiency assessed. WHEREFORE, Plaintiff demands judgment against Defendant in the liquidated amount of $300,000, representing three times the amount of the contracted death benefit of $100,000 plus costs, interest and attorney fees. COUNT III BREACH OF CONTRACT 139. The averments of J¶ 1 through 100 and 102 through 122 above inclusive are incorporated herein by reference as though fully set forth. 140. In issuing the policy in this case to Plaintiff, Prudential entered into a WAYNE F. SuADc Attorney at[Aw 53 Was Pomfret Street Carlisle, Pcnnsylmia 17013 contract with Plaintiff in which Prudential agreed that the payment of premiums during the fixed period of years would be sufficient to carry the cost of the policy for Plaintiffs life without requiring the payment of additional out-of-pocket premiums and without reducing the death benefit of the policy. -22- 141. Plaintiff agreed to those financing terms for the purchase of the policy from Prudential. 142. Prudential has repudiated and breached its contract with Plaintiff by canceling Plaintiffs permanent coverage for nonpayment of additionally demanded premiums. WHEREFORE, Plaintiff demands judgment against Defendant in the liquidated amount of $100,000 plus costs and interest. Wayne F. Aade, Esquire Supreme Court No. 15712 53 West Pomfret Street Carlisle, Pennsylvania 17013 Telephone: 717-243-0220 WAYNE F. SHADE Attorney at law 33 West Pomfret Simi Carlisle, Pennsylvania 17017 -23- I verify that the statements made in the foregoing Complaint are true and correct. I iderstand that false statements herein are made subject to the penalties of 18 Pa. C.S. 3904, relating to unswom falsification to authorities. late: December 13, 1999 ?1(L Wayne F. Shade ..u WAYNC F. SIIAi At1omey ulAw 5J war Pomfret Su Witte. Pcrmgly 17013 Audeatial NAYNE F SHADE 51001000-- L IFE T-HARX The Prudential Insurance Company of America a muhml life insurance coffivan? Corporate Office. Newark. New Jersey 73 073 927 JUN 18, 1981 We will pay the beneficiary the proceeds of this contract promptly if we receive due proof trial the Insured died. We make this promise subject to all the provisions of the contract Please read this contract with care. A guide to its contents is on the last page. A summary is on page 2. If there is ever a question about it. or if there is a claim. just see a Prudential agent or get in touch with one of our offices Right to Cancel Contract.-Not later than ten days after you get this contract, you may return it to us. All you have to do is take it or mail it to one of our offices or to the agent who sold it to you. We will cancel the contract from the start and give back your money promptly. Signed for Prudential. Secretary Pres derv Whole Life Policy. Insurance payable only upon death. Promiums payable throughout Insured's lifetime. Supplementary Benefits. if any. as listed on Contract Data page(s). Eligible for annual dividends as stated in Dividends provision. EWL--B1-A CONTRACT SUMMARY We offer this summary to help you understand this contract. We do not intend that it change any of the provisions of the contract. This is a contract of life insurance. Premiums are to be paid throughout the Insured's lifetime. If a premium is not paid before its days of grace are over, the contract may end or it may stay in force with reduced benefits. If either occurs, you may be able to reinstate its full benefits. Proceeds is a word we use to mean the amount we would pay if we were to settle the contract in one sum. To compute the proceeds which may arise from the Insured's death, we stan with a basic amount. We may adjust that amount if there are loans, dividend credits, premium in default, or a premium paid (but not waived under a waiver of premium benefit, if any) past the date of death. The table on page 15 tells what the basic amount is. The amount depends on how the contract is in force. The table will refer you to the parts of the contract which tell you how we adjust the basic amount. If you surrender the contract, the proceeds will be the net cash value. We describe it under Cash Value Option on page 9. Proceeds often are not taken in one sum. For instance, on surrender, you may be able to put proceeds under a settlement option to provide retirement income or for some other purpose. Also. for all or part of the proceeds which arise from the Insured's death, you may be able to choose a manner of payment to fit the beneficiary's expected needs. If the Insured dies, and one has not been chosen, the beneficiary may be able to do so. We will pay interest under Option 3 from the date of death on any proceeds to which no other manner of payment applies. This will be automatic as we state on page 14. There is no need to ask for it. You and we may agree on a change in the ownership of this contract. Also, unless we endorse it to say otherwise, the contract gives you these rights, among others: • You may change the beneficiary under it. • You may obtain any dividend credits under it. • You may borrow on it up to its loan value. • You may surrender it for its cash value. The contract, as issued, may or may not have extra benefits which we call Supplementary Benefits. If it does, we list them under Supplementary Benefits on the Contract Data page(s) and describe them after page 14. The contract may or may not have other extra benefits. If it does, we add them by rider. Any extra benefit ends as soon as any premium is in default past its days of grace, unless the form which describes it states otherwise. (Contract Summary Continued on Page 15) 1TING rs?SEX 4.1m fco EDNTagCT nnr. CONTRACT DATA INSURED¦S SEX AND ISSUE AGE M-34 RATING CLASS PREFERRED INSURED WAYNE F SHADE FACE AMOUNT 51001000-- PREMIUM PERIOD LIFE AGENCY T-HARX BENEFICIARY HELEN H SHADE, WIFE 73 073 427 POLICY NUMBER JUN 18, 1981 CONTRACT DATE LIST OF SUPPLEMENTARY BENEFITS (EACH BENEFIT IS DESCRIBED IN THE FORM EG100R INSUREDS WHICH BEARS THE NUMBER SHOWN FOR IT) S WAIVER OF PREMIUM BENEFIT. ***** END OF LIST *#**# OF UMS DUE DATES OF CONTRACT PREMIUMS OCCURUON THEPCONTRACT DATE AND AT INTERVALS OF 1 MONTH AFTER THAT DATE. CONT RACT PREMIUMS ARE $142.65 EACH CHANGNG N J1 2012 .65 EACH CONTRACT PREMIUMSIINCLUDEUTHEBPREMIUMSDFOR BENEFIT1EG100R. ***## END OF SCHEDULE ***** PAGE 3 (-,_ ) M34 POLICY NO. 73 073 927 TABLE OF VALUES ME EXPLAIN THIS TABLE UNDER TABULAR VALUES END OF CASH AND LOAN REDUCED PAID-UP CONTRACT EXTENDED INSURANCEn YEAR INSURANCE YEARS DAYS 1 2 0.00 0.00 0 3 $523.00 519753.00 1 0 '4 2,156.00 6,958.00 184 5 3,849.00 11,962.00 S 8 160 5,601.00 16, 765.00 181 10 328 6 7 7012.00 21,371.00 12 8 9,284.00 25,789.00 14 294 9 11,217.00 30,024.00 123 10 13,215.00 34,090.00 15 16 195 15,278.00 37v 986. 00 171 17 73 11 12 17,081.00 40,945.00 17 13 18,935.00 43,767.00 17 190 14 20,842.00 46,459.00 17 269 15 229802.00 49sO27.00 17 317 249815.00 51,474.00 337 17 333 16 17 269882.00 53,804.00 17 18 29,003.00 31,179 00 56,021.00 17 309 265 19 . 337412.00 58,129.00 60,132.00 17 206 20 35,705.00 62,035.00 17 132 17 46 ATTAINED AGE 60 62 46,574.00 71,951.00 15 65 509152.00 74,749.00 14 154 559405.00 78,521.00 288 13 291 n THERE MAY BE EXTRA DAYS OF TERM INSURANCE. WE EXPLAIN THIS UNDER THE EXTENDED INSURANCE PROVISION. PAGE ?i (7 j i ENDORSEMENTS (Only we ran endorse this contract.) GENERAL PROVISIONS Definitions.-We define hays same of the wards and phrases used all through this contract. We explain others, not defined here, in other parts of the text. We, Our and U3.---Prudanfiai. You and Your.-The owner of the contract. Insured.-The person whose name is in the window of the first page. He or she need not be the owner. Example: Suppose we issue a contract on the fife of your spouse. You applied for it and named no one else w owner. Your spouse is the Insured and you a» the owrur. Issue Date.-The contract date. Anniversary or Contras Anniversary.-The same day and month as the contras date in each later year. Example: It the contract date is March 9, 1980, the first anniversary is March 9. 1981. The second's March 9. 1982, and so on. Contract Yew.--A you which starts on the contract dote or on an anniversary. Example. ' the convict date is March 9, 1980, the first contract yedr stars dun and ends on March 8, 1981. The second starts on March 9. 1981 end ends on March B, 1982, and so on. Attained Ape.-The Inwted's attained no at any time is the issue age plus the 1•nGth of time aims the contract date. You will find the issue age near the top of page 3. The Contact. This policy and the application, a COPY of which is attached. fnmt the whole contract. We assume that all statements in the application ware made to the butt of the knowlodoe and belief of the person(s) who made dim; in the ehsgncs of fraud they we deemed to •be•aprosentationeand not warranties. We rolled on those statements when'we issued the contract. We will not sew any sutsmant, unless made in the application, to void the contract or to deny a claim. Contract Modbficadau.-Only a Prudential officer MAY agree to modify this contract and then only in writing. Ownership and Control.