Illinois Division of Insurance acts to protect 47,000 IFDA Illinois consumers, reaches $18 million resolution with Merrill Lynch Life Agency

CHICAGO - Acting to protect more than 47,000 Illinois families who pre-paid for a funeral, the Illinois Division of Insurance (DOI) announced today an $18 million resolution with Merrill Lynch Life Agency, Inc. (MLLA) for its role in pre-need funeral arrangements managed by the Illinois Funeral Directors Association (IFDA). DOI's Order, known as a "Stipulation And Consent Order," will aid members of the IFDA if those Funeral directors agree to provide their client-families with the contracted funeral.

"More than 47,000 Illinois families prepaid for funerals as an aid to their loved ones during the difficult times surrounding their death," said Michael T. McRaith, Director of the State's Division of Insurance. "Our objective was to return peace and confidence to these families, who can now be assured of the comfort for which they paid.

"This Stipulation And Consent order ensures that the well-publicized IFDA challenges do not hurt the more than 47,000 Illinois families who prepaid for funerals," McRaith said. "In addition, this resolution supports hundreds of funeral directors who face financial burdens like many other small businesses."

The $18 million fund results from a DOI investigation begun after a referral by the Illinois Office of the Comptroller in 2006.  "We appreciate and commend the collaborative and responsible efforts of the Comptroller's Office in support of this investigation," said McRaith.
By the terms of the Order, MLLA is required to pay $18 million plus costs into a special fund which will be held in escrow and subject to strict distribution guidelines controlled by Director McRaith and Comptroller Dan Hynes.

"The goal of the Comptroller's Office has been and will continue to be to protect consumers and make sure they receive what they were promised. This resolution will help us achieve this goal and we commend DOI for its action," Hynes said.

Specifically, the Order provides that an IFDA funeral director who agrees to deliver what the client-family bargained for with the pre-need contract will receive a proportionate share of the $18 million fund in order to substantially offset potential IFDA losses.  To the extent that a funeral director opts not to agree to provide the benefits negotiated by a client-family, a share of the escrowed funds will be paid directly to client-families with non-guaranteed contracts.

In addition to announcing the $18 million resolution, DOI revoked the Illinois insurance producer's license of Edward Schainker, an MLLA agent who allegedly developed, marketed and sold an insurance scheme to the IFDA.  Mr. Schainker is also fined $100,000, the maximum penalty allowed by Illinois law.  According to the revocation Order, Mr. Schainker's conduct violated several provisions of the Illinois Insurance Code.