American Council of Life Insurers Compliance & Legal Sections Annual Meeting. July 11 13, 2011 San Antonio, TX

Transcription

1 American Council of Life Insurers Compliance & Legal Sections Annual Meeting July 11 13, 2011 San Antonio, TX I See A Light At The End Of The Tunnel, Someone Please Tell Me It s Not A Train. Cracker Insurance Litigation Developments David Loper Protective Life Insurance Company Birmingham, Alabama Jeff Grantham Maynard, Cooper & Gale, PC Birmingham, Alabama 1

2 TABLE OF CONTENTS Page I. ANNUITIES. 3 A. Annuity Pricing 3 B. Sales Practices.. 5 II. UNIVERSAL LIFE POLICIES... 7 A. Cost of Insurance Challenges... 7 B. Death Benefits Payments.. 9 C. Retained Asset Account Litigation.. 12 D. 412(i) Retirement Plan & 419 Welfare Benefit Plan Abusive Tax-Shelter Litigation. 14 III. MORTGAGE-BACKED SECURITIES 17 IV. AGENT-RELATED ACTIONS.. 20 A. STOLI. 20 B. Agent Rebating 21 2

3 I. ANNUITIES A. Annuity Pricing and Disclosure Litigation regarding annuity pricing and sales practices remained active over the last year. Consumers and plaintiffs counsel have been unsuccessful, generally speaking, at maintaining class actions involving the pricing of annuities; however, they continue to file such actions. As a result, this is an area of law that annuity-issuers and their counsel should be aware of and attuned to. Noteworthy trial and appellate level determinations are summarized below. 1. Avritt v. ReliaStar Life Insurance Co., No , 615 F.3d 1023 (8th Cir. 2010) In 2006, investors in fixed deferred retirement annuities sued ReliaStar based on a ratesetting practice that allegedly misled consumers by crediting higher interest rates to more recent deposits in annuity accounts and crediting lower interest rates to older deposits in said accounts. The plaintiffs specifically alleged breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, and violation of Washington and California state statutes. Some evidence suggested that the annuities sales agents inadequately disclosed and inaccurately characterized the interest-crediting practice. In December 2007, the United States District Court for the District of Minnesota granted in part and denied in part the defendant s motion to dismiss, leaving only the breach of contract, restitution, and Washington state statutory claims. Later in February 2009, the court denied the plaintiffs motion for class certification because the evidence regarding whether the interest-crediting practice misled the plaintiffs and whether the plaintiffs relied upon said representations required proof of individuals experiences, not uniform evidence relevant to the entire class. Following the class certification denial, the court dismissed the case for lack of subject matter jurisdiction in June 2009 because the amount in controversy was below the jurisdictional requirements for federal standing. The plaintiffs appealed the denial of class certification in August One year later the United States Court of Appeals for the Eighth Circuit affirmed the district court s order, finding no abuse of discretion because class certification would have been inappropriate given the lack of uniformity of conduct and evidence. The court held that liability for the entire class could not be established with common evidence because individual expectations and experiences would vary among putative class members. 2. Kennedy v. Jackson National Life Insurance Co., No (9th Cir. Sept. 1, 2010) Jackson National offered fixed deferred annuity products with bonus interest rates during the first year of investment and lower rates of return in subsequent years. Investors sued Jackson National for fraud, misrepresentation of bonus interest rates, insufficient disclosure of the agent commission structure, racketeering, elder financial abuse, and violations of California state statutes. The United States District Court for the Northern District of California granted the plaintiffs motion to certify a class in June 2010 based upon plaintiffs commonality of experience and legal theory in the pleading for relief. In October 2010, however, the court granted Jackson National s motion for summary judgment, finding that the plaintiffs presented insufficient evidence that Jackson National violated its duty to disclose material facts because the 3

4 bonus interest rates and commission structure were not a part of a scheme to defraud investors. Additionally, the court held that the plaintiffs failed to present sufficient evidence of racketeering to pursue a RICO claim. The plaintiffs appeal to the United States Court of Appeals for the Ninth Circuit was dismissed in January 2011, pursuant to stipulation. 3. In re National Western Life Insurance Deferred Annuities Litigation, No. 05-CV-1018-JLS (S.D. Cal. July 12, 2010) National Western sold deferred annuities through agents and provided investors with uniform written representations that there were bonus interest rates on the annuities received and no upfront sales charges associated with such annuities. Plaintiffs purchased said deferred annuities and subsequently sued National Western in 2005, alleging that the defendant misrepresented the bonus interest rates, failed to disclose the commission structure of its sales agents, and acted in violation of RICO and California state statutes. In June 2009, the United States District Court for the Southern District of California denied the defendant s motion for summary judgment. Months later in January 2010, the court denied the plaintiffs motion for class certification. In July 2010 the plaintiffs filed a renewed motion for class certification, which the court granted with the exception of plaintiff s breach of fiduciary duty claim. The court found that the plaintiffs demonstrated commonality and typicality of claims that could be proven with generalized evidence of the uniform written representations to putative class members. However, with regard to the breach of fiduciary duty claim, the court found that class certification was inappropriate because individual issues and nonuniform evidence predominated. As of June 2011, no decision on the merits has been reached. 4. Chambers v. North American Co. for Life and Health Ins., No. 1:11-cv (N.D. Ill. filed May 25, 2011) Plaintiff filed her complaint in federal court on May 25, 2011 in which she purports to bring a class action on behalf of all purchasers of indexed annuities from Defendant. According to the complaint, [a]n indexed annuity typically permits the policyholder to allocate premiums to a fixed account, which operates like a traditional fixed annuity by crediting interest at a fixed rate; and/or to one or more indexed accounts. Plaintiff asserts that Defendant entices prospects to purchase the annuities by purporting to pay a premium bonus percentage, yet in reality the bonus is a notional value only, unattainable by the policyholder due to very high surrender charges... Furthermore, Plaintiff alleges that Defendant incentivizes its agents with very high commissions that ultimately reduce the assets invested on behalf of the policyholder. Plaintiff alleges that Defendant must therefore ensure that the policyholder pays the commission and self-funds the bonus and that none of this information is disclosed to the potential customer. Thus, the complaint characterizes Defendant s conduct as a scheme that targets the elderly, yet injures anyone who purchases the product. Plaintiff asserted three counts in the complaint: violation of RICO, 18 U.S.C et seq., breach of contract and common law unjust enrichment. A status hearing is set for July 14,