-Unless we endorse this contract to say otherwise: (1) the owner of the contract is the insured: and (2) while the Insured is living the owner alone is entided to (a) any eontrabt benefit andib • S (b) the exercise of any right and priviNge Granted the contrect or by us. - Sulolds Exclusion -tr the Insured. whottvtr sane or insane. dies by suiria^ within two yeah from the issue date, we will pay no mss than the sum of the premiums paid. Currency.-,Any money we pay. or which is paid to us. must be in United States currency. Any amount we owe will be payable at our Corporate Office. (Continued on Next Page) Page 5 (58---79- -LR) GENERAL PROVISIONS (Continued) Misstatement of Age or Sea.-If the Insured's stated age or sex or both are not correct. we will change senh benefit and any amount to be paid to that which the premium would have bought for the correct age and sex. The Schedule of Premiums may show that premiums change or stop on a certain date. We may have used that date because the Insured would attain a certain age on that date. If we find that the issue age was wrong, we will correct that date. Incontestability.---Except for non-payment of premium, we will not contest this contract after it has been in forte during the Insured's lifetime for two years from the issue date. Assignment.-We will not be deemed to know of an .assignment unless we receive it. or a copy of it. at our dome Office, We are not obliged to see that an assign- ment is valid or sufficient. Loan Interest Rates.-The loan interest rate we refer to ,-,der Loans is 8% a veer. But for contract debt restored or paid back if the contract is reinstated, the rate is lea. In that use, it is 6% a year for the period from the due date of the premium in default to the date at reinstate. merit and 8% a year for any other period. We may set a lower rate or rates for any period during which there is contract debt. If we do, we may later set a higher rate or rates but not more than the rates which we state here. The increase will apply to any existing loan. We will not increase interest rates more than once a year, and rate increases will not be more than I% e year. We will tell you the rate in effect when you make a ban and when we give you notice of interest due. We will give 30 days written notice to you, and to any assignee of whom we know, of a rate increase on any loan existing 40 drys before the date of the increase. Changes in Plan.- You may be able to have this contract changed to another plan of life insurance. But any change may be made only if we consent, and will be subject to conditions and chargei which we then determine. BENEFICIARY you may designate or change a beneficiary Your request must be in writing and in a form which meets our needs. It will take effect only when we file it at our Home Office; this will be after you send the contract to us to be endorsed. if we ask you to do so. Then any previous beneficiary's interest will end as of the date of the request It will end then even if the Insured is not living when we file the request Any beneficiary's interest is "blest to the rights of any assignee of whom we know. Wnen a beneficiary is designated. any relationship shown is to the Insured. unless otherwise statod. To show priority, we may use numbered classes, so that the class with first priority is called class 1, the class with next priority is called class 2, and so on. When we use numbered classes, these statements apply to beneficiaries unless the form states otherwise. I One who survives the Insured will have the right to be paid only if no one in a prior class survives the insured. 2 One who has the right to be paid will be the only one paid if no one else in the same class survives the Insured. 3. Two or more in the same class who have the right to be paid will be paid in equal shares. 4. If none survives the Insured, we will pay in one sum to the Insurod's exists Example: Suppose the class I beneficiary is Jane and the class 2 benefidierief are Paul and John. We owe Jane the proceeds it she is living at the Insured's death. We owe Paul and John the proceeds it they are living then but Jane is not. But if only one of them is living, we owe him the proceeds. If none of them is living we owe the Insured's estate. Beneficiaries who do not have a right to be paid under. these terms may still have a right to be paid under the Automatic Mode of Settlement. Before we make a payment, we have the right to decide what proof we need of the identity, age or any other facts about any persons designated as beneficiaries. If benefici- aries are not designated by name and we make payment(s) based on that proof, we will not have to make the payment(s) again PREMIUM PAYMENT AND REINSTATEMENT Payment of Premiums.-The Schndrrlp nl Prn,..1.,--... .. PREMIUM PAYMENT AND REINSTATEMENT Payment of Premiums.-The Schedule of Premiums shows the amounts of the premiums and how often they must be paid. We tell you below how you may be able to have them fall due either more or less often. Due dates fall on the same day of the month as the contract date. They occur only while the Insured is living. The premium period, shown in the window of the first page, starts on the contract date. Each premium is to be paid by its due date. It may be paid at our Home Office or to any of our authorized agents. If we are asked to do so, we will give a signed receipt. A premium is in default if it is not paid when it is due. Change of Frequency.-You may ask us in writing to have premiums fall due either more or less often. If we agree, we will make the change and tell you what the new premiums are and when they are due. The more often premiums are due, the larger the total amount that will have to be paid for a contract year. Grace Perfod.-Wo grant 31 days of grace for paying each premium except the first one. If a premium has not been paid by its due date, the contract will stay in force during its days of grace. If a premium has not been paid when its days of grace are over, the contract will end and have no value, except as we state under Contract Value Options. Premium Adjustment.-The Insured might die while no premium is in default. If so, we will make an adjustment so that the proceeds will include that part of the last premium paid which is more than that which was needed to pay premiums through the data of death. Or the Insured might die in the days of grace of a premium in default. If so, the amount needed to pay premiums through the date of death is due us. We will make an adjustment so that the proceeds will not include that amount. Example: Suppose the contract date is in 1980. An annual premium of $400 due in 1982 is paid. The Insured dios nine months later. The proceeds will include about $ 100 from the premium, since $300 was enough to pay premiums through the date of death. The proceeds could include slightly more or less than $ 100, since some months have more days than others. This contract might have an extra benefit which insures someone other than the Insured. And there might be a claim under that benefit while the Insured is living and in the days of grace of a premium in default. In this case, we will subtract any premium in default when we settle the claim. Reinstatement.-You may reinstate this contract after the days of grace of a premium in default. All these conditions must be met: 1. Premium payment must not be in default more than three years. 2. You must not have surrendered the contract to us for its cash value. 3. You must give us any facts we need to satisfy us that the Insured is insurable for the contract. 4. We must be paid all premiums in arrears with compound interest at 6% a year. We may set a lower rate for any period in which there are arrears. 5. Any contract debt must be restored or paid back with interest to date at the rate or rates which we state for reinstatement under Loan Interest Rates. If that debt with interest would exceed the loan value of the reinstated contract, the excess must be paid to us before reinstatement. Example: Suppose a premium due May 1st is not paid on time. The contract will stay in force until June 1st whether the premium is paid or not. If the premium is not paid by June 1st you must most all the above conditions if you want to reinstate the contract. Page 7 (ELB--61) DIVIDENDS Participation.-We will decide each year what part of our surplus, if any, to credit to this contract as a dividend The contract will be eligible for such a dividend if (1) the Insured is living: (2) the contract is in force other than as extended insurance; and (3) all premiums due before the anniversary have been paid unless the contract is in force as reduced paid-up insurance. We will credit any such dividend on the anniversary. But we do not expect to credit one before the second anniver- sary. Dividend Options-If the contract is in force as reduced paid-up insurance, we will credit any such dividend as an addition (which we define in 3 below). In other cases, if you ask us in writing at our Home Office and in a form which meets our needs, you may choose any of these uses for any such dividend: 1. Cash.We will pay it to you in cash. 2. Premium Reduction.