(Cost of Insurance Charge)   (Improving Expectations as to Future Mortality Experience)   (Maintenance and Administrative Charges)   11.  Plaintiff purchased from USAA Life Insurance Company a “Universal Life  Insurance Policy” bearing policy number 3240875U4, with an effective date of January 20,  1992, and an initial specified amount of $25,000 (the “Policy”).  A true and accurate copy of the  Policy is attached hereto as Exhibit A, and incorporated herein by reference.   12.  Plaintiff has always been both the “owner” and the “insured” under the Policy,  which remains in force.   13.  Defendant is the effective and liable insurer of the Policy, and policies meeting  the class definition (the “Class Policies”).   14.  The Policy “is a legal contract” between Plaintiff and Defendant.  Ex. A at 5.   15.  The entire contract between Plaintiff and Defendant consists of the Policy, the  application, and any supplemental application.  Ex. A at 5 & Accidental Death Benefit Rider  (General Provisions) (“This rider is attached to and is part of the policy.”).   17.  Only an officer of USAA Life has authority to waive or change a provision of  the Policy, and then only in writing.  Ex. A at 5.   18.  USAA Life has issued and administered, and currently administers, all aspects of  the Policy and Class Policies, including collecting premiums, and setting, assessing and  deducting policy charges.   19.  In addition to a death benefit, the Policy and Class Policies provide policyholders  an investment, savings, or interest-bearing component, that accumulates value over time.  Although the savings component in certain of the Class Policies may be identified by a different  name, it is identified in the Policy and throughout this Complaint as the “cash value.”       20.  Generally, like Plaintiff and class members, universal life insurance  policyholders contribute premiums, the net amount of which, after a “Premium Deduction”  charge is deducted, are deposited into the cash value of a policy, from which the insurer deducts  monthly charges as authorized by the policy.     22.  The Policy expressly defines the specific charges that USAA Life may assess  and deduct from Plaintiff’s premium payments and the Policy’s cash value.  USAA Life may  assess and deduct only those charges allowed by the Policy.   23.  The Policy authorizes USAA Life to take from the cash value a “Monthly  Deduction:”   The monthly deduction on each monthly anniversary shall be calculated as (1) plus (2)  plus (3) where:   1) is the cost of insurance and the cost for any policy riders;   2) is the monthly policy maintenance charge, which is a flat charge per policy; and   3) is the monthly administrative charge, which is a flat charge per policy that is applied  only during the first 12 policy months.    Ex. A at 12.   24.  The Policy authorizes Defendant to deduct a maintenance charge in the fixed,  maximum amount of $2.50 per month.  Ex. A at 2.  The Policy expressly provides that the  “maintenance charge” Defendant is authorized to take as part of the monthly deduction is a  charge that “reimburses [USAA Life] for recurring administrative expenses related to the  maintenance of the policy.”  Ex. A at 4.     26.  In addition to setting the fixed maximum amounts Defendant is authorized to  deduct for the maintenance charge and administrative charge, the Policy expressly defines how  the cost of insurance is calculated:  The cost of insurance is calculated on each monthly anniversary.  First, we divide  the death benefit on the monthly anniversary by 1.0036748, and then we subtract  the cash value. . . .We divide the resulting net amount at risk by 1000 and multiply  that result by the applicable cost of insurance rate.  Ex. A at 12.   27.  Under the explicit terms of the Policy, USAA Life is authorized to use only the  insured’s age, sex, rate class, and its expectations as to future mortality experience when  determining the Policy’s cost of insurance rates:  The cost of insurance rates for each Specified Amount are based on the insured’s  age, sex, and rate class. Current cost of insurance rates are based on our  expectations as to future mortality experience. . . .USAA LIFE guarantees that the  cost of insurance rates will never be greater than those shown in the Table of  Monthly Guaranteed Cost of Insurance Rates Found in the Policy Schedule page.  Ex. A at 12.   28.  Age, sex, and rate class are factors commonly used within the life insurance  industry to determine the mortality expectations of an insured or group or class of insureds.    29.  Because the Policy specifically identifies age, sex and rate class as the defining  components of the cost of insurance rates, and expressly states that current cost of insurance  rates are based on USAA Life’s expectations as to future mortality experience, the parties  agreed that mortality expectations are what determine cost of insurance rates under the Policy.   31.  Although the Policy and Class Policies authorize USAA Life to use only its  “expectations as to future mortality experience” when determining cost of insurance rates,  USAA Life uses other factors, not authorized by the Policy, when determining such rates,  including without limitation, expense experience.    32.  By including other factors in calculating cost of insurance rates, USAA Life  knowingly causes those rates to be higher than what is explicitly authorized by the Policy and  Class Policies.   33.  