Company comes up short on prearranged funerals

Jerome Avenson's father made careful plans for dealing with his own death.

In 1989, Harvey Avenson paid $1,532.80 through a funeral home in Prescott, Ariz., where he lived then, to a company called National Prearranged Services Inc. Under the contract, the money would accrue interest and cover the full cost of his chosen funeral services at the time of his death.

"He said he did not want to be a burden to any of his children," Jerome Avenson said of his father.

After the younger Avenson moved his father close to his home in Chesapeake last year, they transferred the contract to Oman Funeral Home & Crematory, which put all the arrangements in place. Harvey Avenson died Aug. 2 at age 91.

That's when Jerome Avenson and his three sisters learned a lesson about the best-laid plans. Oman's directors in Chesapeake called and told him that National Prearranged Services wouldn't honor the full price of the funeral as promised.

National Prearranged Services, based in Missouri, has come under scrutiny by several states in recent months over its practice of using life insurance policies to back its "pre-need" funeral contracts. A Texas court has placed the company and its Texas-based insurance partners in receivership under that state's Department of Insurance, which describes the companies in court papers as being "in hazardous financial condition" and has moved to liquidate them.

A group of life and health insurance guaranty associations has agreed to cover the company's existing contracts but will pay only the initial policy amount paid by the consumer, said John Greeley, a spokesman for the Texas Insurance Department. By law, the guaranty associations cannot cover accrued interest or inflation costs, Greeley said.

That means funeral homes such as Oman have to absorb the funeral costs that exceed the original contract price or ask the families of the deceased to cover the difference. For the basic cremation services that Harvey Avenson requested, the price is around $2,900 now, or about twice the amount he paid, Jerome Avenson said.

"Basically, they're going to just be out" the money, Greeley said of the funeral homes that held contracts with National Prearranged Services. "The funeral home is the one that did the deal and said they would cover the cost of the funeral when it came time."

The cost of cremation alone has more than doubled in the 19 years since Harvey Avenson made his arrangements, said Tim Briggs, Oman's manager. The funeral home plans to help the family with the balance owed on their services, he said.

"If they are in that position, we will share the burden with them," he said of any family in this circumstance. "It's just the right thing to do. Fortunately, it doesn't happen very often."

Jerome Avenson, 69, said he doesn't think Oman should bear responsibility for the additional cost, because the local funeral home took the contract at his request.

"My dad put this money in in good faith 20 years ago," Avenson said, noting that the amount should have doubled or tripled in that time. "He would be very upset right now. He went to great lengths to make sure that everything would be taken care of. That was his primary concern."

Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com