-We will use it to reduce any premium then due. 3. Addition.-We will use it at the net single premium rate at the Insured's attained age to provide an addition, which is paid-up life insurance on the Insured's life. Example: Suppose we credit a dividend of s 10 to the contract on an anniversary. Suppose it will provide an addition in the amount of $17. The amount of this addition will not change. Its net value is that which we will pay if the addition is surrendered. The net value, which starts at $ 10, will increase with time if it is not Benefit After the Grace Period,--After the days of grace of a premium in default, we will use any net cash value (which we describe under Cash Value Option) to keep the contract in force as one of two kinds of insurance. One kind is extended insurance. The other is reduced paid-up insurance. We describe both below. You will find under Automatic Benefit which kind it will be. Extended Insurance.-This will be term insurance on the Insured's life. We will pay the amount of term insurance if the Insured dies in the term we describe below. Before the end of the term there will be cash values but no loan value. The amount of term insurance will be (1) the face amount, plus (2) any dividend credits, minus (3) any contract debt. The term is a period of time which will start on the due date of the premium in default. The length of the term will be that which is provided when we use the net cash value at the net single premium rate at the Insured's attained age. Example: Suppose the face amount of the contract is $12,000. On the day a premium is due, dividend credits are additions in the amount of $ 1,200, plus $530 more we are holding at interest. There is contract debt of $420. If the premium due is not paid at the end of its days of grace, the amount of term insurance will be 513,310. This comes from the $ 12,000 face amount, plus S 1,730 in dividend credits (S 1,200 in additions and $530 at interest), minus $420 of contract debt. The term insurance will last as long as the net cash value will provide it. (Continued on Next Page) Pace B 1111.4311 reduced by contract debt. 4. Accumulation -We will hold it at interest. The rate will be at least 3% a year. We may use a higher rate. If you have not made another choice by 31 days after the anniversary, we will use the dividend as we state in 3 above. But if a premium is in default at the end of its last day of grace, we will use the dividend as we state under Contract Value Options. Dividend Credits Described.-The-phrase dividend credits means the total of (1) any dividends and interest we hold under 4 above; (2) either the amount or value, as we explain below, of any additions under 3 above; and (3) any other dividends we have credited to the contract but have not yet used or paid. It includes the amount of any of those additions when we refer to the proceeds which arise from the Insured's death. It includes the net value of any of those additions when we refer to loans, net cash values, or the proceeds which arise on surrender. The surrender value of those additions will never be less than the dividends we used to provide them. Surrender of Dividends.-You may surrender any dividend credits for their net value if (1) we have not included them in the net cash value used to provide extended or reduced paid-up insurance; (2) we do not need them as security for contract debt: and (3) we have your request in writing at our Home Office and in a form which meets our needs. Settlement.-We will include any dividend credits in the proceeds when we settle the contract. CONTRACT VALUE OPTIONS (NON-FORFEITURE BENEFITS ARE DESCRIBED HERE) CONTRACT VALUE OPTIONC m .:.. a, 7ene.R Irl 0t1 CONTRACT VALUE OPTIONS (Continued) There may be extra days of term insurance. This will occur if the due date of the premium in default is before the tabular extended insurance first equals or exceeds 90 days, or the number of days for which premiums have been paid, if less. The number of extra days will be (1) 90, or the number of days for which premiums have been paid, if less, minus (2) the number of days of tabular extended insurance, if there is any. The extra days, if any. start on the day after the last day of term insurance provided by the net cash value, if any. If there is no such term insurance, they start on the due data of the premium in default. The term insurance for the extra days has no cash value. There will be no extra days if you replace the extended insurance with reduced paid-up insurance or you surrender the contract before the extra days start. Reduced Paid-up Insurance.-This will be paid-up life insurance on the Insured's life. We will pay the amount of this insurance when the Insured dies. There will be cash values and loan values. The amount of this insurance will be that which is provided when we use the net cash value at the net single premium rate at the Insured's attained age. Computations.-We will make all computations for either of these benefits as of the due date of the premium in default. But we will consider any dividend credits you surrender and any loan you take out or pay back in the days of grace of that premium. Automatic Benefit.-When a premium is in default, the contract will stay in force as extended insurance. But it will stay in force as reduced paid-up insurance if either of these statements applies: (1) We issued the contract in a rating class for which we do not provide extended insurance; in this case the phrase No Extended Insurance is in the Rating Class on page 3. (2) The amount of reduced paid-up insurance would be at least as great as the amount of term insurance. Optional Benefit.-You may choose to replace any extended insurance that has a cash value by reduced paid-up insurance. To make this choice, you must do so in writing to us and in a form which meets our needs, not more than three months after the due date of the pre. mium in default. You must also send the contract to us to be endorsed. Cash Value Option: You may surrender this contract for its net cash value. To do so, you must ask us in writing and in a form which meets our needs. You must also send the contract to us. Here is how we will compute the net cash value: 1. If all due premiums have been paid: The net cash value as of any date will be (a) the tabular cash value (which we explain under Tabular Values), plus (b) any dividend credits. minus (c) any contract debt. 2. If premium payment is in default three months or less: We will compute the net cash value as of the due date of the first unpaid premium. But we will adjust this value for any dividend credits you surrender and any loan you take out or pay back in the days of grace of that premium. 3. If premium payment is in default more than three months: The net cash value as of any date will be the net value on that date of any extended insurance benefit which would have been provided by that net cash value. Or it will be the net value on that date of any reduced paid-up insurance benefit including any dividend credits, less any contract debt. However, within 30 days after an anniversary, the net cash value under 2 and 3 will not be less than it was on that anniversary. It will, of course, be adjusted for any dividend credits you surrender and any loan you take out or pay back in those 30 days. Example: Look back at the example we show for extended insurance. Suppose the tabular cash value is $2.675 and the net value of the additions is $800. The net cash value will be $3,585. This comes from $2,675 tabular cash value, plus $ 7,330 in value of dividend credits ($800 in additions and $530 at interest), minus $420 of contract debt. We will usually pay any cash value promptly. But we have the right to postpone paying it for up to six months. If we do so for more than 30 days, we will pay interest at the rate of 3% a year. Tabular Values.-The table on page 4 shows tabular values at the ends of contract years. These are the values if all due premiums have been paid, there is no contract debt, and there are no dividend credits. For any extended insurance shown in the table, the term will be the number of years and days shown there. The amount of term insurance will be the face amount shown in the window of the first page. If we need to compute tabular values at some time during a contract year, we will count the time since the start of the year and any premiums paid for the year. We will let you know the tabular values for other durations if you ask for them Page 9 (L-81) LOANS Loan Requirements.-After this contract has a tabular loan value (which we show in the table on page 4 and explain under Tabular Values). you may borrow from us on tLe contract. All these conditions must be met: 1. The Insured is living. 2. The contract is in force other than as extended insurance. 3. The contract debt will not be more than the loan value. (We explain these phrases below.) 4. As sole security for the loan, you assign the contract to us in a form which meets our needs. If there is already contract debt when you borrow from us, we will add the new amount you borrow to that debt. Contract Debt.