Justia Insurance Law Opinion Summaries

Imperial Premium Finance LLC was implicated in a life insurance scheme. Imperial’s primary business involved stranger-originated life insurance (STOLI), yet its business was not a STOLI in its purest form: instead of buying a policy on a person's life outright, Imperial provided financing for life insurance premiums in the form of loans whose terms allowed Imperial to foreclose on the policy and become the policy owner if the borrower defaulted. Seeking to evade "insurable interest" requirements, Imperial drafted its loan agreements to require that during the term of the loan the policy be held in irrevocable trust (with a trustee chosen by Imperial) for the benefit of the insured’s relatives. In late 2007, Florida resident Barton Cotton met with an insurance agent to buy a multimillion-dollar life insurance policy and finance the premium payments. Cotton was ultimately referred to Imperial about financing the premium payments. Cotton and an irrevocable trust in his name applied to Lincoln National Life Insurance Company for an $8 million life insurance policy. The beneficiaries of the trust were Cotton’s wife and children. Cotton falsely stated on the insurance application that he was not buying the policy for resale and that he would not use a third party to finance the premium payments. Lincoln issued Cotton a $5 million policy, which became an asset of the Cotton trust. Premium payments were advanced to the trust until Imperial lent the trust $335,000. The trust used that money to repay the advance and to continue making the premium payments. Because of the high interest rate and an “origination fee," after less than two years, Imperial’s $335,000 loan to the Cotton trust had ballooned to more than $557,000. Cotton was diagnosed with esophageal cancer. The loan used to finance the policy reached maturity and became due, and Cotton died two months after that. At the time of his death the trust had not paid back Imperial for the loan, but Imperial had not yet foreclosed on it, which left the trust for the benefit of Cotton’s family as the record owner of the policy. After learning of Cotton’s death, Lincoln launched an investigation which turned up the fact that Imperial had financed the purchase of the policy on Cotton’s life under a STOLI scheme. Lincoln refused to pay the death benefit. In April 2011 the Cotton trustee sued Lincoln for the benefit. Lincoln counterclaimed, alleging fraud, negligent misrepresentation, and civil conspiracy. Imperial asked its outside counsel to represent the trust. During discovery, Lincoln sought to depose Imperial under Rule 30(b)(6) of the Federal Rules of Civil Procedure. Because the topics included in Lincoln’s subpoena touched on subjects related to the criminal investigation, Imperial’s managers and employees exercised their individual Fifth Amendment rights and all refused to testify in the Rule 30(b)(6) deposition in the Lincoln case. Imperial's proffered expert witness was unable to answer questions at the deposition or at trial specific to the facts of the Cotton trust case. The jury later returned a verdict in favor of the trust, finding that though Cotton and others conspired to commit an unlawful act, Lincoln had not relied on or been damaged by the misrepresentations, and therefore not injured by the conspiracy. The court notified the parties that it was considering sanctions against Imperial and its proffered expert due to the witness' poor "performance" and lack of preparation at trial. After a hearing, the court assessed sanctions against Imperial. Imperial appealed that sanctions order. Finding that the district court's findings were not clearly erroneous and its imposition of sanctions was not an abuse of discretion, the Eleventh Circuit affirmed the sanctions order. View "Lincoln National Life Insurance Company v. Imperial Premium Finance Company, LLC" on Justia Law

Edwin Moreau worked at the W.R. Grace mine from 1963 until 1992. Edwin died of asbestos-related lung cancer in 2009. In 2013, Transportation Insurance, W.R. Grace’s workers’ compensation insurance carrier, accepted liability for Edwin’s medical expenses. Both the Libby Medical Plan, an entity established and funded by W.R. Grace to pay the medical care expenses of employees who were injured by asbestos exposure, and W.R. Grace refused to accept reimbursement from Transportation for the medical expenses the Plan had paid on Edwin’s behalf. Cristita Moreau, as personal representative of Edwin’s estate, demanded that the amount of reimbursement declined by the Plan and W.R. Grace should be paid either to Edwin’s Estate or to a charity selected by the Estate. After Transportation refused to pay the money, Moreau filed this petition to the Workers’ Compensation Court (WCC) to resolve the dispute. The WCC denied the petition, determining that it lacked jurisdiction to hear the matter because Moreau lacked standing. The Supreme Court reversed, holding that the Estate had standing and was entitled to have its petition determined on the merits. Remanded. View "Moreau v. Transp. Ins. Co." on Justia Law