5 B. Annuity Sales Practices Since 2005, multiple complaints about two-tiered annuities and annuities with initial bonus rates have resulted in class action litigation over the sales practices of insurance companies and their agents. Much of the litigation ended or settled in Stephens v. American Equity Investment Life Ins. Co., No. CV (Cal. Super. Ct., San Luis Obispo Cty.) When selling deferred annuities to senior citizens, American Equity was accused of intentionally doing business with trust mills and other agents who engaged in unscrupulous sales tactics by failing to disclose surrender penalties, in addition to other aspects of the deferred annuity. Plaintiff s third amended complaint, filed in 2007, set forth the allegations and claimed that the Defendant s conduct constituted fraud, breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of California UCL. Originally filed in 2004, the matter was coordinated for pre-trial purposes with a case in San Francisco state court in Eventually, in November of 2008, a California-only class of purchasers of particular annuities, as well as a subclass, was certified in the San Francisco state court, however, in June of 2009, some of those class members were removed from the class as the result of an intertwined class settlement. San Luis Obispo County received the case back, pursuant to a transfer order and in September of 2010, American Equity moved for a judgment on the pleadings and was denied. Thus, the parties proceeded to trial. The first part of the trial, which started in November of 2010, focused upon American Equity s alleged failure to adequately disclose surrender penalties. The court entered a Statement of Decision against American Equity but the order never became final as objections to it were filed and, ultimately, the parties settled in February of The second half of the trial was set to commence on March 7, 2011; however, the case was closed on May 9, 2011 as a result of the settlement. 2. In re Midland National Life Insurance Co. Annuity Sales Practices Litigation, No , 484 F. Supp. 2d 1355 (C.D. Cal. 2011) In re Midland involves two cases in connection with deferred annuities products for senior citizens, one in California and the other in Iowa, alleging that Midland engaged in deceptive sale and marketing practices violating RICO and California state statutes. The plaintiffs allege that the deferred annuities are high-cost, illiquid, poor performing, laden with hidden charges and phony bonuses, and tax-disadvantaged. In May 2007 the court transferred the Iowa action to California to enable efficient discovery, consistent rulings, and conservation of resources based on the common questions of law and fact. The parties began settlement negotiations in October In February 2011, the United States District Court for the Central District of California ordered final approval of the class action settlement, dismissing the claims with prejudice. The cause was docketed by the United States Court of Appeals for the Ninth Circuit in March 2011, and the case was denied admission to the Circuit s Mediation Program in June Opening briefs are due to the court of appeals in August

6 3. Negrete v. Fidelity & Guarantee Life Insurance Co., No. 2:05-cv CAS-MAN, 444 F. Supp. 2d 998 (C.D. Cal. 2011) In 2005, investors in deferred annuities marketed to senior citizens filed a complaint alleging that Fidelity engaged in unfair, fraudulent, and unlawful sales of annuities that would mature after the actuarial life expectancy of the annuitants, alleging that the annuities were unsuitable parts of an illegal churning scheme. The complaint specifically alleged violation of RICO; elder abuse; unlawful, unfair, and deceptive business practices; unlawfully deceptive and misleading advertising; breach of fiduciary duty; and unjust enrichment. The defendants motion to dismiss the elder abuse and breach of fiduciary duty claims was denied by the United States District Court for the Central District of California in January Following settlement negotiations between the parties, the court issued a final order and judgment in April 2010 approving the settlement and dismissing the claims on the merits and with prejudice. In September 2010, the court enjoined class members from pursuing litigation against the defendants. Allianz Life Insurance Company of North America filed a notice of appeal to the Ninth Circuit as an intervenor party in March Negrete v. Allianz Life Insurance Co. of North America, Nos. CV CAS, CAS (C.D. Cal. Nov. 1, 2010) In California, the approximately 200,000 Negrete v. Fidelity plaintiffs filed suit in 2005 against Allianz, alleging that Allianz produced misleading statements and omitted material information regarding the value of its annuities. Specifically, the plaintiffs alleged violation of RICO; elder abuse; unlawful, unfair, and fraudulent business practices; false and misleading advertising; breach of fiduciary duty; and unjust enrichment. The court granted class certification in November Allianz moved for summary judgment, which was denied by the court in August In November 2010 the court denied Allianz s motion for reconsideration, and its motion in the alternative for interlocutory appeal. Litigation in the case is still pending, with a renewed motion for summary judgment set for hearing in August Yokoyama v. Midland National Life Insurance Co., No , 594 F.3d 1087 (9th Cir. 2010) Three investors initiated an action against Midland in 2005 regarding the purchases of annuities marketed to senior citizens between 2001 and They alleged that the sales brochures provided by Midland to its independent brokers violated Hawaii s Deceptive Practices Act by misrepresenting the annuities freedom from market risks. The United States District Court for the District of Hawaii denied the plaintiffs motion for class certification on the grounds that uniform evidence would be inappropriate to demonstrate individual reliance on the alleged misrepresentations. In October 2007, the district court granted permission for the plaintiffs to appeal the district court s order. The United States Court of Appeals for the Ninth Circuit reversed and remanded the district court s order denying plaintiffs class certification in February 2010, finding that Hawaii consumer protection laws look to objective rather than individual and subjective evidence of reliance; the sales brochures would allow a putative class to present generally applicable evidence; and individualized damages do not impede class certification. The district court approved the class action settlement in May 2011, dismissing the claims on the merits and with prejudice. 6

