The action alleges that Philadelphia Life agents engaged in a practice known as "churning," where they lie to current policyholders, leading them to believe that it would be wise to replace their existing policies with new ones--the new policies in effect convert some of the old policy's value into company profits and agent commissions, but harm the policyholder by replacing the existing policy with one that is less valuable. Policyholders were allegedly told that they would be getting greater coverage for little or no extra charge. Agents also allegedly committed fraud when they promised policyholders what is referred to as a "level premium," one that is guaranteed to never rise beyond a fixed amount.

The action initially alleged that Philadelphia Life was guilty of selling single-premium payment and vanishing-premium policies. Allegedly, agents led policyholders to believe that after the payment of one payment, or a certain number of payments, the policies would be fully paid up and no additional money would ever be due. These policies were supposed to be backed by such strong investments that they would generate sufficient interest to pay for themselves. The court ruled that too much time had passed, so that these claims were barred by the statute of limitations. The court of appeals subsequently upheld the ruling, but ruled that the churning and level-premium allegations should be litigated.

Named plaintiff David H. Siegel purchased a $100,000 Philadelphia Life flexible premium adjustable life insurance policy in June 1986. He was promised that after five yearly payments of $2,643, he would never again have to pay on the policy. He was also promised that the death benefits would never be compromised.

In June 1991, after the policy was supposedly paid up, a Philadelphia Life agent approached Mr. Siegel with an offer. For the accumulated value in the $100,000 policy plus annual payments of $100, his coverage could be increased to $150,000. As long as he paid the $100, the policy would remain in force. The agent told Mr. Siegel that there would be no commissions or costs because he was the regional director of Philadelphia Life. There was allegedly no mention that premiums might increase in the future. The action alleges that the replacement of his old policy was decidedly contrary to his best interests. Mr. Siegel allegedly received no comparison of the costs and benefits of his original policy to the potential costs and benefits of the replacement policy.

In 1996, Mr. Siegel noted that the value of his coverage was decreasing. When he contacted the company, he was informed that charges for policy administration and cost of insurance had been regularly debited from the policy. At that time, he was allegedly told that his coverage would continue until age 100. In 1998, Mr. Siegel was informed that his coverage would terminate when he reached age 80 because the investments supporting his policy had not performed as expected. To increase his coverage to age 90 or 100, the action alleges that he would have to pay either $747 or $1,225, respectively. By purchasing the new policy, he had lost his guarantee of $100,000 in coverage for no more premiums, only to find that he would have to pay more than 10 times as much per year to maintain his coverage.