Jones was murdered, leaving no will. He owned a life insurance policy through his employer. He did not designate a beneficiary. The policy provided that the proceeds ($307,000) would go first to a surviving spouse (Jones never married), second to surviving children, third to surviving parents, and fourth to his estate. Quincy claimed to be Jones’s son; Moore, claimed to be his daughter. The insurance company filed an interpleader action. After paying $24,000 for funeral expenses and $137,000 to Quincy, the company deposited the remainder with the court. Jones’s biological sister also claimed the proceeds, arguing that Jones was homosexual and had not fathered children. Jones’s income tax returns showed that he had claimed various children as dependents, sometimes omitting Quincy. A DNA test established that Moore was not his daughter. The district judge declined to order a test for Quincy because Jones had held Quincy out as his biological son and had signed an order in 1996 acknowledging Quincy (then six years old) as his son. The judge awarded Quincy the deposited funds.. The Seventh Circuit affirmed. Rule 35 would have allowed, but did not require, the judge to order a DNA test, given the presumption of paternity under Illinois law. View "MN Life Ins. Co. v. Jones" on Justia Law

In 2006, Lincoln T. Griswold purchased an $8.4 million life insurance policy. Griswold established a Trust for the sole and exclusive purpose of owning the policy and named Griswold LLP as the Trust’s sole beneficiary. In 2008, the Trust sold its policy to Coventry First LLC. The written purchase agreement contained an arbitration clause. After learning that the policy was sold for an allegedly inflated price that included undisclosed kickbacks to the broker, Griswold sued. Coventry moved to dismiss the case for lack of standing or, in the alternative, to compel arbitration. The district court denied the motion, concluding that both Griswold and the LLP had standing and that the arbitration clause was unenforceable as to the plaintiffs, who were non-signatories. Coventry appealed. The Third Circuit (1) concluded that it lacked appellate jurisdiction to review the district court’s denial of Coventry’s motion to dismiss; and (2) affirmed the district court’s denial of the motion to compel arbitration against the plaintiffs, as they never consented to the purchase agreement.View "Griswold v. Coventry First LLC" on Justia Law

After Plaintiff filed a complaint for divorce from Dean Miller, Plaintiff and Dean executed a property settlement agreement providing that Dean would maintain life insurance for the benefit of the parties' four minor children until they reached the age of majority. Dean subsequently executed a service request form listing his children as the beneficiaries of his life insurance policy and instructing that beneficial interests be paid to and managed by Kristin Saunders as custodial trustee for the benefit of his minor children. After Dean died, funds from his life insurance policy were distributed to Saunders. Plaintiff filed a complaint seeking declaratory and injunctive relief asking the superior court to declare that Dean's four children were the sole beneficiaries of his life insurance policy. The court granted Defendants' motion for summary judgment, finding that Dean created a valid custodial trust pursuant to the Rhode Island Uniform Custodial Trust Act (RIUCTA) and that the trust was not inconsistent with Dean's obligations under the property settlement agreement. The Supreme Court affirmed, holding (1) Dean created a custodial trust pursuant to RIUCTA; and (2) Dean did not violate the property settlement agreement by designating Saunders as custodial trustee on the service request form. View "Miller v. Saunders" on Justia Law

Kenneth Poch and Kevin Key were temporary workers contracted through Personnel Resources of Georgia, Inc. and Carolina Staffing, Inc. d/b/a Job Place of Conway, to work for Bayshore Concrete Products/South Carolina, Inc. to clean up a concrete casting worksite and dismantle equipment used to produce concrete forms. As a result of a tragic, work-related accident, Poch was killed and Key was injured. Poch's estate and Key received workers' compensation benefits through Job Place. Subsequently, Key and his wife and the estate of Poch filed suit against Bayshore SC and its parent company, Bayshore Concrete Products Corporation. The circuit court granted the company's motion to dismiss the actions on the ground that workers' compensation was Petitioners' exclusive remedy and, therefore, the company was immune from liability in a tort action. The Court of Appeals affirmed the circuit court's order. Though the Supreme Court agreed with the result reached by the Court of Appeals, it found the court incorrectly analyzed Petitioners' arguments. Accordingly, the Court affirmed as modified. View "Poch v. Bayshore Concrete" on Justia Law