7 6. Mooney v. Allianz Life Insurance Co. of North America, Civ. No ADM/FLN (D. Minn. May 11, 2011) A separate suit was filed against Allianz in Minnesota in 2006, alleging that Allianz offered two-tiered deferred annuities that provided up-front bonuses which in fact were not available until years later, amounting to consumer fraud. The United States District Court for the District of Minnesota certified the class of plaintiffs in May 2007 as purchasers of Allianz s twotiered annuities from 2000 to Though Allianz petitioned to remove the case to another jurisdiction to consolidate its annuities litigation, the court denied the transfer request in October In October 2009, the court issued a judgment finding that although Allianz misrepresented or used deceptive practices in selling its two-tiered annuities, the plaintiffs suffered no harm and were therefore not entitled to damages. Plaintiffs subsequently sought to permanently enjoin Allianz from further consumer fraud violations. The court responded in January 2010 with an order denying the plaintiffs motion for permanent injunction against Allianz because no plaintiffs were actually harmed by Allianz s conduct and therefore equitable relief would be inappropriate. In May 2011, the court issued another order denying Allianz s motion for a permanent injunction and denying the Negrete v. Allianz plaintiffs motion to intervene, finding that neither motion was justified given the divergent set of factual circumstances in the other pending cases. Allianz filed notice of appeal of the court s May 2011 order in June Derry v. Jackson National Life Ins. Co., No. CV (C.D. Cal. filed March 2, 2011) This action was initiated on March 2, 2011, when plaintiffs filed a putative class action complaint against Jackson National. Jackson National markets and sells deferred annuities and the complaint states that the action is filed on behalf of all similarly situated California senior citizens who purchased these deferred annuities. Plaintiffs allege that Defendant is engaged in unscrupulous and unlawful business tactics in the marketing and sales of this product to senior citizens. The complaint characterizes deferred annuities as long-term in nature and consisting of extended maturity dates and therefore, that the product is not even likely to benefit an elderly purchaser. Plaintiffs assert that Defendant s marketing materials fail to disclose or do not fully disclose these and other material facts regarding deferred annuities, such as penalties associated with accessing the funds. Most recently, Plaintiffs filed an amended complaint on June 3, II. UNIVERSAL LIFE POLICIES LITIGATION A. Cost of Insurance Challenges Plaintiffs continue to file actions over increases in the cost of insurance rates in which they claim that insurers lack the authority and sufficient basis upon which to determine said increases. Additionally, plaintiffs claims often examine the contractual language of the policy which sets forth the limiting factors that bind the insurer when determining monthly COI charges. Specifically, insurers are facing allegations of considering non-mortality factors when determining their rates, although claiming that such calculations are within the terms set forth in the policy agreement. Defendant insurers usually claim they possess broad discretion in setting rates, thus, typically relying on broader definitions of the factors used to determine such rates. In contrast, plaintiffs have relied on the plain meaning construction of a policy s terms and 7

8 experienced some success as courts have agreed with plaintiffs reading of the policy s terms, specifically, how to define the factors be used when calculating the COI rates. 1. Yue v. Conseco Life Ins. Co., No (9th Cir. March 4, 2011) The beneficiary of a ValuLife universal life policy issued by the defendant, filed suit in 2008, after Conseco adopted a cost of insurance rate increase in In addition to claiming a violation of California Bus. & Prof. Code 17200, et seq., Plaintiff asserted a breach of contract claim, alleging that Conseco could only increase its monthly charge based upon its expectation as to the future mortality experience. After denying Conseco s motion to dismiss, which was based on the ground that the controversy was not ripe for review, in December 2009, plaintiff s motion for class certification was granted by the district court. A few months later, Plaintiff filed a motion for summary judgment on the declaratory relief claim and in January of this year, the district court granted said motion. Plaintiff made two principle arguments in support of its motion, relying on the terms of the Cost of Insurance Rates section of the policy, which provided that current monthly cost of insurance rates will be determined by the Company based on its expectation as to future mortality experience. Given that 93% of the defendant s Valulife and Valuterm policies incorporated the term current when referencing the monthly charge, Plaintiff argued that Conseco would breach the policy language that requires it to set current COI rates if it determines COI rate increases in one year and delays collecting the increased charges until years later. Additionally, Plaintiff argued that the phrase, expectation as to future mortality experience meant the expectation of the rate of mortality, as opposed to Conseco s definition, which allowed it to calculate a COI rate based on factors other than mortality experience, such as account lapse and interest rates. Ultimately, the district court agreed with the plaintiff on both arguments, stating that the modifier current serves as a limitation on Conseco s ability to set deferred COI rates, and that Conseco was prohibited, by the terms of its policy, from taking into account factors other than mortality when determining COI rates. Following the declaratory judgment issued on February 2, 2011, both parties filed notices of appeal to the Ninth Circuit. The court determined that the case would not be selected for inclusion in the Mediation Program and the parties cross-appeal briefing schedule has been set. 2. In re Conseco Life Ins. Co. LifeTrend Insurance Sales and Marketing Litig., Nos. M SI, C SI, C SI270, 270 F.R.D. 521 (N.D. Cal. Oct. 6, 2010) Conseco is involved in a MDL action that stems from claims initiated in federal district courts in Florida and California in 2008 and In addition to alleging breach of the implied covenant of good faith and fair dealing, fraud, and negligent misrepresentation, Plaintiffs claim that Conseco is in breach of contract. According to the plaintiffs, from the time they purchased their policies until 2008, Conseco sent yearly notices stating that the policies were adequately funded and required no additional payments, yet, in a letter sent to policyholders in 2008, Conseco declared its intention to begin collecting increased cost of insurance and expense charges. The letter stated that Conseco s experience factors had changed since the issuance of 8

9 the policies and thus, there were shortfalls in their accumulation accounts. The plaintiffs complaint offered an alternative explanation and alleged that as a result of Conseco s business errors, the insurer was attempting to pass its losses onto the customers by increased COI charges. Thus, Plaintiffs claimed that Conseco violated the terms of the policy when it retroactively imposed charges to remedy its own errors. The California MDL court considered the plaintiff s motion for certification of a nationwide class, in addition to a California subclass of policyholders asserting claims of breach of the implied covenant of good faith and fair dealing, fraud, and negligent misrepresentation. Although the district court denied the certification of the California-only subclass, in October 2010, it certified a nationwide Fed. R. Civ. P. 23(b)(2) class of Conseco policyholders that have received since October 2008, or in the future may receive,... notice of increased cost-ofinsurance deductions under the Policy. The parties are currently engaged in discovery; in a pretrial order issued on March 15, 2011, in addition to staying the ADR process pending rulings on discovery, the court continued the case and set trial for May 7, Thao v. Midland National Ins. Co., No. 2:09-cv LA (E.D. Wisc. filed Dec. 18, 2009) In December of 2009, the plaintiff filed a putative class action and alleged that Midland was in breach of its policies terms when it considered certain factors to determine its monthly COI. According to the complaint, Midland s policy prohibits it from considering components other than Issue Age, completed Policy Years, Sex, Specified Amount, and Premium Class, as the plaintiff asserts that these are commonly understood mortality components. In November of 2010, plaintiff filed a motion to certify the class. In May of this year, the district court denied the plaintiff s motion for class certification without prejudice, but granted a motion for leave to file under seal, and thus set a new due date for plaintiff s motion for class certification on July 10, B. Death Benefits Payments Investigations and Litigation Thirty-five states launched investigations in the last three years of twenty-one insurance companies by the auditing firm Verus Financial regarding the companies compliance with state unclaimed property laws. The initial audit illustrated a pervasive industry problem in the companies procedures for determining when death benefits become payable to the designated beneficiaries or the state. Typically, insurance companies do not contact designated beneficiaries or pay out policy proceeds until the company receives proper notification of the insured s death. Preliminary investigations tended to show, however, various companies used the Social Security death database, the Death Master File, to determine annuity holders deaths in order to stop payments immediately in the event the company did not receive due proof of death. Conversely, the companies did not use the Death Master File to reveal cases where policies became payable and due proof of death was not received. Instead, some companies continued making premium payments from the policyholder s account until cash reserves were depleted instead of verifying whether the insured had died. After the cash reserves were exhausted, the companies cancelled the policy and made no attempts to locate the designated 9