-Contract debt at any time means the loan on the contract, plus the interest we have charged which is not yet due and which we have not yet added to the loan. Interest Charge.-We will charge interest daily on any loan at the rate or rates shown under Loan Interest Rates. Interest is due on each contract anniversary, or when the loan is paid back if that comes first. If interest is not paid when due. it will become pan of the loan. Then we will start to charge interest on it, too. Example 3. Suppose the contract date is in 1981. Six months before the anniversary in 1990 you borrow 51,000 out of a $4,000 loan value. Assume we charge 8% a year. Three months later, but still three months before the anniversary, we will have charged about $20 interest. This amount will be a few cents more or less than $20 since some months have more days than others. The interest will not be due until the anniversary unless the loan is paid back sooner. The loan will still be $ 1, 000. The contract debt will be $ 1,020, since contract debt includes interest charged but not yet due. Example 1: Suppose the contract has a loan value of $6,000. A few months ago you borrowed $ 1,500. By now there is interest of $60 charged but not yet due. The contract debt is now $1,560, which is made up of the $ 1,500 loan and the $60 interest. Loan Value.-You may borrow, at any time, any amount up to the difference between the loan value and any existing contract debt at that time. On a premium due date, the loan value is the tabular loan value plus the net value of any dividend credits. At any other time, the loan value is the amount which would grow at interest to equal the loan value on the next premium due date. There are two exceptions. The first is that, in the days of grace of a premium in default, the loan value is what it was on the due date of that premium. But we will subtract the net value of any dividend credits you surrender in those days of grace. The second is that, if the contract is in force as reduced paid-up insurance or has become paid-up, we use anniversaries and not premium due dates to find the loan value since there are no more of those due dates. The tabular loan values on page 4 do not apply to reduced paid-up insurance. We use its net value to which we refer in 3 under Cash Value Option. Example 2: Suppose, in example 1, you want to borrow all that you can. We will lend you $4,440 which is the difference between the $6,000 loan value and the $ 1,560 contract debt. This will increase the contract debt to $6,000. We will add the new amount borrowed to the existing loan and will charge interest on it, too. Page 10 (L8-19) On the anniversary in 1990 we will have charged about $40 interest. The interest will then be due. Example 4: Suppose the $40 interest in example 3 was paid on the anniversary. The loan and contract debt each became 51,000 right after the payment. Example 5: Suppose the $40 interest in example 3 was not paid on the anniversary. The interest became part of the loan, and we began to charge interest on it, too. The loan and contract debt each became $1,040. Repayment.-All or part of any contract debt may be paid back at any time while the Insured is living. But if there is contract debt at the end of the last day of grace of a premium in default, it may be paid back only if the contract is reinstated. When we settle the contract, any contract debt is due us. We will make an adjustment so that the proceeds will not include that debt. Excess Contract Debt.-If contract debt ever grows to be equal to or more than the loan value, all the contract's benefits will end 31 days after we mail a notice to you and any assignee of whom we know. We may also send a notice to the Insured's last known address. In the notice we will state the amount which, if paid to us, will reduce the contract debt enough to keep the contract's benefits from ending for a limited time. Postponement of Loans.-We will usually make a loan promptly. But we have the right to postpone making a loan for up to six months unless it will be used to pay premiums on this or other contracts with us. Printed in U.S A SETTLEMENT OPTIONS Primed in U 5 A Page 10 (L8-79) • SETTLEMENT OPTIONS Payee Defined.-In these provisions and under the Auto- matic Mode of Settlement, the word Payee means a person who has a right to receive a settlement under the contract. Such a person may be the Insured, the owner, a beneficiary or a contingent payee. Choosing an Option.-While the Insured is living you may choose, or change the choice of, an option for all or part of the proceeds which may arise from the Insured's death. The requirements are the same as those to designate or change a beneficiary. We describe them under Beneficiary. A Payee may choose an option for all or part of any proceeds or residue which becomes payable to him or her in one sum. We explain residue under Residue Described. In some cases, you or another Payee will need our consent to choose an option. We describe these cases under Conditions. Options Described.-Here are the options we offer. We may also consent to other arrangements. As we use it in Options 2 and 5, the phrase regularly issued does not include contracts which are used to qualify for special Federal income tax treatment as a retirement plan. Option 1 (Instalments for a Fixed Period).-We will make equal payments for up to 25 years based on the Option 1 Table. The payments will include interest at an effective rate of 3'h% a year. We may credit more interest. If and while we do so, the payments will be larger. Option 2 (Life Income).-We will make equal monthly payments for as long as the person on whose life the settlement is based lives, with payments certain for the period chosen. The choices are either ten years (10-Year Certain) or until the sum of the payments equals the amount put under this option (Instalment Refund). The amount of each payment will be based on the Option 2 Table and the age and sex, on the due date of the first payment, of the person on whose life the settlement is based. But if a choice is made more than two years after the contract proceeds first become payable, we may use the Option 2 rates in Ordinary policies we regularly issue, based on United States currency, on the due date of the first payment. On request, we will quote the payment rates in policies we then issue. We must have proof of the date of birth of the person on whose life the settlement is based. The settlement will share in our surplus to the extent and in the way we decide. Option 3 (Interest Payment).-We will hold an amount at interest. We will pay interest at an effective rate of at least 3% a year ($30.00 annually, $14.89 semi-annually. $ 7.42 quarterly or $2.47 monthly per 51,000). We may pay more interest. Option 4 (Instalments of a Fixed Amount).-We will make equal annual, semi-annual, quarterly or monthly payments if they total at least $90 a year for each s 1,000 put under this option. We will credit the unpaid balance with interest at an effective rate of at least 3'/2% a year. We may credit more interest. If we do so, the balance will be larger. The final payment will be any balance equal to or less than one payment. Option 5 (Non-Participating Life Income).-We will make payments like those of any life annuity we then regularly issue which (1) is based on United States currency; (2) is bought by a single sum; (3) is not eligible for dividends; and (4) does not normally provide for deferral of the first payment. For the first $250,000 or Isss placed under this option on any date, the payment will be 103% of what we would pay under that kind of annuity with its first payment due on its contract date. For any excess placed under this option on that date, the part of the payment provided by the excess will be 101.5% of the part of the payment the excess would buy under that kind of annuity. In any case, we will compute the present value of any unpaid payments certain at the same interest rate we would use for that kind of annuity with the same provisions as to withdrawal. At least one of the persons on whose life the Option 5 is based must be a Payee. We must have proof of the date of birth of any person on whose life the option is based. Option 5 cannot be chosen more than 30 days before the due date of the first payment. On request, we will quote the payment which would apply for any amount placed under the option at that time. First Payment Due Date.-Unless a different date is stated when the option is chosen: (1) the first payment for Option 3 will be due at the end of the chosen payment interval; and (2) the first payment for any of the other options will be due on the date the option takes effect. Residue Described.