Hearing set for California life settlement suit

The lawsuit alleges that when customers in the situation the couple were in consult Lincoln National and other insurers about retaining or modifying their existing life insurance policies, “defendant — as a regular practice or policy — fail to advise them that they can sell all or part of their policy to a third party for more than its cash surrender value (i.e., a life settlement).

“Defendant purposely omits this information from plaintiffs and class members because it knows that other options, such as surrendering the policy (in whole or in part) or letting it lapse, will generate greater profits to defendant than a life settlement would,” the suit alleges.

The lawsuit was filed on behalf of Larry Grill, his wife, Joan Grill, and Steven Grill, the trustee for the Grills’ estate and owner of the $7.2 million policy the Grills ultimately were forced to reduce to $2 million because they couldn’t afford the payments, as well as others “similarly situated.”

George S. Trevor, the lawyer for the Grills at Pearson Simon Warshaw LLP in San Francisco, declined to comment on the Lincoln National answer and motion to dismiss. “The Grills will be filing their opposition to Lincoln National’s motion at the appropriate time,” he said.

See also: Life settlements: A long road to redemption

Michael Arcaro, a vice president and head of corporate communications at Lincoln Financial, said the company’s policy is not to comment on litigation.

In its answer and motion to dismiss, Lincoln National argues that, “far from concealing life settlements,” the Lincoln National policy change form, which the Grills signed to surrender part of their policy, “explicitly asks about” the “possible sale or assignment of this policy to a life settlement, viatical or other secondary market provider.”

Besides technical reasons for dismissing the suit, Lincoln National says that the plaintiffs have not provided facts supporting their argument that “Lincoln had a duty to disclose that they could sell their policies through a life settlement.”

Lincoln National says that under California law, an insurer is not a fiduciary to the insured and any special duties owed to the insurer arise in the context of coverage and claim processing [is] “not at issue here.”