10 beneficiaries. Insurance regulators deemed this selective use of the Death Master File to reveal areas of financial benefit to the company and not areas of possible financial liabilities as indicative of bad faith and unfair dealing. The National Association of Insurance Commissioners (NAIC) appointed Kevin McCarty, Florida s Insurance Commissioner, to lead a task force 1 to further examine existing laws and individual company practices. The investigation s overall goal is to determine unfair practices in the payment of death benefits under life insurance policies and annuities. Additionally, the investigators hope to uncover instances where unclaimed benefits are not properly turned over to the states unclaimed property funds. To date, the investigations have revealed areas in company policies where improvements are required to ensure that insurance proceeds are timely paid to consumers or handed over to the State as unclaimed property. State insurance regulators now look to implement model laws and regulations imposing a more stringent duty on life insurance companies to ascertain policyholder deaths, pay beneficiaries, and pay unclaimed benefits to the state as a result of the preliminary findings and hearings. The aim of these policies will be to provide a template for insurance companies to follow to maximize the matchups between policies and beneficiaries. Furthermore, the investigation commenced by the NAIC will likely expand to include the majority of the nation s insurance companies, and new class action suits and settlement agreements between various states and insurance companies follow. 1. John Hancock Settlement Agreements California and Florida reached milestone settlement agreements with John Hancock Insurance Company in April and May, 2011, respectively. John Hancock denied any legal wrongdoing in the agreements, maintaining its only obligation under state regulations requires mailing a letter to the last known address of a beneficiary upon receipt of due proof of death of an insured or an annuitant. John Hancock did agree, however, to various modifications to its business practices. Specifically, the settlement agreements articulate procedures for identifying the beneficiaries or owners of life insurance policies, annuity contracts, and retained asset accounts. For example, the company must match its list of policyholders against the Death Master File on at least a quarterly basis in order to ascertain policyholders deaths not determined through the usual processes. Additionally, the agreements list requirements for surrendering unclaimed benefits to the applicable state s Bureau of Unclaimed Property in the event the designated beneficiaries cannot be located. Finally, John Hancock agreed to pay a $20 million settlement to California, $3 million to Florida agencies, and establish a $10 million fund to aid in the payment of unidentified beneficiaries. Since the original settlement agreements, John Hancock has also settled with the state of Louisiana for $1 million. The settlement covers unclaimed life insurance benefits the company 1 The task force is composed of regulators from California, Iowa, Louisiana, North Dakota, New Jersey, New Hampshire, Pennsylvania, and West Virginia. 10

11 failed to report to the State s Treasury Department. The company will likely face similar settlements in other states which were a part of the original thirty-five state investigation. 2. MetLife and Nationwide Hearings Florida subpoenaed MetLife, Inc., and Nationwide Insurance Company to appear in an investigative hearing before the states controllers and insurance commissioners on May 19, Representatives from fifteen other states also attended. The California Department of Insurance held a similar hearing on May 23, The hearings sought to establish evidence of the companies use of the Death Master File and to identify areas for further improvement in the companies practices for settling life insurance and annuities claims. After the hearings, McCarty estimated the investigation would grow to encompass forty of the nation s largest life insurance companies, representing ninetytwo percent of all the life insurance policies and annuities in the country. Additionally, he predicted these same companies likely owe unidentified beneficiaries over $1 billion in death benefits. 3. Stevenson v. W. & S. Mut. Holding Co., No (Ohio Ct. Com. Pl. filed May 24, 2011). In the first major litigation corresponding to this topic, plaintiff s complaint against Western & Southern Mutual Holding Company and its subsidiary, the Western & Southern Life Insurance Company ( Western & Southern ), seeks injunctive relief and alleges declaratory judgment, failure to act in good faith and to engage in fair dealings, and unjust enrichment. The class is composed of the defendant company s insureds whose actuarial probability of mortality is at least 70% and insureds currently deceased to whom life insurance proceeds remain unpaid. The complaint alleges that Western & Southern failed to make reasonable and necessary attempts to determine policyholders deaths, and as a result, was unjustly enriched by improperly retained death benefits. The complaint urges the Court to order the Defendant to make, at minimum, annual reasonable inquiries to determine whether insureds at a mortality probability of greater than 70% have died. According to the complaint, a reasonable inquiry includes using the Death Master File to match policyholders against the list of deceased Americans. Plaintiff further alleges the Defendant s failure to make this reasonable inquiry qualifies as a breach of good faith and fair dealing. C. Retained Asset Account Litigation The use of retained asset accounts ( RAAs ) by insurers to pay out death benefits has recently come under attack and noteworthy litigation has ensued. For over twenty five years, beneficiaries of life insurance policies electing to receive a lump sum payment have been 2 The hearing investigated MetLife, Inc., John Hancock Insurance Co., Prudential Insurance Co. of America, Nationwide Insurance Co., The Hartford Financial Services Group, Sun Life Financial Inc., New York Life Insurance Co., Aegon Group, and Pacific Life Insurance Co. 11

