Has Texas adopted a rule that life settlements are securities? Life settlements provider asks state Supreme Court for help.

by Jim Orr

The Texas Supreme Court is being asked to hear an appeal in a case that raises the question of whether investments in life settlements should be classified as securities. The life settlement brokerage firm Trinity Settlement Services has filed a petition for review with the Texas Supreme Court following the dismissal of the firm’s lawsuit against the Texas State Securities Board.

Trinity Settlement Services alleges that the Securities Board has publicly announced an interpretation of the Texas Securities Act whereby interests in the proceeds of life insurance benefits are deemed to constitute “securities” for purposes of the Act. Trinity argues that the Board’s interpretation is a “statement of general applicability” that the Board has been generally applying to settlement service providers in the state such that it constitutes a “rule” under the state’s administrative procedure act. Trinity argues the “rule” should be declared void because the Board adopted it without following requirements for promulgating agency rules.

The court of appeals affirmed the trial court’s dismissal of the suit. Trinity Settlement Services, LLC v. Texas State Securities Bd., No. 03–10–00639–CV (Tex. App.–Austin August 01, 2013). According to the court of appeals, Trinity Settlement is basing its claim that the Board has adopted a “rule” largely on the Board’s position in a previous lawsuit against a different life settlement provider, Retirement Value, LLC (“RV”). The court of appeals ruled that Trinity failed to show that the Board had actually adopted an ad-hoc “rule.” Rather, according to the court of appeals, the Board’s statements in the suit against RV “were limited solely to an adjudication of RV’s individual rights under the TSA and are not statements of general applicability.” Id. The court of appeals noted that the Board’s:

… petition in the RV suit specifically describes the business model and investment transactions of RV’s Re–Sale Life Insurance Policy Program, analyzes the definition of “security” under the TSA, and concludes that the specific investments sold by RV were “securities” subject to regulation by the TSSB. But this statement applies only to RV and is based on the specific transactions involved in the Re–Sale Life Insurance Policy Program.

Further, the TSSB did not express an intention in the RV suit to apply this interpretation of the TSA in all future cases involving the sale of viatical settlements, regardless of whether the particular factual circumstances of a transaction might result in a different treatment.


Trinity’s petition to the Texas Supreme Court argues that the RV litigation was just one of many occasions that the Board has advanced the interpretation at issue. According to Trinity’s recently-filed petition to the Supreme Court:

The general public and the life settlement industry are left with one conclusion: The TSSB interprets the TSA to include the regulation of percentage interests in the proceeds of life insurance benefits. Moreover, [the Board’s] enforcement action under the TSA solidified the already-publicized fact that they intend to regulate percentage interests in the proceeds of life insurance benefits as securities.

Trinity is asking the Texas Supreme Court to both conclude that the Board has adopted a “rule” and that the rule is invalid. The State has filed a waiver of its right to respond, noting it does not intend to file a response to the petition unless asked to do so by the Supreme Court.

Life Settlement Lawsuits filed by Heygood, Orr & Pearson

Heygood, Orr & Pearson has filed several lawsuits against Life Partners, Inc., a Waco-based subsidiary of Life Partners Holdings, Inc., in connection with the life settlement investments sold by the company. We have filed numerous cases on behalf of individual investors who allege they were overcharged for their life settlement investments based on inaccurate life expectancies prepared for Life Partners. These lawsuits allege that in many instances, Life Partners had life expectancy estimates from legitimate companies in the business of providing life expectancy estimates, but they withheld this information from their own customers.

Heygood Orr & Pearson has also filed lawsuits alleging that Life Partners charged its investors excessive amounts to cover premium payments on their life settlements. Traditionally, life settlement companies pay to the life insurance company only the minimum amount necessary to keep the subject policy from lapsing – called the “cost of insurance.”

Our law firm has filed claims on behalf of investors alleging that Life Partners has been charging investors the full scheduled premium rather than just the cost of insurance. These lawsuits seek to recover from Life Partners the amount of these excessive charges for premiums on behalf of investors who have been required to pay excessive premiums. We have also filed lawsuits on behalf of life settlement companies when life insurance companies have wrongfully refused to pay the policy’s death benefits by claiming it was a STOLI policy or that the policies has no insurable interest.

If you or someone you know purchased a Life Settlement policy from Life Partners, or if you are a provider of life settlements who had a claim for death benefits wrongfully denied, you may be eligible to seek compensation through a class action lawsuit or to file your own individual case.

For a free consultation with an attorney to determine your eligibility, contact the lawyers at Heygood, Orr & Pearson by calling our toll-free hotline at 1-877-446-9001. You can also reach us by following the link on this page to our free case evaluation form, and one of our representatives will be in touch with you as soon as possible.

by Jim Orr

Jim Orr is a licensed attorney and a partner at HO&P focusing on business and personal injury litigation. Jim was selected multiple times to the Super Lawyers List and has tried 70+ cases to verdict.