The lawsuit, filed in federal court in Miami, Florida alleges replacement telephones are often cheap, used, or refurbished models which further decrease the value of the insurance and monthly premiums are misleading since they don't really insure the phone in the event of a loss.

These insurance plans usually costs $4 or $5 per month and covers a lost, damaged or stolen phone with a deductible of $35 to $100. A consumer could easily pay up to $120 over two years for insurance and have purchased only $20 in actual coverage when the $100 deductible is subtracted. In many cases, the insurance actually costs more than the purchase price of a new phone.

Lastly, the complaint claims insurers impose unlawful and unreasonable stipulations for filing a claim, including requiring a police report even if a phone is lost rather than stolen.

The insurers, including three major companies (Asurion Insurance Services in Nashville, Tennessee, Lock/Line LLC in Kansas City, Missouri, and Signal Holdings in Wayne, Pennsylvania) are being sued for unfair trade practices and other violations for "falsely representing that the purchase of wireless phone protection provides a benefit."

The suit, filed on behalf of a Dade County, Florida, 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 that purchased insurance during the same period from Lock/Line, which provides coverage to customers of AT&T Wireless and Cingular.

Damages sought include refunds for monthly premiums and reimbursement of any deductibles paid that exceed the actual cost of replacement phones, plus interest, costs and attorney fees.