12 presented with a checkbook to draw down on an interest bearing account held with the insurer instead of a single check. By maintaining an account of the beneficiaries proceeds, insurers have been able benefit on the spread from the interest rate it receives on the money and the amount of interest it pays out. Although the use of RAAs has received attention in the past, since the circulation of stories that paint a picture of insurers profiting from retaining benefits that belong to bereaved beneficiaries, the industry s practices have come under recent scrutiny. Insurers claims that the payment method is lawful as it complies with the agreed upon terms of the policies have been met with some success. However, the defendant companies have remained embattled in litigation as key motions to dismiss have been denied and matters have gone up on appeal. 1. Clark v. Metropolitan Life Ins. Co., No. 3:08-cv LRH-VPC, 2010 WL (D. Nev. Sept. 10, 2010); (docketed on appeal as No (9th Cir. Sept. 21, 2010) Met Life s use of the Total Control Account Money Market Option, came under attack when the plaintiff filed a putative class action in March of 2008, alleging that the insurer breached the terms of its life insurance policies when it provided funds to beneficiaries by presenting them with a RAA. Plaintiff s claims did not fare well in the district court, as the unjust enrichment and breach of fiduciary duty claims were dismissed, and Met Life s motion for summary judgment was granted regarding the breach of contract and breach of a special relationship claim. The court found that the relevant terms of the policy stated that the insurer would place benefits into an account that earns interest and therefore, Met Life s use of the RAA was consistent with this language. Additionally, the court found that the insurer s retention of earnings above the rate of interest paid to the beneficiaries did not constitute a maintenance fee and did not violate the terms of the RAA, which stated that the account would be maintained without incurring a monthly fee. Thus, given the court s findings regarding the terms of the policy and the absence of a wrongful monthly fee, the court held that the breach of contract failed as a matter of law. Although the court stated that the name of the account was inherently deceptive to a reasonable insured because it would lead one to believe that the funds were deposited into an FDIC-insured money market account, the plaintiff did not suffer any damages. The matter is now on appeal and fully-briefed before the Ninth Circuit. 2. Phillips v. Prudential Financial Inc., Case No. 3:11-cv WDS- SCW (S.D. Ill.) Prudential removed the present matter to federal court after Plaintiff initially filed a complaint in Illinois state court on December 10, Plaintiff s amended complaint, filed in March of this year, described Prudential s use of an RAA as the delay in the payment of death benefits, claiming that Prudential failed to make a prompt payment in a single sum as the terms of the policy required. Plaintiff asserted that by retaining the death benefits and investing them in a general account, Prudential collected the generated earnings on the retained benefits. In addition to claiming a breach of fiduciary duty and a breach of special/confidential relationship, Plaintiff asserted that by determining how to invest the retained death benefits, and then determining what part of the earnings to pay beneficiaries, Prudential exercised unilateral control over the death benefits and such control constituted a breach of contract. On behalf of herself and a putative class of Illinois citizens, Plaintiff seeks relief, including extra-contractual relief for 12

13 Prudential s allegedly vexatious and unreasonable conduct. Following the recusal of Judge Stiehl, Chief Judge Herndon was reassigned to the case and the court continued the presumptive trial month to February Prudential s reply to Plaintiff s response to the insurer s motion to dismiss was filed on June 1, 2011 and the court subsequently denied the insurer s motion to stay discovery. 3. In re Prudential Ins. Co. of America SGLI/VGLI Contract Litig., Master Case No. 3:11-md MAP (D. Mass.) Prudential s use of RAAs to pay beneficiaries death benefits awarded pursuant to a contract with the United States Veterans Administration came under fire when four putative class actions were filed in the latter half of This MDL action is the result of the consolidation of those four actions, beginning with Phillips v. Prudential Ins. Co. of America, No. 2: (D.N.J. filed Nov 3, 2010) being consolidated with Lucey v. Prudential Ins. Co. of America, No. 3: (D. Mass. filed July 29, 2010) pursuant to an order issued on February 4, 2011, by the United States Judicial Panel on Multidistrict Litigation. Two more cases, Witt v. Prudential Ins. Co. of America, No. 2: (D.N.J. filed Nov. 19, 2010) and Garrett v. Prudential Ins. Co. of America, No. 2: (D.N.J. filed Dec. 16, 2010), were consolidated and, ultimately, based upon an order issued on March 21, 2011 and a joint motion filed by all of the parties, all four were consolidated into the instant action, currently being litigated in the federal district court in Massachusetts. Subsequently, a motion to dismiss the plaintiff s amended complaint in Lucey was denied and the court ordered all initial disclosures and plaintiffs motion for class certification to be due in January of 2012, with argument regarding certification scheduled to take place in April of Otte v. Life Ins. Co. of N. Am., Case No. 1:09-cv (D. Mass.) Two Cigna Corp. subsidiaries, Life Insurance Company of North America ( LINA ) and Connecticut General Life Insurance Company ( CGLI ), allegedly failed to pay out death benefits on ERISA life insurance policies. The companies informed the designated beneficiaries that the death benefits owed were placed into free CIGNAssurance accounts with competitive interest rates. Instead of depositing the funds, however, the companies retained the plan proceeds and invested the funds into the companies own accounts. LINA and CGLI placed the funds into the CIGNAssurance accounts only after beneficiaries presented them with checks for payment. Plaintiff, the beneficiary of one of the ERISA life insurance policies issued by LINA, filed a class action suit against CIGNA in September 2009 for these alleged actions. In early June 2011, District Court Judge Stearns provisionally certified two subclasses in the suit. One subclass consists of all plan beneficiaries with claim accrued within the three years prior to the filing of the complaint. The second subclass consists of all beneficiaries whose claims arose before the formation of the first class. Judge Stearns ordered a brief round of discovery to determine whether the latter subclass was sustainable in light of predominance issues or lack of an adequate representative. 13