---For Options 1 and 2, residue on any date means the then present value of any unpaid payments certain. We will compute it at an effective interest rate of 3'h% a year. But we will use the rate we used to compute the actual Option 2 payments if they were not based on the table in this contract. For Options 3 and 4, residue on any date means any unpaid balance with interest to that date. For Option 5, it means the then present value of any unpaid payments certain. We will compute it at the interest rate to which we refer in Option S. For Options 2 and 5, residue does not include the value of any payments which may become due cfter the certain period. (Continued on Next Page) Page 11 (79) j M_ SETTLEMENT OPTIONS (Continued) OPTION 1 TABLE OPTION 2 TABLE MINIMUM A MOUNT OF MINIMU M AM OUNT OF MONT HLY PA YMENT FOR EACH $1,000, THE FI RST MONTHLY PA YMENT FOR PAY ABLE IM MEDIATELY EACH $ 1,00 0, THE FIRST KIN D OF LI FE INCO ME KIN D OF LI FE INCO ME PAYABLE IM MEDIATELY AGE 10- Year Insta lment AGE 10- Year Insta lment LAST Cer tain Ref und LAST Cer tain Ref und Number Monthly BIRTHDAY Male Female Male Female BIRTHDAY Male Female Male Female of Years Payment 10 53.23 S3.16 $3.22 $3.15 45 $4.33 $4.01 $4.21 S3.96 and under 46 4.39 4.06 4.27 4.00 11 3.24 3.17 3.23 3.16 47 4.46 4.12 4.32 4.05 1 $84.65 12 3.26 3.18 3.25 3.17 48 4.53 4.17 4.38 4.10 2 43.05 13 3.27 3.19 3.26 3.18 49 4.60 4.23 4.44 4.15 3 29.19 14 3.29 3.20 3.28 3.19 50 4.67 4.30 4.51 4.21 4 22.27 15 3.30 3.21 3.29 3.20 51 4.75 4.36 4.58 4.26 5 18.12 16 3.32 3.23 3.31 3.22 52 4.83 4.43 4.65 4.33 17 3.34 3.24 3.33 3.23 53 4.92 4.50 4.72 4.39 6 15.35 18 3.36 3.26 3.34 3.25 54 5.00 4.58 4.79 4.46 7 8 13.38 11 90 19 3.37 3.27 3.36 3.26 55 5.10 4.66 4.87 4.53 9 10.75 20 3.39 3.29 3.38 3.28 56 5.19 4.74 4.96 4.60 10 9.83 21 3.41 3.30 3.40 3.29 57 5.29 4.83 5.05 4.66 22 3.44 3.32 3.42 3.31 58 5.40 4.92 5.14 4.76 11 9.09 23 3.46 3.34 3.44 3.33 59 5.51 5.02 5.24 4.85 12 8.46 24 3.48 3.36- 3.46 3.34 60 5.62 5.12 5.34 4.94 13 7.94 25 3.51 3.37 3.49 3.36 61 5.74 5.23 5.45 5.04 14 7.49 26 3.53 3.39 3.51 3.38 62 5.87 5.34 5.56 5.14 15 7.10 27 3.56 3.42 3.54 3.40 63 6.00 5.46 5.68 5.25 28 3.59 3.44 3.56 3.42 64 6.13 5.59 5.81 5.37 16 6.76 6 47 29 3.62 3.46 3.59 3.44 65 6.28 5.73 5.94 5.49 17 18 6.20 30 3.65 3.48 3.62 3.47 66 6.43 5.87 6.08 5.62 19 5.97 31 3.68 3.51 3.65 3.49 67 6.58 6.02 6.23 5.76 20 5.75 32 3.71 3.54 3.68 3.52 68 6.74 6.19 6.39 5.91 33 3.75 3.56 3.71 3.54 69 6.91 6.36 6.56 6.07 21 5.56 34 3.78 3.59 3.74 3.57 70 7.08 6.53 6.74 6.23 22 5.39 35 3.82 3.62 3.78 3.60 71 7.26 6.72 6.93 6.41 23 5.24 36 3.86 3.65 3.81 3.63 72 7.43 6.92 7.13 6.61 24 5.09 37 3.91 3.69 3.85 3.66 73 7.61 7.12 7.34 6.81 25 4.96 38 3.95 3.72 3.89 3.69 74 7.80 7.32 7.57 7.03 39 4.00 3.76 3.93 3.72 75 7.98 7.53 7.81 7.26 Multiply the m onthly amount 40 4.05 3.79 3.97 3.76 76 8.16 7.74 8.06 7.51 by 2.989 for q uarterly, 41 4.10 3.83 4.02 3.79 83 77 78 8.33 8 52 7.95 15 8 8.34 63 8 7.77 8 06 5.952 for semi -annual or 42 43 4.15 4.21 3.87 3.92 4.06 4.11 3. 3.87 79 . 8.68 . 8.35 . 8.95 . 8.36 11.804 for ann ual. 44 4.27 3.96 4.16 3.91 80 8.85 8.54 9.29 8.68 and over (Continued on Next Page) Pana 12 f791 SETTLEMENT OPTIONS (Continued) SETTLEMENT OPTIONS (Continued) Withdrawal of Residue.-Unless otherwise stated when the option is chosen: (1) under Options 1, 2 and 5 the residue may be withdrawn; and (2) under Options 3 and 4 all, or any part not less than $100, of the residue may be withdrawn. If an Option 3 residue is reduced to less than $1,000, we have the right to pay it in one sum. Under options 2 and 5, withdrawal of the residue will not affect any payments that may become due after the certain period; the value of those payments cannot be withdrawn. Instead, the payments will start again if they were based on the life of a person who lives past the certain period. Designating Contingent Payee(s).--A Payee under an option has the right, unless otherwise stated, to name or change a contingent payee to receive any residue at that Payee's death. This may be done only if (1) the Payee has the full right to withdraw the residue; or (2) the residue would otherwise have been payable to that Payee's estate at death. A Payee who has this right may choose, or change the choice of, an option for all or part of the residue. In some cases, the Payee will need our consent to choose or change an option. We describe these cases under Conditions. Any request to exercise any of these rights must be in writing and in a form which meets our needs. It will take effect only when we file it at our Home Office. Then the interest of anyone who is being removed will end as of the date of the request, even if the Payee who made the' request is not I. ling when we file it. Changing Options.-A Payee under Option 1, 3 or 4 may choose another option for any sum which the Payee could withdraw on the date the chosen option is to start. That date may be before the date the Payee makes the choice only if we consent. In some cases, the Payee will need our consent to choose or change an option. We describe these cases next. Conditions.-Our consent is needed for an option to be used for any person under any cf these conditions: 1. The person is not a natural person who will be paid in his or her own right. 2. The person will be paid as assignee. 3. The amount to be held for the person under Option 3 is less than $1,000. But we will hold any amount for at least one year under the Automatic Mode of Settlement. 4. Each payment to the person under the option would be less than $20. 5. The option is for residue arising other than at (a) the Insured's death, or (b) the death of the beneficiary who was entitled to be paid as of the date of the Insured's death. 6. The option is for proceeds which arise other than from the Insured's death, and we are settling with an owner or any other person who is not the Insured. Death of Payee.-If a Payee under an option dies and if no other distribution is shown, we will pay any residue under that option in one sum to the Payee's estate. ENDORSEMENTS (Only we can endorse this contract.) Page 13 (79) AUTOMATIC MODE OF SETTLEMENT Applicability.-These provisions apply to proceeds arising from the Insured's death and payable in one sum to a Payee who is a beneficiary. They do not apply to any periodic payment. Interest on Proceods.-We will hold the proceeds at interest under Option 3. The Payee may withdraw the residue. We will pay it promptly on request. We will pay interest annually unless we agree to pay it more often. We have the right to pay the residue in one sum after one year if (1) the Payee is not a natural person who will be paid in his or her own right; (2) the Payee will be paid as assignee; or (3) the original amount we hold under Option 3 for the Payee is less than $ 1,000. Settlement at Payee's Death.-If the Payee dies and leaves an Option 3 residue, we will honor any contingent payee provision then in effect. If there is none, here is what we will do. We will look to the beneficiary desig- nation of the contract; we will see what other benefici- ary(ies), if any, would have been entitled to the portion of the proceeds which produced the Option 3 residue if the Insured had not died until immediately after the Payee died. Then we will pay the residue in one sum to such other beneficiary(ies), according to that designation. But if, as stated in that designation, payment would be due the estate of someone else, we will instead pay the estate of the Payee. Example: Suppose the class I beneficiary is Jane and the class 2 beneficiaries are Paul and John. Jane was living when the Insured died. Jane later died without having chosen an option or naming someone other than Paul and John as a contingent payee. If Paul and John are living at Jane's death we owe them the residue. If only one of them is living then, and if the contract called for payment to the survivor of them, we owe him the residue. If neither of them is living then, we owe Jane's estate. Spendthrift and Creditor.--A beneficiary or contingent payee may not, at or after the Insured's death, assign, transfer or encumber any benefit payable. To the extent allowed by law, the benefits will not be subject to the claims of any creditor of any beneficiary or contingent payee. ENDORSEMENTS (Only we can endorse this contract.) Voting Rights. We are a mutual life insurance company. Our principal office is in Newark, New Jersey, and we are incorporated in that State. By law, we have 24 directors. This includes 16 elected by our policyholders (four each year for four year terms), two of our officers, and six public directors named by New Jersey's Chief Justice. The election is held on the first Tuesday in April from 10:00 A.M. to 2:00 P.M. in our office at the Secretary's address shown here. After this contract has been in force for one year, you may vote either in person or by mail. We will send you a ballot if you ask for one. Just write to our Secretary at Prudential Plaza, Newark, New Jersey 07101, at least 60 days before the election date. By law, your request must show your name, address, policy number and date of birth. If you are an individual, you must be at least 18 years old to vote. Home Office Locations.