By loading cost of insurance rates with unauthorized factors, USAA Life  repeatedly and continuously breaches the Policy and Class Policies by impermissibly inflating  those rates such that they substantially exceed USAA Life’s “expectations as to future mortality  experience.”    34.  The higher cost of insurance rates used by USAA Life cause the monthly cost of  insurance charge to be greater than what is explicitly authorized by the Policy and Class  Policies. Consequently, USAA Life withdraws from the cash value an amount for the cost of  insurance that is greater than that authorized under the Policy and Class Policies.   35.  Each of USAA Life’s past and future cost of insurance deductions from the cash  values of Plaintiff and the class constitutes a separate breach of contract.   37.  By loading cost of insurance rates with undisclosed expense experience factors,  including without limitation maintenance and administrative expense factors, Defendant  repeatedly and continuously breaches the Policy and Class Policies by impermissibly deducting  amounts from the cash values of Plaintiff and the class in excess of the fixed and maximum  maintenance charge and administrative charge amounts expressly authorized by the Policy and  Class Policies.   38.  Each of USAA Life’s past and future maintenance charge and administrative  charge deductions from the cash values of Plaintiff and the class constitutes a separate breach of  contract.   39.  As a direct and proximate result of Defendant’s breaches, therefore, Plaintiff and  the class have been damaged and those damages are continuing in nature in that Defendant has  deducted and will continue to deduct maintenance and administrative expenses from the cash  values of Plaintiff and the class in amounts not authorized by the Policy and Class Policies.    40.  The nature of USAA Life’s conduct is such that Plaintiff and each member of the  class would be unaware that Defendant was engaging in wrongdoing by taking inflated charges  and improper amounts from cash values. USAA Life possesses the actuarial information and  equations underlying the computation of rates and charges for the Policy. The cost of insurance  rates used to calculate cost of insurance charges are not disclosed to policy owners, nor are the  components or factors that comprise those rates. And, even if they were, Plaintiff and the  members of the class would lack the knowledge, experience, or training to reasonably ascertain  how USAA Life calculated the rates and charges included in the Policy.   42.  Plaintiff did not discover, nor could he have, through reasonable diligence,  discovered the facts establishing USAA Life’s breaches or the harm caused thereby.   43.  Pursuant to Federal Rules of Civil Procedure 23(a), 23(b)(1), 23(b)(2), 23(b)(3)  and/or 23(c)(4), Plaintiff brings this action on behalf of himself and all others similarly situated,  and seeks to represent the following class:  All persons who own or owned a life insurance policy issued or administered by  Defendant, the terms of which provide or provided for: 1) an insurance or cost of  insurance charge or deduction calculated using a rate that is determined based on  Defendant’s expectations as to future mortality experience; 2) additional but  separate policy charges, deductions, or expenses; 3) an investment, interest- bearing, or savings component; and 4) a death benefit.   45.  Plaintiff’s claims satisfy the numerosity, typicality, adequacy, commonality and  superiority requirements under Federal Rule of Civil Procedure 23, as set forth more fully  herein.    46.  The persons who fall within the class number in at least the hundreds and most  likely thousands, and thus the numerosity standard is satisfied. Because class members are  geographically dispersed across the country, joinder of all class members in a single action is  impracticable.    47.  Class members are readily ascertainable from information and records in  Defendant’s possession, custody, or control. Notice of this action can readily be provided to the  class.   49.  The questions set forth above predominate over any questions affecting only  individual persons, and a class action is superior with respect to considerations of consistency,  economy, efficiency, fairness, and equity to other available methods for the fair and efficient  adjudication of the claims asserted herein.   50.  Plaintiff’s claims are typical of the claims of the class in that Plaintiff and the  class members all purchased policies containing the same or similar limitations on the amounts  that Defendant could charge its policyholders under the express terms of the Policy and Class  Policies.   51.  Plaintiff will fairly and adequately protect and represent the interests of the  proposed class, because his interests are aligned with, and not antagonistic to, those of the  proposed class, and he is represented by counsel who are experienced and competent in the  prosecution of class action litigation, and have particular expertise with class action litigation on  behalf of owners of universal life insurance policies.   53.  The preceding paragraphs are incorporated by reference as if fully alleged herein.   54.  Plaintiff and the class purchased life insurance policies—the Policy and Class  Policies—from Defendant.   55.  The Policy and Class Policies are valid and enforceable contracts between the  Defendant and Plaintiff and class members.    56.  Plaintiff and the class substantially performed their obligations under the terms  of the Policy and Class Policies.   