14 D. 412(i) Retirement Plan & 419 Welfare Benefit Plan Abusive Tax-Shelter Litigation There has been much litigation arising out of insureds and their employers participation in defined benefit pension plans intended to meet the requirements of former Section 412(i) of the Internal Revenue Code (the Code ) and welfare benefit plans intended to meet the requirements of Section 419A(f)(6) of the Code (for multiple employer plans) and Section 419(e) of the Code (for single employer plans). In many cases, life insurance policies were the funding vehicle, in whole or in part, for the 412(i) and 419 plans. From approximately , the IRS issued guidance regarding issues related to 412(i) and 419 plans and, since then, the IRS has focused increased scrutiny on the plans, concluding in many cases that the plans did not comply with the relevant Code sections, disallowing deductions taken by the employers and levying harsh penalties. As a result, insureds and their employers have filed lawsuits under various theories against the plan designers and the insurance companies claiming that they were misled regarding the tax benefits of the plans and the compliance of the plans with the Code. 1. Omni Home Fin., Inc. v. Hartford Life & Annuity Ins. Co., 2008 U.S. Dist. LEXIS 35259, 2008 WL , *5 (S.D. Cal. Apr. 29, 2008) ( Omni I ); Omni Home Fin., Inc. v. Hartford Life & Annuity Ins. Co., 2008 U.S. Dist. LEXIS 85581, 2008 WL , **3-4 (S.D. Cal. Aug. 1, 2008)( Omni II ) In many of the documents used to construct the 412 or 419 plans, the participant agrees that he is not relying on the insurance company s representations regarding the validity of the plan or its tax benefits, and the participant represents that he is relying on his own independent tax advisor in deciding to participate in the plan. For instance, in Omni I, the Southern District of California held that a disclosure statement provided to the Plaintiffs precluded claims for fraud and negligent misrepresentation because the plaintiffs could not establish reasonable reliance as a matter of law. Contrary to the language agreed upon in the disclaimer provision, the plaintiffs alleged that Hartford, among others, misrepresented to them the tax consequences of their contributions to a 412(i) plan. After an IRS audit found that the plaintiffs plans did not comply with several requirements for the qualified plans, the plaintiffs filed suit. Despite the fact that the plaintiffs claimed that they did not read the disclaimers they signed, the Omni court held that the receipt of the disclosure statements by plaintiffs precluded a finding of reasonable reliance, and granted summary judgment in favor of Hartford on the plaintiffs claims. In Omni II, the plaintiffs motion for reconsideration was denied as the court noted that the material disclosures were in short documents easily intelligible to plaintiffs, who were reasonably sophisticated businesspeople and furthermore, that such contracts did not violate public policy, nor were they contracts of adhesion as it is objectively unreasonable for a sophisticated contracting party to fail to read short, readily comprehensible documents he or she signs. However, the court in Berry v. Indianapolis Life Insurance Co. (discussed in Section II.D.3., supra) denied the insurers motions for summary judgment based on disclosures similar to the disclosures at issue in Omni I and Omni II. Most notably, the court denied summary judgment for the plaintiffs whose claims were governed by Texas law and Wisconsin law. Thus, 14

15 the success of the disclaimer of reliance argument may differ may from court to court and will depend on which state s law applies. 2. Berry v. Indianapolis Life Ins. Co., 600 F.Supp. 2d 805 (N.D. Tex. 2009)( Berry I ); Berry v. Indianapolis Life Ins. Co., 638 F.Supp. 2d 732 (N.D. Tex. 2009)( Berry II ); Berry v. Indianapolis Life Ins. Co., 2010 WL (N.D. Tex. Aug. 26, 2010)( Berry III ) In this class action lawsuit, the plaintiffs, a nation-wide class consisting of doctors, dentists, and construction company owners, and the companies they operate, filed suit, alleging that the defendants sold life insurance policies to fund defined benefit plans in compliance with section 412(i) of the Internal Revenue Code, but were later deemed abusive tax-shelters by the IRS. Plaintiffs allege that four insurance companies (Indianapolis Life, Hartford, American General, and Pacific Life) knew or should have known that the plans would be scrutinized and found to be illegal by the IRS. Plaintiffs also allege that many of the defendants, including the four insurance companies, conspired to market these plans and made fraudulent or negligent misrepresentations about the tax benefits of these plans without disclosing any risk that the IRS would find the plans to be illegal. Ultimately, many of these claims were dismissed for failure to state a claim for relief. Because the alleged misrepresentations were made prior to the IRS pronouncements calling into question the tax benefits of various plans, they were either not false when made or predictions and opinion that are not actionable. In Berry I, the court dismissed plaintiffs fraud theory holding that there was no apparent reason why the alleged misrepresentations were false when they were made in 2001 and The rational behind the court s ruling was that the IRS had not made any definitive statement about the legality of the 412(i) plan at the time the plaintiffs enrolled in the plan and purchased life insurance policies to fund the plan. The court noted that the plaintiffs could not use the rulings and rulemakings by the IRS in 2004 and 2005 to retroactively demonstrate that representations made by [the insurer s] alleged agents in were false when made. Moreover, the court held that, as a matter of law, representations regarding the validity and likely tax treatment of the plaintiffs 412(i) plans were forward looking statements or opinions as to how the IRS would treat 412(i) plans after plaintiffs funded them with insurance policies. The court found that it was inherently unreasonable for any person to rely on a prediction of future IRS enactment, enforcement, or non-enforcement of the law by someone unaffiliated with the federal government. The court concluded that, [a]s a matter of law, any representation or prediction by any alleged [insurance company] agent as to how the IRS would treat the 412(i) plans, and the funding thereof, in the future is either an unactionable opinion or was unjustifiably relied upon. Subsequently, the Northern District of Texas allowed the plaintiffs an opportunity to replead, and it then reaffirmed its prior ruling and dismissed the Berry plaintiffs fraud-based claims with prejudice. The claims against the other insurance company defendants in Berry have been dismissed for the same reasons but the court has not yet decided whether the plaintiffs will be allowed to re-plead. As of November 2010, the third amended complaint was filed, to which Pacific Life filed a reply. Hartford and Pacific Life filed responses to the synopsis of the third amended complaint. 15