-When we use the phrase Home Office we mean any of these Prudential offices: Corporate Office, Newark, N.J. Central Atlantic Home Office, Fort Washington, Pa. Northeastern Home Office, Boston, Mass. Eastern Home Office, South Plainfield, N.J. South-Central Home Office, Jacksonville, Fla. Head Office, Canadian Operations, Toronto, Ont. Southwestern Home Office, Houston, Tex. Mid-America Home Office, Chicago, III. Western Home Office, Los Angeles. Calif. North Central Home Office, Minneapolis, Minn. The Prudential Insurance Company of America, COMB 34693-79 Secretary Page 14._(79) Primed in U.S A RIDER FOR 3RfY)Y`, t; ..._ P,_ to 17 et RIDER FOR INSURED'S WAIVER OF PREMIUM BENEFIT This Benefit is a part of this contract only if it is listed on the Contract Data pago(s) Total Disability Benefit.-We will waive contract premiums which fall due while the Insured is totally disabled. But this is subject to all the provisions of this Benefit and of the rest of this contract. Disability Defined.-When we use the words disability and disabled in this Benefit we mean total disability and totally disabled. Here is how we define them: (1) until the Insured has stayed disabled for two years, we mean that he or she cannot, due to sickness or injury, do any of the duties of his or her regular occupation; but (2) after the Insured has stayed disabled for two years, we mean that he or she cannot, due to sickness or injury,'do any gainful work for which he or she is reasonably fitted by education, training, or experience. Except for what we state in the next sentence, we will at no time regard an Insured as disabled who is doing gainful work for which he or she is reasonably fitted by education, training, or experience. We will regard an Insured as disabled, even if working or able to work, if he or she incurs, during a period in which premiums are eligible to be waived as we describe below, one of these conditions: (1) permanent and complete blindness of both eyes; or (2) severance of both hands at or above the wrists or both feet at or above the ankles; or (3) severance of one hand at or above the wrist and one foot at or above the ankle. Premiums Eligible To Be Waived.-If the Insured becomes disabled before the first contract anniversary after his or her 60th birthday and that disability begins (1) on or after the first contract anniversary after his or her 5th birthday, if the contract date was before that birthday; or (2) on or after the contract date, if that date was on or after his or her 5th birthday. we will waive all premiums which fall due while he or she stays disabled. If the Insured becomes disabled on or after the first contract anniversary after his or her 60th birthday, we will waive only those premiums which fall due before the first contract anniversary after his or her 65th birthday and while he or she stays disabled. If the Insured becomes disabled on or after the first anniversary after his or her 65th birthday, we will not waive any premium which falls due in that period of disability. YIO,IUU .11 U J N Conditions.-Both of these conditions must be met: (1) The Insured must become disabled while this contract is in force with no premium in default past its days of grace. (2) The Insured must have stayed disabled for a period of at least six months while living. Exceptions.-We will not waive any premium if the Insured becomes disabled from: (1) an injury he causes to himself, or she causes to herself, on purpose; or (2) sickness or injury due to service on or after the contract date in the armed forces of any country(ies) at war. The word war means declared or undeclared war and includes resistance to armed aggression. Successive Disabilities.-Here is what happens if the Insured has at least one premium waived while disabled, then gets well so that premium payment resumes, and then becomes disabled again. In this case, we will ignore the six-month period which would otherwise be required by Condition (2) and consider the second period of disability to be part of the first period unless (1) the Insured has done gainful work, for which he or she is reasonably fitted, for at least six months between the periods; or (2) the Insured became disabled the second time from an entirely different cause. If we ignore the six-month period required by Condition (2), we also will not count the days when there was no disability as part of the two year period when disability means the Insured cannot work at his or her regular occupation. Notice and Proof of Claim.-Notice and proof of any claim must be given to us while the Insured is living and disabled, or as soon as reasonably possible. If notice or proof is not given as soon as reasonably possible, we will not waive any premium due more than one year before the date that notice or proof is given to us. We may require proof at reasonable times that the Insured is still disabled. After he or she has been disabled for two years, we will not ask for proof more than once a year. As a part of any proof, we may require that the Insured be examined at our expense by doctors of our choice. Recovery from Disability.-We will stop waiving premiums if (1) disability ends; or (2) we ask for proof that the Insured is disabled and we do not receive it; or (Continued on Next Page) EG 100 R (Continued from Preceding Page) (3) we require that the Insured be examined and he or she faits to do so: Miscellaneous.-,Any premiums which fall due are payable until we approve a claim. We will refund any premium paid which is later waived. There might be unpaid premiums which fall due (1) after disability starts: but (2) more than one year before we have notice of claim at our Home Office. Or disability might start in the days of grace of a premium which is unpaid. In either case, if we are otherwise able to approve a claim, those unpaid premiums which we do not waive will be due us with compound interest at 6% a year. If we do not receive them, we will deduct them with interest from any amount which we pay under the contract. Any premium we waive will be at the frequency in effect when the Insured becomes disabled. If we waive premiums, the effect on this contract will be the same as if the premiums had been paid in cash. But the Premium Adjustment provision in the contract will not apply to any premium we waive under this Benefit. If we owe the Insured a refund of premium but have not paid it before his or her death, we have the choice of paying the beneficiary for insurance payable upon the death of the Insured or the Insured's estate. Benefit Premiums.-The premiums for this Benefit are a part of the contract premiums due before the first contract anniversary after the Insured's 65th birthday. Termination.-This Benefit will end on the earliest of: 1. the end of the last day of grace of a premium in default; it will not continue if a benefit takes effect under any contract value options provision which may be in the contract; 2. the end of the day which is the last premium-due date in the premium period; 3. the date the contract is surrendered under its Cash Value Option, if it has one; 4. the end of the day before the first contract anniversary after the Insured's 65th birthday, unless the Insured has stayed disabled since before the first contract anniversary after the 60th birthday: and 5. the date the contract ends for any other reason. This Supplementary Benefit rider attached to this contract on the Contract Date The Prudential Insurance Company of America, By Secretary EG 100 R Printed in U.S.A. '(nt) 1b. Sex 12a. Date of birth j2b. Age I2c. Plaoe of b tr h ivi rut n c Mo. I Dav I Yr. 1 Z <: . I. EG 100 Fl r..nma'n ll a ? B'(ffel; Inhlal, Imil lPrlntl lb. so. 12e.. Dntn nl hinn 12h. noel, 2C. Pllarn of hLa ?yn 't Fi rdo IDnv yr. I _ I . r7 .1. Nidnwed Adtflnss for m,l'I :I '*?•Merrlad ? I $In':I -? "?""`.•. • a41 .. Cet of C3 Divorced No Smlr I li fm I Coy Cv, r•(, !? 5b. For how long? L-----" - - , Wr7. Fnr nnr.h Child p^.nrr•..•d Inr [uvrraqu Pw.. per cgverego, givd: First nmmn & Ilcl,urun"I D•nu of hn16:unL al 1011 .i. ! - initial i.e.' I,Ma.?D?ry;Vr'?ms. minru• I M1 `y,y'ppe d.+Pleco O. Aml. of life a _- S ' 'p{birth fit in tares h.._. C. _.-_.._.._._ .{ -•-?•^ " eb: Initial amount d. I tr4;1In'Qr. 10:'Acefdental dssth coverage L ?•?? r•t ?e'Ihlllel,emt, Insurance e for n child will not sloe until the 15th Any 'b. RatingQ2 Q3 ?e ?5 of lire- @PPlementary Benefits, give details: fel illivte rp on insured I. FnmIIV Income to ih Contract Annrver arv n'• p? .. Innumrl S .. Per month yb:" nltiil Amount. I C (Del.re6sln0Term. on ?Spouse g. Family ncnmr in :nor lIOUI l Annwr r ealV 'r" 1 . uxn L hr,.u'rd & SPOIn,'• 4 nor n,nrrnr iAgci sq5 u:-Inttlnl Amount. U • t S to 1 {,'d k'MI66Kon Insured h. Family Inromc In :•SI^ GSM16H( on tnsrund '+.:? " .••--'" Initial Amount 5 _ _pnr month. e pLM165F on Spouse I, Family income to Age 52NI155F on Snousn µ? 3 normonth Irtilel Amount. 5--- - rr•Tq:. '• ° -• vol Term on Depende h Ln pn ?lflaured $ -- -- Ch ddrrn 5 ?IUpI'.C d Mod. Premium u k. option IP Purchase Addhionlp :I,.urnn:n S .:m).u?ewDn?Kr (Do not complete fort a Fnnaily ar Insun.d W bpnn'n I' dmv .. pesth.U1 (1) the losumd, nett I21 en maumtf chart oiler Ina drna, nl Pu• h..nn nl •• '9 ,. IEf I'Equest. -_----. IA. List ell life. Wsur:m' n, annwbr :nvl v.v ial Ar,,.n .. Iraris on pmpnsnd Insured. 