A life settlement is the sale of an existing life insurance policy by the policyholder (who is typically an ill and/or elderly person) to another party. The policy is sold at a discount to the face amount. The policyholder receives a cash payment while the purchaser takes an ownership interest in the policy. The purchaser then receives the full amount of the death benefit paid out under the policy when the insured dies. Life settlements investments are often purchased by a group of investors who each buy only a fractional interest in a given policy. The purchasers also pay premiums as due to keep the policy in force until the policy matures.
Life Partners, Inc.—based in Waco, Texas—is in the business of selling investments in life settlements. Life Partners negotiates a price for a policy and then sells fractional interests in that policy to its clients. Helen McDermott and others purchased an interest in a life settlement from Life Partners, Inc. known as the Gummelt policy.
Represented by Heygood Orr & Pearson, McDermott has filed a lawsuit against Life Partners on behalf of herself and others who invested in that policy. The suit alleges that McDermott and other investors provided Life Partners with the amount stated by Life Partners as necessary to maintain the policy for five years (the estimated life expectancy). The policy matured far sooner than expected and McDermott and other investors expect to receive their money back that had not been needed to pay premiums. However, Life Partners did not return all such money. Instead, it turned out that Life Partners had paid hundreds of thousands of dollars to the insurance company over and above the premiums due. According to McDermott’s lawsuit, the overpayment or prepayment of premiums was of no practical benefit at all to investors and, on the contrary, cost them money when the policy matured early and such money was not returned to them.
McDermott asserted claims for breach of contract, breach of fiduciary duty, and unjust enrichment. The trial judge subsequently entered an order certifying a class. The order defined the class as “All persons residing in the United States who purchased any portion of a life settlement interest from Life Partners, Inc. in the Gummelt policy[.]” The court’s order stated “the overarching coming question in this case is whether the defendant breached a contractual or fiduciary duty owed in common to the class members by making a ‘pre-payment’ of insurance premiums on the subject life settlement policy.”
Life Partners appealed the order certifying a class. The Dallas Court of Appeals has now affirmed the decision of the trial court. Life Partners, Inc. v. McDermott, 2014 WL 2810472 (Tex. App.–Dallas June 23, 2014). The court of appeals disagreed with Life Partners’ argument that the trial court had somehow failed to conduct the required “rigorous analysis” to determine whether all prerequisites to certification were met before ruling on class certification. The case was remanded to the trial court to proceed to trial as a class action.
Life Settlements Litigation & Heygood, Orr & Pearson
In addition to the McDermott class action, other lawsuits have been filed by Heygood, Orr & Pearson on behalf of many clients against the life settlements company Life Partners accusing the company and its executives of misleading investors about the value of the life settlement investments they offer.
According to these other lawsuits, Life Partners hired a doctor to provide life expectancy assessments on insured individuals that were far shorter than their true life expectancies. Because a policy with a shorter life expectancy is more valuable than one with a longer life expectancy, the lawsuits allege, among other things, that Life Partners was able to use inaccurate short life expectancies to induce investors to pay much more for life settlement investments than they were worth.
If you or your company has been aggrieved by wrongful conduct related to a life settlement, then you may need a sophisticated and knowledgeable law firm such as Heygood, Orr & Pearson to represent you. For more information and a case evaluation, please contact us by calling toll-free at 1-877-446-9001, or by filling out the free case evaluation form located on this website.