16 3. Zarrella v. Pacific Life Insurance Company, No CIV, 755 F.Supp.2d 1231 (S.D. Fla. 2011) In March of 2003, Plaintiffs purchased nine individual policies from Pacific Life for use in Zarrella Construction s 412(i) plan. It was not until February of 2004 when the IRS issued a declaration, naming such policies as abusive tax-shelters. Plaintiffs contend that Pacific Life marketed and expressly touted the Policies by highlighting these special benefits and/or incentives that they knew or should have known violated the IRS Code and presented substantial tax risks to Plaintiffs. On May 10, 2010, Plaintiffs brought a class action against Pacific Life. Following Pacific Life s first motion to dismiss being partially granted, Plaintiffs filed their Amended Class Action Complaint in December of The Plaintiffs asserted the following claims: breach of contract, equitable fraud, negligence, and a violation of California Business and Professions Code 17200, et seq. Plaintiff s alleged that there was a breach of contract because the Policies when used to fund 412(i), did not and could not satisfy the requirements of Section 412(i). The court countered by explaining that in the written contract, Pacific Life specifically did not guarantee any future tax or legal consequences. Additionally, the court noted that Plaintiff s negligence claim failed because they failed to allege the existence of a legal duty. Similarly, the court dismissed the class action fraud allegations against Pacific Life because the plaintiffs failed to explain why the defendants alleged statements were false when made in The court also noted that fraud must be based on material facts, not a promise or prediction of future events and that the insurance company s alleged representations were just statements of opinion regarding future events. Thus, once again, Pacific Life s 12(b)(6) motion was granted and the amended complaint was dismissed without prejudice on all counts. Accordingly, a second amended complaint was filed by Plaintiff s on April 12, The court has set the trial date for October 24, 2011 and the parties response and reply to Pacific Life s motion to dismiss the second amended complaint are before the court. 4. Chau v. Aviva Life and Annuity, No. 3:09-cv-2305-B, 2011 WL (N.D. Tex. May 20, 2011) Doctors and dentists alleged that Indianapolis Life Insurance Company advertised, marketed, and consummated fraudulent business transactions, resulting in damages. Plaintiffs originally filed their complaint in April of 2009 in Washington state court and after Aviva removed the case to federal district court, the MDL Panel ordered the case transferred to the Northern District of Texas. Prior to the case being transferred, Plaintiffs filed their second amended complaint and subsequently, Aviva filed its motion to dismiss Plaintiff s second amended complaint on February 5, Plaintiffs allege that the insurer knew that the IRS had looked askance at the legality of similar tax-shelter arrangements (welfare benefit trusts) and indicated that these arrangements may be deemed abusive tax shelters, yet continued to market its 419 Plan as a tax-avoidance plan. Plaintiffs motion for a suggestion of remand to the Judicial Panel of Multidistrict Litigation was filed on March 3, 2011 and was subsequently denied by the district court. 16

17 However, the court noted that plaintiffs may motion again, should there be further developments in the case. Aviva s motion to dismiss the second amended complaint was granted in part and denied in part on May 20, In its motion, Aviva claimed that Plaintiffs common law fraud/negligent misrepresentation claim did not meet the heightened pleading requirements of Rule 9(b), in addition to failing to state a claim, and the court agreed. However, on the breach of contract claim, the court found that under the applicable law governing the contract, plaintiff s claim was not due to be dismissed. The court elaborated on its reasoning, noting that allegations concerning oral representations made about the policies, specifically, their ability to obtain substantial tax savings with the 419 Plan. Plaintiffs asserted in their second amended complaint that those representations were false and resulted in substantial tax penalties and interest due to an IRS audit. Thus, the court found that such allegations, accepted as true, state a claim for a breach of contract under Washington state law. III. MORTGAGE-BACKED SECURITIES LITIGATION Since the identification of mortgage-backed securities and the housing bubble as chief culprits of the financial crisis of 2008, mortgage companies have come under attack. Defendant companies are being accused of earning substantial profits from selling securitized loans headed for default to unwitting investors in secondary markets, claiming that they relied on the companies offering materials, in which the investment products were represented as being investment grade and underwritten pursuant to prudent and reliable guidelines. Several suits of this nature of been filed already this year; Countrywide and Bank of America, specifically, have garnered headlines from their involvement in the litigation. Recently, claims by pension funds, attempting to hold BofA liable for Countrywide s lending practices, were dismissed by a federal judge in California. Additionally, a suit against BofA was tossed out by a federal judge in New York for being filed after a three-year statute of repose. However, Countrywide and BofA have also had new suits filed against them within the last six months. 1. Dexia Holdings, Inc. v. Countrywide Financial Corp., Index No /2011 (Supreme Ct. of N.Y., N.Y. Cty. filed January 24, 2011) Countrywide Financial is accused by a group of institutional investors of committing fraud on the basis that it misled investors into purchasing millions of dollars in risky mortgagebacked securities. In a complaint filed on January 24, 2011, the plaintiffs allege that when they purchased hundreds of millions of dollars in Countrywide mortgage-backed securities between 2005 and 2007, the related registration statements and prospectuses contained materially false statements and omissions that were made either recklessly or knowingly. The plaintiffs assert that they wanted low-risk investments and bought Countrywide s mortgage-backed securities because the investments were represented as being issued pursuant to sound underwriting guidelines when they were actually backed by much riskier loans. The complaint states that Countrywide was an enterprise driven by only one purpose to originate and securitize as many mortgage loans as possible into MBS to generate profits for the Countrywide defendants, without regard to the investors that relied on the critical, false information provided to them with respect to the related certificates. The plaintiffs contend that regardless of whether the loan met the company s underwriting guidelines, Countrywide was approving any loan application as long as the loan could be resold in the secondary markets, thus, unloading all of the risk. 17

18 The complaint names over 20 defendants, including Bank of America, which acquired Countrywide in 2008; Countrywide; and former CEO Angelo Mozilo, Chief Operating Officer, David Sambol, and Chief Financial Officer, Eric Sieracki. Similar claims have been brought against Countrywide and its former executives in the past by the U.S. Securities and Exchange Commission. As the result of a settlement between the SEC and former Countrywide executives, in which the executives were accused of fraud and insider trading charges, the former CEO agreed to pay over $20 million as a penalty, in addition to $45 million in disgorgement of illgotten gains. The case was filed in the Supreme Court of New York, New York County and on February 23, 2011, upon a notice of removal, was docketed in the United States District Court for the Southern District of New York. The plaintiffs have filed a motion to remand, and the defendants have filed motions to dismiss, in addition to a motion to transfer the case to Central District of California. These motions are fully-briefed before the court. 2. Mass. Mutual Life Ins. Co. v. DLJ Mortgage Capital, Inc., No. 3:11-cv MAP (D. Mass. filed Feb. 25, 2011) MassMutual filed this action in February of this year, alleging DLJ, a subsidiary of Credit Suisse Holdings, along with other Credit Suisse affiliates, sold residential mortgage-backed securities pursuant to public filings and offering materials that contained untrue statements and omissions of material facts, in violation of the Massachusetts Uniform Securities Act.... The complaint also alleges that several individual defendants, officers, directors, and those who exerted control over operations, are jointly and severally liable under the Act. According to the plaintiff, in 2003, the defendants began originating their own mortgage loans through an affiliate to obtain a larger number of loans for securitization and to take advantage of the exploding market for residential mortgage-backed securities. The complaint alleged that because these non-conforming loans could not be sold to Fannie Mae or Freddie Mac, they were securitized and sold to investors, such as MassMutual. Thus, the defendants earned substantial profits while transferring the risk of default to the investors. The plaintiff asserted that defendants represented that the loans backing the securities were underwritten in accordance with prudent underwriting standards that ensured a borrower could repay the loan. Additionally, the complaint alleged that defendants abandoned or disregarded disclosed underwriting guidelines when making loans, and as a result, the securities now qualify as junk. The plaintiff contends that it should be entitled to rescind its purchase and/or recover appropriate damages under the Massachusetts Uniform Securities Act. Defendants filed a motion to dismiss, including supporting affidavits, on April 29, Western and Southern Life Ins. Co., v. Countrywide Financial Corp., No. 1:11-cv SAS-KLL (S.D. Ohio filed April 27, 2011) Between 2005 and 2007, Western & Southern Financial Group purchased $619 million in residential mortgage-backed securities from Countrywide in reliance upon registration statements and prospectuses that indicated Countrywide followed a conservative and reliable underwriting process, according to the complaint filed in April of this year. The plaintiffs, a group of insurers owned by Western & Southern Financial Group, assert that these securities 18