111 NONF.aab•' Initial Year Kind ILdc, Mad :1p•r•l.t,• : , I = r^.,Sv,^ {,, ? Company eml I issued I End tyGrounl yec ., 1 L_ 1 Vela F•- . ,?lone - _ _ ? [, .1 r ' v InsuflNlCei?ePlnce;or change any existing insummo of annudy hr any r<npl 'v 'tarp a 71I( "Vet", qn their X- nmmes, name of cu'npany. elan, mm?u' t . vl t •'' v ,Epp. (Ilia' pertry'Ingtorelnstnte,lllnnrhunhhlnsurnnrnnnnnvnnrsnn nnne•d ..'L'cn y'••. ''r et a,µ? pO?,,,,a0Y7 If "Yoe'.glve amount, details land company. - ••spY, ,"tW .. vVereon named In to. 6 or 7 plan to Ilvo or Iravel outside thr. Unnad Stntns ann anmL' vfn•. r teneltt'12.., onthst:lt "Yes'. give details. Y person ha ilod In 16, 6 or 7 Plan to Try an ain;•all, glider, balloon or like auv¢c a"' ""' .r y O.flow•n as a student Pilot, pilot or crew rnemhar or half mw mt'•r' 'y ?1t g1(8$f, balloon or like device while in flight including flight for hrgl•it t:ar I' '2orIYp10t0 IntiOn:Duestfonnairo`__.--•,,. B16 Is or 6, within Iho last 12 mnmhs: ?rJs(i bti d'doclor for or had o known hand allack, sPhV tent rncrin ntimr h In or th, 1117 LrhAllogri urn for chest pain or fo' any hnr .. d ' ssurel...... mljlayisblq'jo Anno-OSeml•Ann, OOunr. Vi Mon {Wrv N'?dn 1•m LLn.. tyEld one (Must be "Nom{' it either P1a nr 19b +ansv+""•" - Yn• t' Wa k?.[N - - rs - - fI' .`1 a(nOd I examination will be made on nnV P"rsno named in ta. b n' 71 It -'Y'" r X".a:• ..? • ?' _ ______._._. _ '-vas kr Ayes",its it greed that no Insurance Will take eHoct on anyonn until all mndmal ovamo•ann"= -__ -oaf'l'.tgP1nh l shows that an amount has been paid? the spouse (if proposed for Covnra,lcl dnel:nrl sI:n It" I» a n! the krnt•.'.°1qr•: ^d N•b...... )vs matomenls an, complete nndtrua. VJhm.Pnrlnntcd ::'v!calrccq"'""" .Otherwise. no <ovrrngr'wie stns unless '+ •: }1, ap girgewell start o9shown in that form coopted, and 131 the full first promium is paid while all persons to be coverr!d Vi Irving :1 wl'unn consran ladle Ports ;pprovod by aclcthose take Place. eptance of to contract. Bill whtv,nhn on hP law conttaC% (1 swill be app i:al'tan; such a change can be made only it those who vpu the, tu' n' •nl;"avr q"' r!""'q" °' kE or change o eenInIM or waive any of Prudonlial's aphis of ner'Is l 1 other dvm rv. ,mine asked for above, the owner of Iho contract will be. Ill lam app a'ar Viae,(2llllo proposed Insured. But this in suhject In any mdnmalic bnnslrr nl nv,nrr .' .. .X Stale rtt l '- 7 ... , -- Y, Lke(f6W?'AQIs , (Wrlung Flop' 00 n YCt t*MVANIA 3p t.t . S'gr111 Jo of Proposnd Ins"ryl Signllturi: nl Jnllll!;n 111 puyv,•.rd tar Cnvnnui L ---- -- " 111 PII'etr man ern Pn ¢r,l br•.: .rn•'• I Si{Innlurr• of APpbr:am By ,.:.i.__•.. 11 . i.............. .. tsal..n..., 1 nsquen for.Chantim Policy of person examined - first, Inltiol,'last (Print) { Living b. c. No,-/- ass your weight changed more than 10 pounds in the past year? Wed',-Geln_Ibs. Loss lbs. Reason for change cm, long has the present weight been the some? / '1?s/r nave YOU aver ampxear ............................. ...........9 ................ !T .. Ves [] Nor / If "Yes". give date(s) last smoked: Cigarettes Mo V C'igars' i ars. Mo. Yr. Pipe Mo. Yr. ,16C116l1d(d.Y.4U,last.eoneult adodos] Mo. A t Yr. e- (Give details in 12. ) -- _ -- _ Are you now being treated or taking medicine for Inv condition or disease? Yns (! NPr,' H ave you ever: a. had any surgery or been advised to have surgery and have not done so7. vex f. ? b.. been In a hospital, sanitarium or other institution for obsorvation, rest. diagnosis or treatment? V; o.,*• regularly used or am you now using, barbhumtns or amphetamines. manluana or outer hat iuclnatory drugs, or heroin, opiatoa or other narcotics exce t . p as prescnbefl by A do.AorI d. boon treated or counseled for alcoholism? .. • ! ??. ti fib tBe•orheahh Insurance declined, postponed, changed. mtod•up or wdhdrawn0 ; -v-. C :had Ilfe'or health Insurance canceled or its renewal or reinstatement refused? _ I'1 Have YOU ever bean treated by o doctor for or had any known sign of: •• a: high blood pressure? (If "Yes", state data found. if drugs are used And if still heinq treated 1 yes b.?-cheat pain, pressure or discomfort? (if "Yes", state where located, mimher of Atlarks. Ih.ii --:"'; tfuration, data of, last, attack and treatment.) .......... . ''ff E r>- e rtmurfhuror rheumatic favor? (If rheumatic favor, state number of attacks. dole of hill :elArk I ??+rtd hovYI6np dIoabled for each.) ......... ......... .. .. 3fX.talNtme; efddhyiedli or tuberculasis7 ................... .. . .. ? mO peet / ukemle diabetes or s hili ? t ' !.I tA, . p , s yp ........... ......... ... .. .. ..... b •ngervou oub bt-4 onwlel ins, opilopw or mental disorder? (_: -l vn above, have you over boon treated by a doctor for or had any knew. smn nl a r of the: Yes No/ Yes Nn -- rv .,-onontmorvamar-nc.....;?/; xa[j•.r • :N lunge chest or throat? e. kidneys, bladder, genital organs or urin- , ............. ? 100 FfIa1M1IQ119'rya[am7.......... ? 'E ' be f E ary IracO 1. spine, joints, skull or othnr bons? 13 CG , 1I 11? aei, stomachInter h/0r.toetlfIII? ............. c] p g. blood, glands or skin? h. oars eyes nos. or sinusos. f?Jy - ' r , , ..____ :Other then ee ihoWn above, have you in the ore : v5 f 0 v a. •;eOniuited or beers attended or examined by any doctor or other prnl:titionnr? ' as No b. hod'ebletroeerdfogranne, X-rays for diagnosis or treatment, or blond urino or other eindvnl ' , . taste? (If "Yes", state dates, why made and by whom.) . C. made claim for or reeelved benefits, compensation, or a pension because of sickness or injury? LJ ' r - :60yod'how have a known sign of any physical disorder, disease or defect not shown above? .. Yos f [INor?'•- MkVflthlMts,I?dMfeil? ottee enesvsr to 5 and to each pan of 6 through 11 which is answered "Yes"? :,. r., asss o?other reason ..? . If operated, so store. nnasoo for Timn lost Full PRINT full nn m"•. "'- _ _ • any ehxk-up doctor a advina, gegnn from narmnl rucnvnry 010111 addrr•xxP stllon No 11matmbff'andifoadieati M Y . r. on. o. r. nctivitins Mn. Yr. dnrtors And h nxpnal- IA- i.S .- a am Or' that, to the best of my knowledga and belief, the above statements are complol. and true. (Be cure you have road all the questions and answers before signing.) Signature of person examined vtt _2 Living D"Ad (give ago) I Cause'. Aged Veer .. Yes? Ng? 4 - GUIDE TO CONTENTS Page Contract Summary ............ ............. 2 Table of Basic Amounts ....... ............ 15 Contract Data ........... 3 Rating Class; List of Supplementary Benefits, if any; Schedule of Premiums Page Contract Value Options ............... .................. .8 (Describes Non-Forfeiture Benefits) Benefit After the Grace Period; Extended Insurance; Reduced Paid-up Insurance; Computations; Automatic Benefit; Optional Benefit; Cash Value Option; Tabular Values Table of Values ............................. 4 A table showing Cash and Loan Values; amounts of Reduced Paid-up Insurance; and Extended Insurance, if any General Provisions ........................... 5 Definitions; The Contract; Contract Modifications; Ownership and Control; Suicide Exclusion; Currency; Misstatement of Age or Sex; Incontestability; Assignment; Loan Interest Rates; Changes in Plan Beneficiary .............................3 & 6 Premiums ............................:.3 & 7 Payment of Premiums; Change of Frequency; Grace Period; Premium Adjustment Reinstatement ..............................7 Dividends .................................8 Participation; Dividend Options; Dividend Credits Described; Surrender of Dividends; Settlement Loans ................................ ...10 Loan Requirements; Contract Debt; Loan Value; Interest Charge; Repayment; Excess Contract Debt; Postponement of Loans Settlement Options ....................... ... 11 Payee Defined; Choosing an Option; Options Described; First Payment Due Date; Residue Described; Income Tables; Withdrawal of Residue; Designating Contingent Payee(s); Changing Options; Conditions; Death of Payee Automatic Mode of Settlement ............... .. 14 Applicability; Interest on Proceeds; Settlement at Payee's Death; Spendthrift and Creditor Voting Rights ........................... .. 14 Home Office Locations ..................... .. 14 Basis of Computation ...................... .. 15 Mortality Tables Described; Interest Rates; Exclusions; Values After 20 Contract Years; Minimum Legal Values Any Supplementary Benefits and a copy of the application follow page 14. Page 16 Whole Life Policy. Insurance payable only upon death. Premiums payable throughout Insured's lifetime. Supplementary Benefits, if any, as listed on Contract Data page(s). Eligible for annual dividends as stated in Dividends provision. EWL_? -? a r l 1 Nintad in U.S.A. .0- ENDORSEMENTS (Only we can endorse this contract.) BASIS OF COMPUTATION Mortality Tables Described.-We base all not premiums and net values to which we refer in this contract on the Insured's attained age and sex. For extended insurance we use the Commissioners 1958 Extended Term Insur- ance Table. For all other of those net premiums and net values, we use the Commissioners 1958 Standard Ordi- nary Mortality Table. If the Insured is female and at least age 15, we set the tables back 3 years. If she is younger, we use the female extensions of the tables for ages less than 15. We use continuous functions based on age last birthday. Interest Rates.