Olive Tree Holdings L.L.C. and a trust administrator are suing the Phoenix Companies Inc., Hartford, and 2 of its subsidiaries alleging the companies used fraud to convince elderly individuals to purchase multi-million dollar life insurance policies, telling them the policies could be freely changed into life settlements.

The 2nd of two lawsuits was filed Oct. 26 in Santa Barbara Superior Court in Los Angeles by Alan Fenton as trustee for 14 insurance trusts and Olive Tree Holdings L.L.C. against PHL and its units, PHL Variable Insurance Company and Phoenix Life Insurance Company for fraud and other charges, according to a press release issued by Gerald Kroll, an attorney filing the case.

The 1st lawsuit was filed June 25 by Fenton as trustee of 17 life insurance trusts and XLI Holdings L.L.C. against PHL with similar allegations, according to the release.

Combined, the policies at issue in both cases have a face value that exceeds $260 million, according to Kroll.

Kroll says PHC set up a subsidiary, Phoenix Life Solutions, to buy life insurance policies for an immediate cash settlement. Meanwhile, PHL and Phoenix issued policies that gave them or Phoenix Life Solutions the right of first refusal to purchase the policies when a third-party offered money for a policy transfer, the lawsuit alleges.

But when policyholders actually obtained money offers, the companies neither matched the offers nor acknowledged their validity or allowed the policy transfer, according to the press release.

Instead, PHL and its life insurance units allegedly seek to rescind their PHL life insurance policies and to confiscate the premiums when policy owners try to transfer or assign the policies to unrelated parties, the suit alleges.

In a statement, the Phoenix Companies said that “the allegations noted in that press release are without merit. Further, we wish to clarify that the $260 million figure noted in that press release does not represent Phoenix’s alleged litigation exposure, but is simply the combined face amount of the policies mentioned.”