Class action lawsuit alleges Life Partners used unreasonable life expectancies when selling life settlements

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by Jay Pate

Sean Turnbow et al. v. Life Partners, Inc. et al. involves several lawsuits that were consolidated in a United States District Court in Dallas. The federal court recently denied the plaintiffs’ request that the suits proceed as a class action on behalf of all investors with similar claims against Life Partners, Inc. (“LPI”). The court ruled that the plaintiffs failed to demonstrate that the issues pertaining to liability and damages could be resolved using class-wide proof. As a result, the plaintiffs in the Turnbow case (and all others who want to pursue a claim against the life settlement company) will likely need to pursue their own lawsuits.

The Turnbow plaintiffs are investors in life settlement investments made through LPI. LPI agreed to act as a purchasing agent to identify, examine, and purchase suitable, attractively-priced life insurance policies on behalf of investors. In doing so, LPI obtained a life expectancy estimate and a confidential case history of the insured to disclose to investors. The Turnbow lawsuit alleged that LPI engaged a practicing oncologist, Dr. Donald Cassidy, to review and provide life expectancy estimates for life insurance policies considered by LPI for purchase from policy owners. Pursuant to a written employment contract, LPI compensated Dr. Cassidy on a retainer basis—$15,000 per month—and paid him an additional $500.00 for each insurance policy for which LPI facilitated the sale of fractional interests. Dr. Cassidy calculated life expectancies for insureds by first determining the average life span of a person like the insured using a mortality table—which changed over the years—that used the categories of gender, race, and age.

Around March 2011, after a Wall Street Journal article accused LPI of substantially underestimating life expectancies, LPI engaged a new life expectancy provider, 21st Services, LLC, for the purpose of obtaining a second opinion on life expectancy estimates. During this time, LPI continued to engage the services of Dr. Cassidy.

After the Wall Street Journal article and a piece in The Life Settlements Report, various retail customers of Life Partners filed the putative class action lawsuit alleging that the life expectancies calculated by Cassidy were inaccurate. The six named plaintiffs in Turnbow had purchased fractional interests in life insurance policies for which Dr. Cassidy provided life expectancy estimates. The lawsuit alleges that Life Partners breached duties owed to the plaintiffs by retaining Dr. Cassidy to provide life expectancy assessments, by overcompensating him and incentivizing his poor performance, by failing to monitor his performance or provide quality control, by creating conflicts of interest and engaging in self-dealing transactions that were unfair, by failing to pay reasonable attention or provide reasonable care in obtaining and providing life expectancy estimates, by failing to use its expertise diligently, and by otherwise failing to exercise the requisite care that an agent, fiduciary, or expert in life settlements should have exercised

The plaintiffs sought to represent a class of “all persons in the United States who purchased or otherwise acquired fractional interests in life settlements, from or through LPI or LPHI, for which Dr. Cassidy provided life expectancy assessments.” The court noted that there are approximately 13,000 people covered by that definition, spread across the United States, who purchased fractional interests in 757 life insurance policies.

The gist of the plaintiffs’ case is that the members of the putative class overpaid for their respective interests in each life settlement transaction due to Dr. Cassidy’s erroneous calculations. According to the court, the predominant issue in the case will be whether or not Dr. Cassidy’s methodology was reasonable. However, the court found that the question of reasonableness would have to be answered on a case-by-case basis and would result in 757 separate mini-trials if the cases proceeded as a class action. For example, the court noted that:

“The fact finder would be required to analyze whether Dr. Cassidy’s experience and training, at the time he calculated each life expectancy, was inadequate. This inquiry would not necessarily result in a common answer for the class. For example, as to investors who purchased policies in 2011, Dr. Cassidy had at least eight years of experience calculating life expectancies. This would not be the case for those investors purchasing in 2004.”

Although the court denied the plaintiffs’ request to proceed as a class action, the plaintiffs in Turnbow may still pursue their own personal legal claims against Life Partners. A recent filing with the federal court by the Turnbow plaintiffs states that “discussions regarding the potential disposition of Plaintiffs’ claims are still ongoing.”

Heygood, Orr & Pearson has filed class action lawsuits against Life Partners on behalf of investors across the country who allege they were misled by the company about life settlement investments.

If you or a loved one invested in a Life Partners life settlement, you may be eligible to join one of the lawsuits that have been filed on behalf of investors. For a free legal consultation from an attorney to find out if you qualify, contact Heygood, Orr & Pearson for a free consultation. You can reach us by calling toll-free at 1-877-446-9001, emailing us at info@hop-law.com or by completing the free case evaluation form located on this page.