-For dividend additions we use 4% a year for the net premiums and net values. For all other net premiums and net values to which we refer in this contract we use 4'fi% a year in the first 20 contract years and 3% a year in later years. Exclusions.-When we compute net values we exclude the value of any Supplementary Benefits and any other extra benefits added by rider to this contract. Values After 20 Contract Years.-Tabular cash values after the 20th contract year will be the net level premium reserves. To compute them, we will use the mortality tables and interest rates which we describe above. There will be the same exclusions. Minimum Legal Values.-The cash, loan and other values in this contract are at least as large as those required by law where it is delivered. We have given the insurance regulator there a detailed statement of how we compute values and benefits. CONTRACT SUMMARY (Continued from Page 2) TABLE OF BASIC AMOUNTS When the proceeds arise from the Insured's death: And The Contract Is In Force: Then The Basic Amount Is: And We Adjust The Basic Amount For: with no premium in default past its the face amount (in window on contract debt (see page 10), days of grace page 1), plus the amount of any dividend credits (see page 8), and extra benefit arising from the premium in default or paid (other Insured's death than by a waiver benefit, if any) past the date of death (see page 7). as reduced paid-up insurance the amount of reduced paid-up contract debt and dividend credits (see page 9) insurance (see page 9) since the reduced paid-up insurance began. as extended insurance (see page 8) the amount of term insurance, if nothing. the Insured dies in the term (see page 8); otherwise zero CnN Page 15 (L-81) SHERIFF'S RETURN - REGULAR CASE NO: 1999-07438 P COMMONWEALTH OF PENNSYLVANIA: COUNTY OF CUMBERLAND SHADE WAYNE F VS. PRUDENTIAL INSURANCE CO OF AM KENNETH GOSSERT , Sheriff or Deputy Sheriff of CUMBERLAND County, Pennsylvania, who being duly sworn according to law, says, the within COMPLAINT - EQUITY was served upon PRUDENTIAL INSURNACE COMPANY OF AMERICA (THE) the defendant, at 15:35 HOURS, on the 15th day of December 1999 at 150 CORPORATE CENTER DRIVE SUITE 105 CAMP HILL, PA 17011 CUMBERLAND County, Pennsylvania, by handing to PAULA LASECKI (ADULT IN CHARGE) a true and attested copy of the COMPLAINT - EQUITY together with NOTICE and at the same time directing Her attention to the contents thereof. Sheriff's Costs: Docketing 18.00 9 92 So answers: ;`??.' ' ,-. Service . ii ? Affidavit .00 00 ? Surcharge 8.00 R- omas ine, eri X SHADE 12/16/199 by epu y ri Sworn and subscribed to before me this 11-C" day of 38 .ao?-,rUA'.'D A.D. ? 1 Pro no IN THE CUMBERLAND COUNTY COURT OF COMMON PLEAS WAYNE F. SHADE Plaintiff, V. No. 99-7438 Equity THE PRUDENTIAL INSURANCE COMPANY OF AMERICA Defendants. NOTICE OF FILING OF NOTICE OF REMOVAL TO: Hon. Curtis Long Prothonotary of the Court of Common Pleas of Cumberland County, Pennsylvania Wayne F. Shade, Esquire 53 West Pomfret Street Carlisle, Pennsylvania 17013 PLEASE TAKE NOTICE that defendant the Prudential Insurance Company of America has filed a Notice of Removal in the office of the Clerk of the United States District Court for the Middle District of Pennsylvania on January 5, 2000. A true and correct copy of that Notice of Removal is attached hereto. REED SMITH SHAW & MCCLAY By ! ?c 1 I.D. No. 23846 213 Market Street, N'nth Floor P. O. Box 11844 Harrisburg, PA 17108 (717) 257-3042 Of Counsel: Sonnenschein Nath & Rosenthal Michael H. Barr Kenneth J. Pfaehler Richard J. Cunningham 1221 Avenue of the Americas 24th Floor New York, New York 10020-1089 (212) 768-6700 .2- IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA WAYNE F. SHADE ? A Plaintiff, :CV o,u ® .), ® c) 2 A%d Y? V. No. 1: CV THE PRUDENTIAL INSURANCE COMPANY OF AMERICA FILED Defendants. ?? ,? ?? 'dRQiSBIJRG, PA NOTICE OF REMOVAL JAN u 5 2000 PLEASE TAKE NOTICE that, r?F\?Y [. D LERK pursuant to 28 U.S.EW- Ooputy ,e„ §§1441(a) and 1446, defendant The Prudential Insurance Company of America ("Prudential') hereby removes the above-captioned action from the Court of Common Pleas of Cumberland County, Pennsylvania, to the United States District Court for the Middle District of Pennsylvania, by the filing of this Notice of Removal with the Clerk of the United States District Court for the Middle District of Pennsylvania. Prudential, by and through its undersigned attorneys, Reed Smith Shaw & McClay, respectfully states the following as grounds for removal of this action: 1. This action may be removed to this Court by Prudential pursuant to the provisions of 28 U.S.C. 9§1441(a) and 1446. 2. On or after December 13, 1999, plaintiff filed an action in the Court of Common Pleas of Cumberland County, Pennsylvania, entitled Wayne F. Shade v. The Prudential Insurance Company of America, Case No. 99-7438 (the "State Court Action"). • idd II 3. In his Complaint, plaintiff attempts to state causes of action in equity (Count I), for violation of Pennsylvania's Unfair Trade Practices and Consumer Protection Law (Count II), and breach of contract (Count III). 4. Plaintiff seeks, among other things, compensatory damages, treble damages, attorneys' fees, and costs. 5. Prudential was served with the Summons and Complaint in the State Court Action on December 16, 1999. 6. This Notice of Removal is filed within thirty days after the Complaint in the State Court Action was served on Prudential and therefore is timely filed pursuant to 28 U.S.C. §1446(b). Murphy Bros. Inc. v. Michetti Pipe Stringing Inc., 119 S. Ct. 322 (1999). 7. Copies of all process, pleadings and orders -- limited at this time to the Complaint -- served upon Prudential in the State Court Action are attached as Exhibit A. 8. A copy of the written notice required by 28 U.S.C. §1446(d), addressed to the adverse party and to the Prothonotary of the Court of Common Pleas of Cumberland County, Pennsylvania, is attached as Exhibit B and will be filed in the State Court Action and served upon plaintiff upon the filing of this Notice of Removal. JURISDICTION EXISTS UNDER 28 U.S.C. 51332 9. This action is removable pursuant to the provisions of 28 U.S.C. §1441(a) because it is a civil action over which this Court has original jurisdiction under 28 U.S.C. §1332, in that. there is complete diversity between the parties -2- and the amount in controversy exceeds the sum or value of $75,000, exclusive of interest and costs. The Parties Are Diverse 10. Plaintiff Wayne F. Shade is alleged to reside in the State of Pennsylvania. (Complaint 51). On information and belief, plaintiff is now, and at the time the State Court Action was commenced was, a citizen of the State of Pennsylvania. 11. Prudential is alleged to be a New Jersey corporation with offices in the State of Pennsylvania. (Complaint 112). Prudential is now, and at the time the State Court Action was commenced was, a mutual insurance company organized and existing under the laws of the State of New Jersey with its principal place of business in the State of New Jersey and therefore is now, and at the time the State Court Action was commenced was, a citizen of the State of New Jersey for diversity jurisdiction purposes. 28 U.S.C. §1332(c)(1) Prudential is not a citizen of the State of Pennsylvania for diversity jurisdiction purposes. 12. There is thus complete diversity of citizenship between plaintiff and defendant. The Amount In Controversy Exceeds $75 000 13. For this Court to have subject matter jurisdiction based on diversity of citizenship, the amount in controversy must exceed the sum or value of $75,000, exclusive of interest and costs. 28 U.S.C. §1332(a). 14. The amount in controversy in this case exceeds the sum or value of $75,000, exclusive of interest and costs. -3- 28 U.S.C. §1332(a). Plaintiff seeks damages of $300,000 in Count II and $100,000 on Count III of the Complaint. See Complaint "WHEREFORE" clause following %J138, 142. 15. In light of the foregoing, the amount in controversy clearly exceeds $75,000, exclusive of interest and costs. 16. Consequently, this action is removable to federal court because there is original federal jurisdiction under 28 U.S.C. §1332. WHEREFORE, defendant The Prudential Insurance Company of America removes the State.Court Action from the Court of Common Pleas of Cumberland County, Pennsylvania, to this Court, and requests that this Court take jurisdiction of this civil action to the exclusion of any further proceedings in state court. REED SMITH SHAW & McCLA I.D. No. 23846 213 Market Street, inth Floor P. O. Sox 11844 Harrisburg, PA 1710 (717) 257-3042 Attorneys for Defendant The Prudential Insurance Company of America -4- • r Of Counsel: Sonnenschein Nath & Rosenthal Michael H. Barr Kenneth J. Pfaehler Richard J. Cunningham 1221 Avenue of the Americas 24th Floor New York, New York 10020-1089 (212) 768-6700 fir.=?s v ?I -5-