19 were sold pursuant to registration statements and prospectuses that contained untrue statements and omissions of material facts.... The complaint, filed in the United States District Court for the Southern District of Ohio, alleges that [b]y mixing and matching the worst features of mortgage products from different competitors, Countrywide s composite product offering pushed the frontier of already aggressive underwriting practice. Furthermore, plaintiffs assert that Countrywide was fully aware of its failure to adhere to its underwriting guidelines and yet it continued to place virtually any loan that it could dump on investors.... Plaintiffs complaint seeks compensatory and punitive, stating that when purchased, the securities started out with a AAA rating and now, 94% of them are not even considered to be investment grade. Pursuant to documents publicly released by the U.S. Securities and Exchange Commission, the plaintiffs assert that Countrywide knew they were placing securities backed by toxic loans headed for default with investors to unload the risk. Most recently, the parties briefing schedule, regarding defendants motion to transfer to the Central District of California and motion to dismiss, has been set by the court. 4. Countrywide Home Loans Inc. v. Mortgage Guaranty Insurance Corp., No (9th Cir. 2011) MGIC insured Countrywide against borrowers defaults on mortgage loans made by Countrywide. The initial arose in December of 2009 when MGIC denied coverage pursuant to language in the policies that allowed it to deny coverage or reduce the amount claimed in cases of fraud, misrepresentation, or negligence by Countrywide. As a result, Countrywide filed a declaratory judgment action in California state court that was subsequently removed to the Northern District of California in January of MGIC filed an emergency motion for relief in the Ninth Circuit on May 6, 2010, after the district court decided to remand the suit, arguing that the district court was required to hear its motion to delay sending the suit back to state court until arbitration was finalized, pursuant to the Federal Arbitration Act. In contrast, Countrywide argued that a federal court s discretion to decline to consider its declaratory judgment suit should not be subject to an exception regarding arbitration. The Ninth Circuit overturned the district court s decision in an opinion filed and judgment entered on June 15th of this year. The three-judge panel for the Ninth Circuit ruled that the only discretion under the Declaratory Judgment Act was whether to award declaratory relief and that the Act did not nothing to the court s jurisdiction or alter the right of entrance to a federal court. Thus, the district court is required to reach the merits of MGIC s motion before remanding the suit to state court on the basis of the court s diversity jurisdiction and the terms of the Federal Arbitration Act. IV. AGENT-RELATED ACTIONS A. STOLI These closely-watched insurable interest cases have seen some recent developments that are interesting to say the least. On May 17, 2011, a California appeals court reversed a lower court ruling that had been cited nationwide by insurers seeking to rescind multimillion dollar policies as illegal wagering contracts. Courts are also considering whether incontestability 19

20 clauses bar insurer s actions seeking to have a policy declared void ab initio at the state and federal district court levels. In light of these recent decisions and developments, STOLI litigation promises to remain active over the upcoming year. 1. Lincoln Life and Annuity Co. of New York v. Berck, No. D056373, 2011 WL (Ct. App. Cal. 2011) In 2006, Jack Teren purchased life insurance policies from Lincoln Life and indicated that he had a personal net worth of $46.4 million. Investors paid annual premium payments of $909,000 in anticipation of $20 million in life insurance benefits. Asserting that the policies were void because the beneficiaries lacked insurable interests in Teren s life, and because they were issued pursuant fraudulent representations regarding the insured s net worth, Lincoln Life filed suit in 2008 for declaratory relief in California state court. The lower court ruled in favor of Lincoln Life and held that the trust, the policy beneficiary, was not entitled to either the $20 million policy proceeds or a refund of premiums paid on the policy. The trust appealed, arguing that the insured participated in the transaction and was free to choose the beneficiary of the policy. The trust asserted that because the insured was the settlor of the trust, which acquired and owned the policies, there was in fact an insurable interest in the insured s life. Although it affirmed the lower court s ruling that Lincoln Life s fraud claims were time barred, the California appeals court agreed with the trust s arguments and reversed the lower court s decision regarding the validity of the life insurance policies. In addition, the appellate court awarded the trust its costs on appeal. The appeals panel noted that California had since made similar transactions illegal, but that the law was not retroactive. The dissent claimed that the entirety of the transaction, since its inception, was a sham and a fraud, maintaining the position that there is no California authority which prohibits a trial court from looking behind the signatures on the document to determine the true substance of the transaction and that public policy and case law support such an inquiry when questioning whether a policy was supported by a legitimate insurable interest. Lincoln Life filed a petition for rehearing and on June 13, 2011, the court issued an order denying the petition. 2. Principal Life Ins. Co. v. Lawrence Rucker 2007 Ins. Trust, C.A. No MPT, --- F.Supp.2d ---, 2011 WL (D.Del. 2011) This action was originally filed by Principal in 2008, alleging that a multi-layer trust arrangement was used to circumvent insurable interest requirements for an insurance policy issued by the insurer. In its second amended complaint, filed in April 2009, Principal asserted that the policy should be declared void ab initio for lack of an insurable interest and because the application contained material misrepresentations upon which Principal relied. Although the court determined that there were genuine issues of material fact regarding the representations made on the application, Principal was granted its motion for summary judgment on the claim that the policy was void because of a lack of insurable interest. Thus, the issue was whether, in light of this court s summary judgment ruling that the policy issued by Principal is void, Principal is now required to return the premiums paid for the Policy to Insurance Trust and/or whether, as Principal contends, equitable estoppel allows Principal to retain some or all of the premiums. 20