Allen suffered a fatal heart attack in 2009, leaving a wife of three years, Arlene, and three adult children from a previous marriage. At the time of Allen’s death, his daughter and her children lived with Allen and Arlene. Allen had a will bequeathing $100,000, but his assets passed outside of probate, leaving his estate with insufficient funds for the bequest. Allen had designated his children as beneficiaries of assets, including a home, life insurance policies, retirement accounts, and other savings accounts. Allen had one life insurance policy as part of his compensation package as a pharmacist, which provided $74,000 in basic coverage and $341,000 in supplemental coverage. If the policyholder failed to designate a beneficiary by his date of death, the proceeds would pass to the policyholder’s spouse by default. The insurer never received any indication that Allen wished to designate a beneficiary. In the days following Allen’s death, however, the children found a change-of-beneficiary form, allegedly completed by their father more than a year before his death, but never submitted. The district court ruled in Arlene’s favor, finding that even if Allen had filled out a change-of-beneficiary form he had not substantially complied with policy requirements for changing beneficiaries. The Seventh Circuit affirmed. View "Kagan v. Kagan" on Justia Law

Pruco Life Insurance Company sought rescission of a life insurance policy, owned by the Paul E. L'Archevesque Special Revocable Trust on the life of Paul L'Archevesque, after it discovered that the policy application contained material misrepresentations about the health of Paul. Pruco tendered to Wilmington Trust Company, a co-trustee of the trust, a check in the amount of the policy premiums paid along with a letter stating Pruco was rescinding the policy. Wilmington cashed the check. Pruco subsequently filed a complaint seeking a rescission of the policy and a declaration that the policy was void ab initio. The district court granted summary judgment to Pruco, concluding that, under the circumstances, a mutual rescission had taken place as a matter of law. The First Circuit Court of Appeals affirmed, holding (1) the district court properly interpreted Rhode Island law regarding the standard for mutual rescission; (2) there were no genuine issues of material fact concerning whether Pruco made material misrepresentations in its rescission letter that could have prevented summary judgment; and (3) the district court did not err in finding that the issue of whether Pruco acted in bad faith was irrelevant to the rescission analysis. View "Pruco Life Ins. Co. v. Wilmington Trust Co." on Justia Law

In the early morning hours of April 11, 2008, Jeremy Rustad and Heidi Hanna were killed in a plane crash in McLean County. Rustad was piloting his Cessna aircraft and Hanna was a passenger when the plane crashed. The National Transportation Safety Board determined the probable causes of the accident were due to pilot error and pilot impairment due to alcohol. The estate published a notice to creditors of Rustad for three successive weeks beginning May 22, 2008, informing them they had three months to file claims. On September 24, 2008, Olson, as "co-personal representative of the estate of Heidi Hanna, deceased, caretaker of [B.H.], a minor, and temporary guardian of [B.H.], a minor," filed a claim against the estate asserting the estate was indebted to Hanna's estate and to Hanna's children. The estate "disallowed" Olson's claim. In early 2009, Olson filed this wrongful death and survival action against the estate. The estate moved for summary judgment dismissing the action. The estate argued Olson's claims were barred because she did not serve the personal representative in that capacity and the failure to present her claims in the probate action made them res judicata. The estate also argued Olson could not show Hanna was injured before Rustad died, and therefore, both the wrongful death and survivor claims were barred under the nonclaim provisions of the Probate Code. The district court rejected the estate's arguments that service of process was insufficient and that the action was barred by res judicata. The court concluded Olson presented no evidence to show Hanna died before Rustad, and dismissed the wrongful death and survival actions because they were barred by the nonclaim provisions of the Probate Code. The district court further noted Rustad had an aircraft insurance policy and the nonclaim provisions did not prevent Olson from recovering to the extent of insurance coverage available for the accident. The court ruled the language in the insurance policy unambiguously limited coverage under the circumstances to $103,000, and a judgment was entered in favor of Olson for $103,000. The Estate appealed; the Supreme Court, after review of the trial court record, affirmed. View "Olson v. Estate of Rustad" on Justia Law

Plaintiff, an insurance company, filed an equitable action in the U.S. district court for Rhode Island seeking a declaratory judgment that a life insurance policy was rescinded ab initio due to the fraudulent misrepresentations of Defendant, an irrevocable trust. Plaintiff also sought to retain the premium paid by the trust as an offset against the damages it had suffered in connection with the policy. The district court (1) found that Defendant, by and through its trustee, had made false representations to induce Plaintiff to issue the policy and that this fraud caused Plaintiff damages that would not be fully compensated by rescission alone; and (2) allowed Plaintiff to retain the policy premium paid by Defendant. The First Circuit Court of Appeals affirmed, holding that the district court (1) did not err, under Rhode Island law, in allowing Plaintiff to both rescind the policy and retain the premium; (2) did not err in finding that Plaintiff was a victim of a fraudulent insurance scheme; and (3) appropriately exercised its equity powers. View "PHL Variable Ins. Co. v. Bowie 2008 Irrevocable Trust " on Justia Law