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Class Action Challenges Cell Phone "Insurance"

April 8, 2005
A class-action lawsuit filed in federal court in Miami charges that cell phone insurance is a rip-off, pushed by cell phone equipment insurers using "deceptive and outrageous" practices.

Cell phone insurance typically costs the consumer $4 or $5 per month to replace lost, damaged or stolen phones, but usually with a deductible of $35 to $100. Thus, a consumer could easily pay $120 over two years and, with a $100 deductible, pay more than a new phone would cost.

Even worse, the suit charges, is that phones are replaced with cheap, used or refurbished phones, further reducing the value of the insurance.

The insurers are being sued for unfair trade practices and other violations for "falsely representing that the purchase of wireless phone protection provides a benefit."

The complaint names three big insurers -- Asurion Insurance Services in Nashville, Tenn., Lock/Line LLC in Kansas City, Mo., and Signal Holdings in Wayne, Pa. -- which offer coverage through the country's major cell phone service providers.

The suit, filed on behalf of a Dade County resident, is seeking class-action status covering consumers in Florida who bought insurance from any of the three defendants from July 1, 2001 to the present, and consumers nationwide who purchased insurance during the same period from Lock/Line, which provides coverage to customers of AT&T Wireless and Cingular.

The complaint against Lock/Line covers more consumers because the law in Missouri, where Lock/Line is based, is more easily applied nationwide, attorneys said.

The complaint also charges that the monthly premiums are deceptive because they don't actually insure property in the event of a loss.

"These premium payments do nothing more than create a right to have the opportunity to pay additional monies in the form of the so-called 'deductible' in order to receive a refurbished phone worth less than the deductible alone," the suit says.

The suit also accuses the insurers of imposing unlawful and unfair conditions for filing a claim, including requiring a police report even if a phone is lost instead of stolen.

The lawsuit asks that consumers receive refunds for monthly premiums in addition to any deductibles they paid greater than the actual cost of replacement phones, plus interest, costs and attorney fees.

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