57.  By including unauthorized and undisclosed factors in the monthly cost of  insurance rates, Defendant impermissibly causes those rates to be higher for the Policy and the  Class Policies.    58.  Because Defendant calculates cost of insurance charges using monthly cost of  insurance rates that are higher than those authorized by the Policy and Class Policies, Defendant  has deducted and will deduct cost of insurance charges from the cash values of Plaintiff and the  class in amounts greater than those authorized by their policies.    59.  Defendant’s practice of deducting charges in amounts not authorized by the  Policy and Class Policies constitutes a breach of the policies.   60.  As a direct and proximate result of Defendant’s breach, Plaintiff and the class  have sustained damages that are continuing in nature in an amount to be determined at trial.   61.  The preceding paragraphs are incorporated by reference as if fully alleged herein.   63.  By deducting unauthorized maintenance and administrative charges from the  cash values of Plaintiff and the class, Defendant has breached and continues to breach the  Policy and Class Policies.   64.  As a direct and proximate result of Defendant’s breach, Plaintiff and the class  have sustained damages that are continuing in nature in an amount to be determined at trial.  65.  The preceding paragraphs are incorporated by reference as if fully alleged herein.   66.  When setting monthly cost of insurance rates, the Policy and Class Policies  authorize Defendant to consider only their expectations as to future mortality experience.   67.  Although mortality expectations have generally improved because people are  living longer today than when the Policy and Class Policies were initially priced, Defendant has,  on information and belief, failed to lower monthly cost of insurance rates for the Policy and  Class Policies.   68.  Defendant’s failure to lower these rates even though their expectations of future  mortality experience improved constitutes a breach of the Policy and Class Policies.   69.  As a direct and proximate result of Defendant’s breach, Plaintiff and the class  have sustained damages that are continuing in nature in an amount to be determined at trial.  71.  Plaintiff and the class had a property interest in the funds Defendant deducted  from their cash values in excess of the amounts permitted by the terms of the Policy and Class  Policies.   72.  By deducting cost of insurance charges and expense charges in unauthorized  amounts from the cash values of Plaintiff and the class, Defendant assumed and exercised  ownership over, and misappropriated or misapplied, specific funds held in trust for the benefit  of Plaintiff and the class, without authorization or consent and in hostility to the rights of  Plaintiff and class members.   73.  Defendant continues to retain these funds unlawfully without Plaintiff and class  members’ consent.   74.  Defendant’s wrongful exercise of control over the personal property of Plaintiff  and class members constitutes conversion.   75.  As a direct and proximate result of Defendant’s conduct, Plaintiff and the class  have been damaged, and these damages are continuing in nature.   76.  Although requiring expert testimony, the amounts of unauthorized cost of  insurance charges and expense charges Defendant took from Plaintiff and the class are capable  of determination, to an identified sum, by comparing Plaintiff’s actual cost of insurance charge  each month to a cost of insurance charge computed using a monthly cost of insurance rate  determined using Defendant’s expectations as to future mortality experience.   77.  On behalf of himself and the class, Plaintiff seeks all damages and consequential  damages proximately caused by Defendant’s conduct.    79.  The preceding paragraphs are incorporated by reference as if fully alleged herein.   80.  An actual controversy has arisen and now exists between Plaintiff and the class,  on the one hand, and Defendant, on the other, concerning the respective rights and duties of the  parties under the Policy and Class Policies.   81.  Plaintiff contends that Defendant has breached the Policy and Class Policies in  the following respects:   (a)  By using unauthorized and undisclosed factors to compute the monthly cost of  insurance rates under the Policy and Class Policies, Defendant impermissibly  increased monthly cost of insurance rates for the Policy and Class Policies and,  as a result, withdrew cost of insurance charges from the cash values of Plaintiff  and the class in an amount greater than those authorized by the Policy and Class  Policies.   (b)  By inflating monthly cost of insurance rates with unauthorized expense factors,  including without limitation, maintenance and administrative expense factors,  Defendant impermissibly deducted expenses from the cash values of Plaintiff  and the class in amounts in excess of the fixed, maximum maintenance charges  and administrative charges expressly authorized by the Policy and Class Policies.   (c)  By failing to reduce cost of insurance rates to reflect Defendant’s improving  expectations as to future mortality experience.    82.  Plaintiff therefore seeks a declaration of the parties’ respective rights and duties  under the Policy and Class Policies and requests the Court to declare the aforementioned  conduct of Defendant as unlawful and in material breach of the Policy and Class Policies so that  future controversies may be avoided.   