Justia Insurance Law Opinion Summaries

The 419 Plan was established as a multiple-employer welfare benefit plan, 26 U.S.C. 419A(f)(6). Businesses that enroll contribute to an account, which acquires and pays premiums on life insurance policies for covered employees. Each covered employee determines the type of insurance purchased on his behalf. Participating businesses can choose the number of years for which contributions will be required to fully pay for benefits. The Plan is listed as beneficiary on each policy and passes the death benefit to the covered employee. Participating businesses can withdraw at any time. Testimony indicated that "the beauty" of the Plan "is that you can put away extra money in good times” though the premium is not due, “get a tax deduction today and we don't put the premium in for years to come." Owners of four businesses, enrolled in the Plan, contributed hundreds of thousands of dollars and claimed tax deductions, although only the four owners and a stepson were covered. The IRS determined that the payments were not "ordinary and necessary" business expenses, which resulted in additional pass-through income on which the owners had not paid taxes. The tax court held that the owners owed deficiency payments and accuracy-related penalties. The Second Circuit affirmed.View "Curcio v. Comm'r of Internal Revenue" on Justia Law

Bancorp owns the 792 and 037 patents, for tracking value of life insurance policies in separate accounts, under which the policy owner pays a premium beyond that required for the death benefit and specifies types of assets in which additional funds are invested. Corporations use the policies to insure employees’ lives and fund retirement benefits on a tax-advantaged basis. The value of a separate account policy fluctuates; owners must report the value of their policies. The patents provide a computerized means for tracking book and market values and calculating stable value guarantee. Bancorp sued Sun Life for infringement. In another suit, the court invalidated the 792 patent for indefiniteness. Bancorp and Sun Life stipulated to conditional dismissal on collateral estoppel. The Federal Circuit reversed the other case. The district court vacated dismissal then granted summary judgment of invalidity under section 101 (ineligible abstract ideas) without addressing claim construction and analyzing each claim as a process claim. Applying “the machine-or-transformation test,” specified computer components are only objects on which claimed methods operate, and the central processor is a general purpose computer programmed in an unspecified manner for a process that can be completed manually. The claims “do not transform the raw data into anything other than more data and are not representations of any physically existing objects.” The Federal Circuit affirmed. View "Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Canada" on Justia Law

Dameware Development, LLC Defined Benefit Pension Plan and Trust bought several life insurance policies from American General Life Insurance Company. After Dameware was unable to obtain the tax benefits it hoped would result from purchasing the policies, it sued American General for damages and for rescission of the contract. The district court granted summary judgment to American General. The Fifth Circuit Court of Appeals affirmed, holding that Dameware had not shown any basis for rescinding the contract nor any contractual duties breached by American General, and therefore, the district court did not err in granting summary judgment to American General. View "Dameware Dev., LLC v. Am. Gen. Life Ins. Co." on Justia Law

The National Association of Insurance Commissioners helps to coordinate the state-based regulations of insurance, creating model statutes and regulations and releasing actuarial guidelines. Actuarial Guideline 33 (1995), describing how insurance companies should handle accounting questions connected to annuities sold after 1980. The new guidance prompted plaintiff to change the way it calculated financial reserves for roughly 200,000 annuity contracts it had issued over the prior 15 years, increasing its reserves by approximately $59 million—about 1.2 percent. The company’s parent claimed a deduction for part of that increase on its federal taxes for the following year and sought to do the same for the next nine years, 26 U.S.C. 807(f) The IRS concluded that insurers could not use Guideline 33 in calculating reserves for annuity contracts issued before its effective date. The company paid the disputed taxes under protest and sought to recover $11 million in overpayments and several million more in interest. The district court concluded that Guideline 33 clarified the pre-1995 requirements rather than changing them, granting the company summary judgment. The Sixth Circuit affirmed.

The Oklahoma Tax Commission assessed corporate income taxes against Vermont Corporation Scioto Insurance Company for 2001 through 2005, based on payments Scioto received from the use of Scioto's intellectual property by Wendy's restaurants in Oklahoma. In response, Scioto protested these assessments on the ground that it did not contract with the Wendy's restaurants in Oklahoma for use of the property in question and did not conduct any business whatsoever in Oklahoma. The Tax Commission denied Scioto's protest and the Court of Civil Appeals affirmed. The Supreme Court previously granted certiorari. Upon review, the Court vacated the Court of Civil Appeals opinion, reversed the Tax Commission's denial of Scioto's protest and remanded the case with instructions to sustain Scioto's protest.

Plaintiffs, retired U.S. Airways pilots, each received pensions from the U.S. Airways pension plan (the plan) and each opted to receive his pension in a single lump sum rather than as an annuity. Plaintiffs subsequently sued U.S. Airways claiming that the plan owed them interest for its 45-day delay. The court reversed the judgment of the district court with respect to plaintiffs' actuarial equivalence claim where the amount of plaintiffs' lump sum benefit was equal to the actuarial present value of the annuity payments plaintiffs would have received under the plan's default payment option. Even so, U.S. Airway's 45-day delay in paying plaintiffs was unrelated to the calculation of plaintiffs' benefits and therefore, not reasonable under existing IRS regulations. The court remanded to the district court to calculate the appropriate amounts due to plaintiffs and affirmed the judgment of the district court that plaintiffs were not entitled to attorney's fees.

Appellant filed requests with appellee for refunds of taxes that appellant paid on premiums derived from certain life insurance policies, for tax years 2001 to 2003. The Delaware Insurance Commissioner ("Commissioner") denied appellant's request on the basis that appellant could not aggregate the premium income from those insurance policies into one unitary "case" for tax purposes under section 702 of the Delaware Insurance Code. At issue on appeal was the meaning of the term "case," which appeared in section 702. The court held that the plain meaning of section 702(c)(2)b, both pre- and post-amendment, was that the premiums received from insurance policies could be aggregated into one "case" only if those policies were issued through the same private placement memorandum. Therefore, appellant could not aggregate the seven insurance policies that were issued via separate private placements into one "case."